UNIT-II
CUSTOMER FOCUS AND SATISFACTION
DEFINITION AND TYPES OF CUSTOMERS:
The customer is the end user or the person who consumes the product or gets benefit from the services.
Types of customers:
There are two distinct types of customers:
➢ External Customers
➢ Internal Customers
External Customers: An external customer can be defined in many ways, such as
• The one who uses the product or services
• The one who purchases the product ore services
• The one who influences the sale of the product or service.
• An external customer exists outside the organization and generally falls into three categories:
✓ Current customers
✓ Prospective customers
✓ Lost customers
Internal Customers: An internal customer is just as important. Every function, whether it be engineering,
order processing, or production, has an internal customer.
✓ Each receives a products or services and in exchange provides a product or service. Each person in a
process considered preceding operations.
✓ Each worker’s goal is to make sure that the quality meets the expectation of the next person, and
should satisfy the external customer.
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INTERNAL CUSTOMER CONFLICT
Definition: Disagreement between individuals or groups within an organization that may have an impact on
the overall functioning of the organization.
• Internal conflict is personal to the person involved. This type of conflict takes place within the person.
• It can surface when a person’s values or morals are tested or otherwise compromised.
• Internal conflict can greatly impact the person’s performance level.
Example of Internal Customers Conflict
✓ What products or services are produced?
✓ Who uses these products and services?
✓ Who do employees call, write to, or answer questions for?
✓ Who supplies inputs to the process?
Causes for Conflicts
✓ Managerial Expectations
✓ Breakdown in Communication
✓ Misunderstanding the Information
✓ Lack of Accountability
WHAT IS THE RELATION OF PROCESS vs IT’S CUSTOMER?
The process is defined as a set of interconnected activities that result in a product or a service to be offered to
a customer. Thus, their relation is of critical importance. The result of one activity (the process) directly
affects the other entity (the customer).
For example, all the customer complaints are analogous to process variation. If variation that is non-
conformance to the quality standards occurs, it will ultimately affect the quality of the end product or service.
Therefore it important to keep a strong check on this aspect.
PROCESS VS CUSTOMER
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QUALITY FOCUS
• ‘Satisfaction is an attitude: Loyalty is a Behavior’.
• Loyal customer spends more, is willing to pay higher prices, refer new clients, and is less costly to do business with.
• Common theme is to integrate many individuals / group efforts that may have their own priority.
CUSTOMER SATISFACTION
It refers to the measure of how products and defined as the number of customers, or percentage of total
customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified
satisfaction goals.
Customer satisfaction is not an objective statistic but more of a feeling or attitude. If a customer is happy
with a product or a service it has hired or purchase, they will pay their bills promptly, which greatly improves
cash flow-the lifeblood of any organization. Customers that are satisfied will increase in number, buy more,
and buy more frequently.
Customer Satisfaction – Three Parts System
DETERMINANTS OF CUSTOMER SATISFACTION
Key Indicators for Physical Products
✓ Reliability ✓ Usability
✓ Aesthetics ✓ Functionality
✓ Adaptability ✓ Appropriateness
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Key Indicators for Services
✓ Friendliness/courteousness of employees ✓ Approachability of the service provider
✓ Safety/risk of service ✓ Willingness to listen to customer
✓ Billing/invoicing procedure ✓ Honesty and an ability to communicate in clear
✓ Responsiveness to requests language
✓ Appearance of physical facilities
External Customer Satisfaction:
An external customer is one who isn’t a part of an organization, rather is one who receives service or product
from the organization.
External customer satisfaction shows the extent to which the organization;
✓ Uses methods for determining and monitoring external customer's perceived quality and value.
✓ Uses customer feedback to improve product/service quality.
✓ Handles complaints, resolves them, and uses complaint information for quality improvement and
prevention of recurrence of problems.
✓ Measures performance against customer targets.
✓ Compares its customer satisfaction results with that of main competitors.
Internal Customer Satisfaction:
An internal customer can be anyone within an organization. It could be another department, another branch
or even a co-worker. Every single person in the organization has an effect on the external customers. Internal
co-operation needs to be stimulated to enhance organizational performance. A summary of steps to improve
Internal Customer Satisfaction is given below
✓ Treat employees as you would treat your customers
✓ Share your vision
✓ Surpass their expectations
✓ Take feedback and suggestions
✓ Show appreciation for good work
THE ROLE OF MARKETING AND SALES:
Marketing and sales are function charged with gathering customer input but in many firms the people in these
functions are unfamiliar with quality improvement. Shortcomings in marketing as identified by critics
include:
✓ Partnering arrangement with dealers and distribution channels
✓ Focusing on the physical characteristics of products and overlooking the related services
✓ Losing a sense of customer price sensitivity
✓ Not measuring or certifying suppliers such as advertisers
✓ Failing to perform cost/benefit analyses on promotion costs
✓ Losing markets to generics and house brands
The role of marketing and sales is to identify, satisfy, and retain customers. Before you can create anything
of value,
➢ You must identify a want or need that you can address, as well as the prospective customers who
possess this want or need.
➢ You work to satisfy these customers by delivering a product or service that addresses these needs at
the time customers want it. Key to customer satisfaction is making sure everyone feels they benefit
from the exchange. Your customer is happy with the value they get for what they pay. You are happy
with the payment you receive in exchange for what you provide.
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➢ Effective marketing doesn’t stop there. It also needs to retain customers by creating new
opportunities to win customer loyalty and business.
THE ROLE OF MARKETING AND SALES
BUYER SUPPLIER RELATIONSHIPS:
Deming suggested that a long-term relationship between the buyer and supplier is necessary for economy.
Several guidelines will help both the supplier and buyer benefits from a long-term partnering relationship:
✓ Implementation of TQM by both supplier & customer.
✓ Long term commitment to TQM & to partnering relationship between the parties.
✓ Reduction in supplier base.
✓ Get supplier involved in early stages of Research, Development & Design.
✓ Benchmarking.
BENCHMARKING
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Benchmarking is the process of measuring an organization’s internal processes then identifying,
understanding, and adapting outstanding practices from other organizations considered to be best-in-class.
“Measuring our performance against that of best-in- class companies, determining how the best-in-class
achieve those performance levels and using the information as a basis for our own company’s targets,
strategies and implementation.”
For Example, A food delivery service chain was facing a problem of delay in delivery owing to customer
complaints and dissatisfaction with the service.
The company prepared a team to conduct process benchmarking for this purpose. The team observed and
researched on the strategy of one of its competitors who was taking the market by storm. It found that the
competitive brand has installed the GPS trackers in the delivery bikes.
Thus, it can easily track the position of its delivery person and monitor their timing and efficiency.
THE EVOLUTION OF BENCHMARKING
✓ The benchmarking processes may have evolved in the 1950s when W. EDWARDS DEMING taught
the idea of quality control to the Japanese.
✓ The method was rarely used in the United States until the early 1980s, when IBM, Motorola and
Xerox became the best-known example for using benchmarking processes.
TIME TYPE DESCRIPTION
First generation Reverse Engineering RE is the process of discovering the
technological principles of a device,
object or system through the analysis of
its structure, function & operation
Second generation Competitive Benchmarking Continuous process of comparing a
firm’s practices and performance
measures with that of its most successful
competitor
Third generation Process Benchmarking The initiating firm focuses on its
observation and investigation of business
processes with a goal of identifying and
observing the best practices from one or
more benchmarked firms
Forth generation Strategic Benchmarking Involves observing how others compete
Fifth generation Global Benchmarking Benchmarking with the partners across
the
globe
TYPES OF BENCHMARKING
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Internal Benchmarking
The internal benchmarking refers to the comparison of the organizational performance internally.Either with
its previous performances or with that of its competitors, i.e., the companies belonging to the same industry.
Here, the information is usually gathered and circulated within the organization itself.
Following are the various strategies falling under this category:
• SWOT: In this benchmarking strategy, the strengths, weaknesses, opportunities and threats of the
company are listed out and analyzed by the management.
• Best Practice Benchmarking: The management themselves studies and identifies the strategies and
practices of the other companies who are the market leaders, to plan the desired course of action.
• Performance Metrics: This strategy is based on the statistical metrics derived through the analysis of
the client’s preference and the comparison made with competitors. The company can find out the
loopholes in its performance and work over it.
• Financial Benchmarking: The management conducts a comparative study of the financial forecast
with the actual results or financial reports to find out the areas of shortcomings and take corrective
actions.
• Functional Benchmarking: The company compares its performance and products with that of other
related industries to innovatively improve its functionality.
External Benchmarking
In external benchmarking, the companies compare their performance with that of its competitors in the
industry or across the globe. Usually, by the data collected through associations or third party.
To know about the different external strategies in detail, read below:
• Collaborative Benchmarking: To improve the performance standards, the companies belonging to a
particular industry collaborate with the industrial associations. These associations provide the
benchmarking data on best practices and a comparative analysis of all the companies, to facilitate the
improvement of the underperforming companies.
• Process Benchmarking: In process benchmarking, the company analyzes the competitor’s methods,
tasks, techniques of production, means of distribution, etc. It also studies the standard mechanisms of
performing a particular function, to modify its ways accordingly.
• Product Benchmarking: This strategy focuses on the in-depth analysis of the competitor’s product to
know its features and composition. The company uses this strategy to improve and redesign its
products.
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• Corporate Benchmarking: The company compares its various departments like finance, production,
distribution, marketing, human resource, etc. with those of its competitors to enhance the efficiency of
each division.
• Strategic Benchmarking: This strategy is usually adopted when the company plans to implement a
new policy or idea or modify the existing one. The team compares the company’s approach with that
of the other successful companies in the industry before bringing it into practice.
• Global Benchmarking: It is similar to strategic benchmarking, the only difference is that here the
company compares its strategies with those of its other branch or the various competitors spread across
the globe, to take corrective actions.
PROCESS OF BENCHMARKING
Benchmarking is not an immediate solution to a problem. Instead, it is a step-by-step treatment of the
problem area. These steps are explained in detail below:
1. Planning: The planning phase determines the need for benchmarking and the area which requires it.
The competitors and means to collect the relevant data are also decided at this particular stage.
2. Analysis: The Company then analyzes the data so gathered to find out the strengths of the competitors,
list out its weaknesses and ways of improvement.
3. Integration: At this phase, the analysis is reported to the top management, and after their approval, the
desired action plan with a well-defined strategy, is developed.
4. Action: Now, the management has a workable plan; at this stage, the employees execute the
benchmarking plan.
5. Maturity: The final stage is maturity; it is at this phase, where the result of using benchmarking to
improve the business operations can be observed. A successful application of benchmarking will lead
to the attainment of market leadership.
ADVANTAGES OF BENCHMARKING
• Improves Learning Methodology: Benchmarking paves the way for idea generation and sharing of
proven business practices which can be seen as a learning experience for the companies.
• Initiates Technological Upgradation: Through this strategy, the companies get to know about the
new technology and techniques which have been adopted by the market leaders. The companies can
accordingly plan for up-gradation of its technology to sustain the competition.
• Improve Company’s Standards: The company analyzes and studies the standards of the competitors.
This facilitates the company to raise its standard of production and products accordingly.
• Enhances Work Quality: It leads to organizational growth since it improves the overall quality of the
output and reduces the chances of errors due to the standardization of business operations.
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• Cope Up with Competition: Knowing about the competitors’ business and their strategy, helps the
company to design its strategies efficiently. It also facilitates the company to be updated with the
recent developments and technology, hence beating the market competition.
• Improves Efficiency: The overall efficiency of the employees increases with this practice since
standardization of work motivates them to perform better without making many mistakes.
• Increases Customer Satisfaction: Through benchmarking, the company collects sufficient data on
customer’s needs and wants through customer feedback. This information helps the company to
enhance the customer experience and satisfaction level.
• Help Overcome Weaknesses: These strategies help the company in finding out its shortcomings and
working over them to get the desired results.
DISADVANTAGES OF BENCHMARKING
• Lack of Information: Sometimes, the company is unable to gather adequate information for
benchmarking. This leads to an improper or inadequate comparison of the company’s performance
with that of its competitors.
• Increases Dependency: The companies tend to depend on other companies’ strategies to become
successful. In this process of following the market leaders, they sacrifice their individuality and
uniqueness and starts following the path shown by others.
• Lack of Understanding: At times, companies adopt benchmarking for the sake of doing so, rather
than finding out the necessity of it. It fails to understand its weaknesses while keeping an eye on the
functioning of its competitors.
• Copying Others: Some organizations don’t understand the actual purpose of this strategy and start
copying their competitors in every aspect. This may even lead to a downfall of the business.
• Incorrect Comparison: It demands a comparison between two or more companies belonging to the
same industry and competes with each other. But sometimes, the companies make irrelevant
comparison resulting in poor benchmarks.
• Costly Affair: It requires a team of experienced personnel who have excellent analytical skills and
expertise in the area. Thus, increasing the administrative expenses of the company. Even the
implementation of the changes involves capital expenditure at times.
COMMON PITFALLS IN BENCHMARKING
✓ Lack of management commitment and involvement
✓ Not applied to critical areas first
✓ Inadequate resources
✓ No involvement of the line organization.
✓ Scope not well defined.
✓ To many performance measures.
✓ Critical success factors & performance drivers not understood or identified.
✓ Potential partners ignored
✓ Poorly designed questionnaires.
✓ Inappropriate data collection method.
✓ Too much & inconsistent data.
✓ Analysis paralysis; excess precision.
✓ Management resistance to change.
✓ No repeat benchmarking.
