Managing Quality Integrating the Supply Chain S. Thomas Foster

Strategic Quality PlanningThe Voice of the CustomerChapter 5 • Customer service is important because: • Customers will tell twice as many people about bad experiences as good experiences. • 70% of your customers will remain your customers if you resolve the complaint satisfactorily. • Service firms rely on repeat customers for 85% to 95% of their business. • 80% of new product and service ideas come from customers. • The cost of keeping an existing customer is 1/6th of the cost of attracting new customers. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management Approximately 90% of the business for service firms is repeat business. The focus of process and system design must be on developing relationships with customers rather than simply providing clean transactions at each stage of the process. Customer relationship management views the customer as a valued asset to be managed. In relationship management, the tangibles (facilities and machinery) meet the intangibles (professionalism and empathy) to provide a satisfying experience for the customer. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management Complaint Resolution Feedback Customer Relationship Management Gurarantees Corrective Action Four components of a Customer-Relationship Management Process © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management - Complaints • Complaints should be viewed as opportunities to improve. Because only a small percentage of customers ultimately will complain, this small percentage may represent a much larger population of dissatisfied customers. • Complaint resolution process – This involves the transformation of a negative situation into one in which the complainant is restored to the state existing prior to the occurrence of a problem. The recovery process must document complaints, resolve complaints, document recovery, and provide feedback to the customer and feedback to the firm for system improvement. • You must compensate customers for losses. • You must show contrition. • You must make it easy for complainants to reach resolution to simple complaints. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management - Guarantees • To design a process that ignores product and service failures is a form of denial. • The guarantee is both a design and an economic issue that must be addressed by all companies before the first sale occurs. • Guarantees should be designed prior to beginning business so that employees can be trained to implement the guarantee and marketing can advertise the guarantee properly. • Guarantees are an important economic issue because of the sales potential that is created by a guarantee and the costs associated with fulfillment of the guarantee. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management - Guarantees • To be effective, a guarantee should be: • Unconditional – No small print exceptions. • Meaningful – Customer grievances must be fully addressed. • Understandable – The customer must be able to understand easily the parameters of the guarantee and how to achieve resolution quickly. • Communicable – The phrasing of the guarantee should resonate with the customer. • Painless to invoke – The customer must not be inconvenienced too much. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer-Relationship Management – Corrective Action • Corrective Action – This means that when a service or product failure occurs, the failure is documented and the problem is resolved in a way that it never happens again. Teams should be in place to regularly review complaints and to improve processes so that the problems do not recur. • Closed-loop Corrective Action – The loop is in effect closed because a process is in place that ensures that complaint and field repair data is used for improving processes. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCommunicating with Customers Marketing views every dollar of income equally. Operations does not view a dollar of income from diverse customers equally with a dollar of income from a single set of homogeneous customers for a single product or service because of the costs and confusion associated with trying to satisfy diverse customer groups with different products or services. Customer rationalization results from marketing and operations focusing on those products and services for the 20% customers that contribute 80% of the profit. © 2007 Pearson Education

Strategic Quality PlanningThe Voice of the CustomerCustomer Relationship Management Systems • Customer relationship management systems (CRMS) – use data to manage the following phases of the customer life cycle: • Acquisition • Retention • Enhancement • CRMS monitor customer interactions and preferences through media such as customer transaction records, call center logs, searches, and Web site clicks. • CRMS are used to identify active customers, inactive customers, and the profitability of customers. © 2007 Pearson Education

Managing Quality Integrating the Supply Chain S. Thomas Foster