CHAPTER

service Quality
Strategies that have produced significant results in production are often harder to i plement in a service environment. Thanks to the teachings of Deming, Juran, and c' ers, significant strides have been made in manufacturing. The same results have slower in service organizations or service activities in manufacturing. Customer service is the set of activities an organization uses to win and retain CQsl' tomers' satisfaction. It can be provided before, during, or after the sale of the Product exist on its own. Elements of customer service are:
Organization 1. Identify each market segment. 2. Write down the requirements. 3. Communicate the requirements. 4. Organize processes. 5. Organize physical spaces. Customer Care 6. Meet the customer's expectations. 7. Get the customer's point of view. 8. Deliver what is promised. 9. Make the customer feel valued. 10. Respond to all complaints. 11. Over-respond to the customer. 12. Provide a clean and comfortable customer reception area. Communication 13: Optimize the trade-off between time and personal attention. 14. Minimize the number of contact points. 15.. Provide pleasant, knowledgeable, and enthusiastic employees. 16. Write documents in {;ustomer-friendly language; Front-line people .17. Hire people who like people. 18. Challenge them to develop better methods. 19. Give them the authority to solve problems. 2[-Serve them as internal customers.

"

CUSTOMER SATISFACTION

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Leadership 23. Lead by example. 24. Listen to the front-line people. 25. Strive for continuous process improvement.23

d" Organization To ensure the same level of quality for all customers, the organization must record and then communicate to its employees the directions for all tasks. A service quality handbook.should be created with the description of each serviCe quality standard; Communicating the service quality standard for .each task can be done by formal training, videos, personal coaching, or meetings. Also,intranet sites can be developed so employees can find answers to commonly-asked questions and contact people for more information. Sometimes, the entire process used by an organization to do business must be changed in order to better serve the customer. For instance, the Florida Estate Tax Division revamped the way ~ey operate by eliminating 50,000 estate tax forms. Florida has many senior residents who were required to file tax forms even if the estate was less than $675,000 and no taxes were owed. The heirs had to wait approximately two weeks to get a tax clearance certificate in order to sell a home or divide up property. Since personnel resources were.shiftedfrom these returns to returns where assets were over $675,000, processing time for returns with assets over $675,006 dropped from six months to two
weeks.24

Other times, physical space must be reorganized to better serve the customer. Ha'rris Methodist Hospital in Fort Worth redesigned its emergency room around the patient. It designed a "quick care" unit forernergency roompatients with less serious injuries: The average "qpickcare" patientqow spends 55 minutes in the emergency room instead of 137 minutes. Unfortunately, patients now wonder why treatment is so-costly when it took so little time.25 Likewise, Belmont University reorganized its physical space to better serve its customers, the stUdents: After many years cf ~nldent complaints, Belmont created a one~stop Belmont Central where students can add or drop classes, get transcrIpts, file financial forms, cash checks, and do a myriad of other administrative tasks. Previously, students had to visit several buildings located at opposite ends of the campus - to accomplish simple administrative tasks.26

23 Adapted

from Jacques Horovitz and Chan Cudennec-poon, Progress (January 1991): 54-58. 2000 R!T/USA Today Quality Cup for Government. 1996 RITIUSA Today Quality Cup for Not-Por-Profit.

"Putting Service Quality

into Gear," Quality

24 2S

261997 RITIUSA Today Quality Cup for Education.

.0 .

CHAPTER

Customer Care An organization should revolve around the customer, because customers are the key any business. A customer, any customer, should be valued and treated like a friend. sponses to customer complaints should be immediate and should be more than the c _ tomer expected to recei ve. If they are treated with respect customers will simply forgi~, errors and positively promote the organization. Employees must understand that, Henry Ford said, "It is not the employer who pays wages-he only handIes the money, It is the customer who pays the wages." Employees must please customers, not bosses: management committees, or headquarters. Employees should not follow mind~ numbing rules that provide no benefit to the customer. Fairview-AFX requires its employees to sign a customer code of ethics. It is also: given to all customers in order to hold Fairview-AFX employees accountable. Theil" code of ethics is to: Keep promises to customers. Return calls to customers in an expedient manner. Give customers assistance with their concerns, referring an appropriate staff member for problem-solving action when necessary. Treat our customers with respect, courtesy and professionalism at all times. Remain aware 'IIld evaluate customer satisfaction regularly. Continually search for cllstoml'r-related improvements. Deliver service and products quickly and-efficiently. Give every customer involved and persunal attention. Maintain a clean and neat appearance, including the workplace, at all times. Review and implement customer feedback and suggestions into current procedure when appropriate. Engage in any training or education that will enhance our job perfoimance and our commitment to customer care. Treat every customer just as we would want to be treated ourselves.27 Communication An organization's communication to its customers must be consistent with its level of service quality. A customer will become dissatisfied if there is a difference between what has been advertised and what has been received. An organization communicates to its customers in many subtle ways. For instance, an organization communicates to its customers even by such means as an employee's telephone manners, or an automated voice

""'~~.2,;:t995 RlTIUSA Today Quality Cup for Small Business.

CUSTOMER

SATISFACTION

91

~cf';:o

fn
,-."

0,

response system that is fast and easy for the customer to use. Customer relationships are based on communication. An organization must listen to its customers and establish a level of trust Frequently, the fIrst impression a customer has of an organization is its website. If the organization's website is not customer-friendly, the customer will have a bad fIrst impression. Iomega, the manufacturer of zip drives; improved both the content and the navigation and support tools on the organization's website. Within one year, customer satisfaction increased 40%, problem resolution rate was up 320%, and the cost per solution fell from $lO~OO to $0.69.28

Front-Line People Customers lire the most valuable asset of any company and should not be referred to employees who have not been properly trained to handle their complaints. Only the best employee is worthy of a company's customers. It is best to remember three things about front-line employ~s: 1. Hire the best. 2. Develop the best employees into professionals. 3. Motivate the professionals to stay and excel. To get that "best employee" on the front line, someone with a personality should be hired. For example~ in real estate, the most important aspect is location, location, location. In front-line employees, the most important aspect is personality, personality, personality. If employees are not happy, this will be reflected to the customers. Generally, customers are frustrated by small thingE. Front-line employees need to care, smile, possess a pleaSant voice, and thank the customer often for their business. In sum, it's having a positive attitude. Finding good emllloyees who want to serve customers is not an easy task. Front-line employees also need training. Managers who conduct training classes or participate in class along with employees develop a more effective working relationship and therefore convey the importance of CUSllltUer satisfaction to new employees. Of course, front-line employees should possess written and oral communication skills and problem-solving skills, and they should be empowered to resolve complaints. But more importantly, front-line employees should genuinely care for their customers. Customers understand and know when someone empathizes with their feelings and is genuinely trying to help. The ideal is being overly fair with your customers, putting customers before costs. For instance, when a physician found a seam had split on a recently-purchased business suit from an upscale department store, she returned it. Upon returning the suit, the salesperson gave her a 33% discount coupon
0

282000 RITIUSA Today Quality Cup Finalist for Manufacturing.

92

CHAPTER

for her next purchase because it wasn't fair that she had to take time from her schedule to return the suit. Of course, the physician has been a loyal customer ever since .. Ritz Carlton hotel employees may spend up to $2000 to correct a deficiency or rectify! a customer complaint. 29 At Nordstrom, the company policy is simply stated: "Use your good judgment in all situations, keeping in mind that there are strict orders to be obsessed with the customer

\ 1

customer that when a customer left her airline ticket at the counter of the Nordstrom's women's apparel department, the sales associate took a cab "tothe airport to locate the rather than with Nordstrom's costs." Salespeople at Nordstrom are so obsessed with the customer and deliver the ticket to her.3o Using good judgment is key to customer rela- 1 For instance, on a commuter flight one passenger wanted to board with a huge elk rack that wouldn't fit through the doorway much less in the carry on luggage compartment. The passenger was irate when the flight attendant, pilot, and baggage handler tions. Sometimes one customer's needs must be balanced with other customers' needs. calmly explained why the elk rack wouldn't fit, as if it needed explaining. Finally, the baggage handler firmly stated that the passenger was either to take her seat or leave the aircraft. The passenger quickly left and the remaining fifteen passengers gave a round of applause. Despite one unhappy customer, the ai,rline was left with fifteen very happy customers.3l In summary, front-line people deal with the customers every day. Front-line people are also a valuable so~'rce of information; they know better than management what the customer wants. Front-line staff also nt:.:;dsinformation and support from management to effectively deal with the public. Management can 3Upport front-line staff in various ways. For example, management can coach newcomers to help integrate them into the organization quickly. Milllageffi~nt can also give front-line people the authority tb resolve custom~r problems. Rewards should be given to encourage front-line employees' . efforts. Leadership by Example No quality improvemept can succeed without management's involvement and, more importantly, commitment. Managers can best show their commitment to service quality by example. Texas Namplate Co. customer-care personnel, including the company president, are available to customers 24 hours a day. Every CEO should be required to spend at least four hours each month behind a service desk. It is hard to understand the customer when you're looking down at him from a 43rd floor window. The American Airlines CEO should have to eat the food he feeds to weary travelers. The General Motors CEO should spend time in a dealer repair shop. Or better yet, the CEO should be
't:.-:..

I
1 )
1

1 i1

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1

29 30

Jadyn R. Jeffry, "Preparing the Front Line," Quality Progress (February 1995); 79-82. Robert Spector and Patrick D. McCarthy. The Nordstrom Way, Audio-Tech Vol. 4 No.8 Sec. I (August 1995); 6-7. Business Book Summaries,

31 Scott

Madison Paton, "Unhappy Employees and Unhappy Customers," Quality Digest (January 1999); 4.

CUSTOMER SATISFACTION

9S

the customer. For example, the CEO of Harley Davidson rides his bike to work. He commented that if you build motorcycles for a living, you shouldn't ride to work in a
Rolls-Royce.32

Additional Comments Gaining new customers can be a lengthy process involving research, targeting, advertising, promotion, and networking. Current customers provide organizations with established business relationships, knowledge and predictability in buying behaviors, and short-term opportunities for expanded sales. Thus, an organization's most likely target for new business is its current customers. Service quality is an activity; therefore, it can be controlled and improved. Organizations with higher-quality service can charge up to 20% more and still retain customers. Satisfied customers not only continue to patronize the organization, they also add to profits by referring new customers. Referrals can be twice as effective as advertising. An essential part of customer satisfaction occurs after the sale. Table 3-3 shows various characteristics and expectations. Many organizations emphasIze traditional or reactive service after the sale. Examples include: Preventive maintenance (service provided according to a prescribed timetable). Service contract (service provided as required). No service contract (service requires labor and material billing). Combinations of the above.

TABLE 3-3

Characteristics end ExpectetIons

Characteristic Expectation

Delivery Installation
Use

Deliveredon schedule in undamaged condition Proper instructions on setup, or technicians supplied for complicated products Clearly-written training manuals or instructions provided on proper use Properly-trained technicians to promptly make quality repairs Friendlyservice representatives to answer questions Clearly stated with prompt,service on c1ai~s

Field'rep~ir Customer service Warranty

32lf. James Harrington, "Looking Down at the Customer," Quality Digest (February 2001): 24.

."

CHAPTER

An organization striving to upgrade its service quality must move to the proac:' level. Proactive organizations contact their customers and determine their se: quality needs and expectations. ~is. inf~rmation is used to develop the organizati. strategy. Management must continually Improve the methods for obtaining input fr, customers to better determine their needs .. For instance, the federal government is improving service quality. Former Presi. Bill Clinton released a report titled, "Putting Customers First '95: Standards for Servo the American People." The 232-page report lists the customer service standards . have been formulated by more than 200 federal government agencies. The stmdards designed to please the customers-the American people. For instance, the Occupatio: Safety and Health Adlninistration (OSHA) prolnises that inspectors will b;respe.c and helpful and focus on only the most serious hazards. The Bureau of Labor SfIUiS~ promises data any way you want it: from a live person, a recorded message, fax, mic fiche, diskette, tape, Internet, or telecommunications device for the deaf. The Intern, Revenue Service promises tax refunds due on complete and accurate paper returns in days, or 21 days if the return is filed electronically. Delivering what has been prolnis. builds the American people's confidence that their government can work effectively. ter all, if a government office cannot answer the phone and give quick, courteous se~ vice, how can it handle defense, commerce, and education?33 Although publishing the standards was risky, service in many government offices inf proved. In 1996, Business Week reported that an independent survey of the country's beS telephone customer service ranked the Social Security Adlninistration top in the nation..

Tra IISlating Needs into Requirements ..

The Kano model, which is shown in Figure 3-8, conceptualizes customer requirements .. The model represents three major areas of customer satisfaction. The first area of cus~ tomer satisfaction, represented by the diagonal line, represents explicit requirements. These include written or verbal requirements and are easily identified, expected, to be met, and typically performance related. Satisfying the customer would be relatively simple if these were the only requirements. The second area of customer satisfaction represents innovations, as shown by the curved line in the upper left comer of the figure. A customer's written instructions are often purposefulIy vague to avoid stifling new ideas during conceptualization and productdefinition. Becausethey are unexpected, these creative ideas often excite and delight the customer. These ideas quickly become expected. The third and most significant area of clistomer satisfaction represents unstated or unspokenrequirements,asshown by the curve (n}he lower right comer of the figure. The cus- ~
.,.....,...,...--

r.~_.

c,

"33National Performance Review Staff, "Making the Big VTurn," Quality Progress (March 1996): 59-62 .

.~O;: . 3"'Top Providers ofTelephone Customer Service," Business Week (May 29, 1995): 6.

.'\,

CUSTOMER SATISFACTION

i!
"Exciten" Quickly become expected

Customer Isatisfied

./

.'

Easily identified

Requirements not satisfied

Reifuirements satiSfied

Obvious to the casual observer Known onl)' to experienced desi~en" Typically rediscovered of lessons leamCd ./"

t--'~""./

...,f;.

'

users and

,v-/
durin~alysis {
\ ..

~
Customer Idissatisfied Figure 3-8 Kano Model

J
for Three-

Reproduced, with permission, from Quality Function DevelOpment: ImplementatiQ[JJt1iQpal day Workshop (Allen Park, Mich.: American Supplier Institute, .In",)..

"'

torner may indeed be unaware of these requiren'1ents, or they may asswne that such reqUIrements~ beautomatically.supplied. Basic specifications often fail to take real-world nianufacturing requirements into llCCOWlt; many merely are based on industry standards or past practice. These implied requirements are the hardest to define but prove very costly if ignored. They may be rediScovered during an after-the-fact analysis of lessons learned. _"_ Realistically, the customer doesn't buy'a specification; the customer buys the prod" .

r>~
\G--!"

they People don't buy products; they buy transportation status. Cusuct orbuy-results;" service to fulfill a peed; Peter Drucker once said, "Customers don't or buy prOducts,. toiners are loyal to whatever best helps them achieve theiI' desired outcome.35 Just meeting a customer's needs is not enough; the organiiation mu&lexceed the customer's
Miller.

3$

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CHAPTER 3

Customer reports

NBA
Design reviews Surveys Interviews

Voice of the custoMer Clarify verbatims Affinity diagrams

Figure 3-9 Voice of the Customer

Adapted from Voice of the Customer (51. Louis, Mo .. McDonnell-Douglas Corporation, 1993).

needs. Figure 3-9, the voice of the customer diagram, summarizes much of the mate rial in this chapter.

Customer Retention
Customer retention is more powerful and effective than customer satisfaction. Cus. tomer retention represents the activities that produce the necessary custQmer satisfaction that creates customer loyalty, which act'jally improves the bottom line. Customer satisfaction surveys, focus groups, interviews, and observations can help determine what customers think of a service or a product. However, what people say and think is often different from what they do. Customers may be delighted with the tropical oils and aromas in a high-priced, well-advertised hair-care product but still end up buying the generic equivalent. Therefore customer satisfaction should also be measured by using the hard measures of cash register receipts, market share, the level of cus,tomer retention, and the number of referrals from customers. The better companies have established a link between customer satisfaction and the bottom line. The analysis iden- ~ l-ifiesthe number of customers and the revenue at risk.36

.c

36

A. Blanton Godfrey, "Beyond Satisfaction," Quality Digest (January 1996): 15.

CUSTOMER

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Customer retention moves customer satisfaction to the next level by determining what is truly important to the customers and making sure that the customer satisfaction system focuses valuable resources on things that really matter to the customer. Customer retention is the connection between customer satisfaction and the bottom line. Likewise, high employee retention has a significant impact on high customer retention. One way companies can manage customer retention is to pay attention to their present employees and to who they are hiring.37

'"nal Comments
Improved service frequently carries.a cost, so an organization must determine its return on the service investment by determining those elements of service that significantly improve revenues and market share. Diligent use of information-collecting tools and market research will enable an organization to identify those elements most critical to customer satisfaction. An organization should benchmark (see Chapter 8) the most successful corporations in the industry to determine where it stands relative to its own competitors. Benchmarking will provide information to improve processes and establish realistic goals. The organization must continually improve the methods of obtaining infomlation concerning the customer's needs and exp~ctations. It is the quality council's responsibility to periodically review the methods. World-class competitors tend to continually fine-tune their operations to achieve incremental improvements. They know that continuous improvement and customer satisfaction go hand-in-hand. Maximize customer satisfaction and retention, and the , financial results will follow.

,bemplary Organization38

,.

Merrill Lynch Credit Corporation (MLCC) offers real estate and securities-based consumer credit products-including home financing, personal credit, investment financing, and commercial relu-estate financing-to primarily affluent individuals. About 90 percent of its approximately 830 employees, known as partners, are located in MLCC's JacksonviIle, FL headquarters. As part of the Business Planning Process, each July senior managers translate the strategic imperatives into the company's Critical Few Objectives, key performance measures for their CFOs, and specific targets for the next one and three years. For example, a

37

John Goodman, David DePa1rria, and Scott Broetzmann, Quality Progress (December 1996): 35-39. Internet.

"Maximizing

the Value of Customer Feedback," Homepage,

38 Malcolm

Billdrige National Quality Award, 1997 Service Category Recipient. NISTlBaldrige

<..

CHAPTER

3 CFO to increase process productivity with an aim of increasing shareholder value . measured by the number of days to approve applications, with specific, ambitious, measurable goals. In turn, these CPOSprovide the basis for determining partner perfor, mance management plans. By involving all of the firm's partners in providing inf~ tion for the business planning process, and in regular refinements and progress review~ MLCC ensures that its plans are fact-based and linked to individual goals and objectives: MLCC segments its market into several categories of current and potential eusJ tomers, stratified by their assetlevels and age. Working with its parent company, uses in-depth research to target and deliver appropriate products and services. Its "Voice of the Client" process states customer satisfaction drivers for each client segment and for each of its credJt categories. These priority requirements provide the basis for alignj ing the company's processes and work groups and for identifying indicators and key per: foemance measures for each of its eight core processes. In turn, each of those indicators are tracked and used to identifyand put in place improvements in areas having the great. est impact on customer needs and satisfaction ... Information about the customer is truly paramount for MLCC. To ensure that its mar ket research is always current, MLCC continuously evaluates and improves its data on what its clients need and what they might want in the future. The client data come from an array of sources, ranging from surveys of clients and financial consultants in the field to written or telephone feedback, internal audits, syndicated research, and benchmarking studi~s. Satisfaction levels of competitors' clients alsOare used in analyzing client needs. Customer complaints are analyzed in depth, reo, viewed monthly, and reported back to MLCC regions to identify any sudden changes and to share lessons learned. Negative trends and recurring problems trigger process, improvement teams to develop cOUntermeasuresand to prevent recurrences. Clients receive acknowledgment of any complaint within two business days, and resolution is re-. ceived in no more than five business days. MLCC has impressive results to show that its focus on quality management and perfonnance excellence is a wiseinvestment. Net income rose 100% from 1994 to 1996 and .' exceeds the industry's average. Return on equity increased approximately 74 percent and its return on assets improved approxirnately36 percent in that same period. Key indicatorsfor loan delinquency rates and writeoffs compare favorably with the rest of the induStryand are clearly improving-as are the firm's totai loan originations, market share in originations, wholesale volume as a percentage of first mortgages, and size of servicingportfolio .

,1

. ~ercls.es
>~ Define the terms internal customer and ext~rnal customer. 2. Is the main CiJncem of most consumers the price Of the product or service? Explain.

CUSTOMER SATISFACTION

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3. List and explain the six most important factors that influence consumer purchases. 4. What is the best way to improve market share for a prQduct or service? 5. Design a customer satisfaction questionnaire for the following service industries: (a) (b) (c) (d) (e) (f) Bank Telephone company Hospital Accounting firm Law firm Hotel

6. As a manager of a small sporting goods store, describe how you would train front-line employees to handle customer complaints. 7. How does employee satisfaction relate to customer satisfaction? 8. Derme quality in two words. 9. Mechanical products, such as cars, break d~wn. Cars often are serviced by the car dealer. How can a car dealer use the service department to encourage future car sales? .