Total Quality Management BUS 3 – 142 Voice of the Customer February, 2013

1. Total Quality ManagementBUS 3 – 142Voice of the Customer February, 2013

2. Key Points about Customer Relationships • Customers tell twice as many people about bad experiences as they tell people about good experiences • If a company resolves complaints quickly and well, then 70% of the upset customers will remain • Keeping customers is more profitable than finding new customers • Service organizations rely on repeat business for ~90% of revenue • The cost of finding a new customer is six (6) times greater than the cost of keeping an existing customer • Approximately 80% of new product and service ideas come from customer ideas It is hard to FIND customers. Once you find them, it takes hard work and brains to KEEP them

3. Internal and External Customers • Internal Customers are defined as the name suggests: • Individuals receiving goods or services from within the same organization • Applies within and across processes and functions • Upstream and downstream operators on an assembly line (within) • Purchasing, Receiving, and Accounts Payable working together on the Procurement process (internal) • Sales, Operations, and Finance working together on Revenue and Margin planning (internal) • External customers engage in a financial transaction • Goods and services provided in exchange for money

4. Customer Expectations Expectations change over time – The “bar is raised” Foster, Quality Management, Fifth Edition, Prentice Hall

5. Focus on Improving in the areas that Customers Value Important to the Customer but not your Strength Foster, Quality Management, Fifth Edition, Prentice Hall

6. Customer Relationships • Customer relationships need to be managed like other valuable assets needs to be managed • There are four (4) components of Customer Relationship Management • Complaint resolution • Feedback • Guarantees • Corrective Action Customer “relationships” are different from customer “relations”

7. Cost To Serve • Profitable vs. Unprofitable customers • Specifications vs. Price • Packaging requirements • Exceptions to be managed • Loss leaders • Premiums for premium service • Range of products – not tightest specs while other suppliers provide easier-to-produce items • Expedited shipment modes • Consigned inventory • Frequent design and schedule changes

8. Sources of Complaints over Quality • Regulatory complaints • Employee complaints • Customer complaints • Less reliance on 800 number phone banks, more internet self serve • Often very public, embarassing, and costly (Yelp, Facebook, Twitter, Angie’s List, Consumers Reports, etc…. • Communication • Misaligned expectations • Vague requirements The small percentage of customers who complain are likely to represent a much larger population of dissatisfied customers

9. Customer Complaint Resolution The goal is to turn a negative situation into at least a neutral situation • Compensate the customer for the loss • When there are damages, significant attempts should be made to make the damaged party whole • Sincerely apologize • Make resolution easy

10. Customer Defections A critical piece of data is to monitor customers who do NOT repeat their business • Customers are classified as active vs. inactive. If the inactivity can be attributable to a quality or performance issue, then corrective action must be taken • Defections are often the SILENT dissatisfied customers and must be monitored and turned around

11. Guarantees Five (5) Key Elements of a Good Guarantee • Unconditional • No small print • Meaningful • Address ALL customer grievances • Provide full recovery from financial loss • Understandable • Items in and out of scope explicitly stated • Communicable • Can often double as a marketing tag line • Easy for the Customer to act on • “No questions asked” • Free Sshipping • Etc…