BPSM Mod1 (2)

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Amity Business School

Business Policy

&

Strategic Management

.. Semester III

40 Contact

Hrs.

4 Credits

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Transition from Old to New age Policies

Philosophy of integrating market driven focus elements for continuous

improvement in all work processes of the enterprise becomes necessary

due to:

Customer driven market revolution Fierce global competition

Unpredictable market, changing expectations & moving targets

Need to develop a customer focused culture

Integrate market driven culture

Focus on quality, cost, productivity

Customer loyalty & Change Management

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Evaluation of Competitive Capabilities

Not only how much better than you own history but how muchbetter than your competitors

What is that you do that the customers value better than the

competition

Evaluation of your resources is of no value unless done in

respect to your competitors

If you are not the best in a critical activity, you are sacrificing

the competitive advantage by continuing to do what you aredoing with old practices

Only the firms that are able to continually build new strategic

assets faster and cheaper than the competition will earn superior

customer value and returns over long period

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Focus Elements of a Market Driven Enterprise

Commitment to customer satisfaction

Human Resource Development

Total Quality Culture

Error Prevention Philosophy

Zero Error Solutions

Design & Product Quality

Quality Services

Quality of Management & Services

People Development

Productivity, efficiency and effectiveness

Process & Technologies for continuous improvement

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Total Quality Management

concepts & understanding

TQM is a philosophy that represents a set of guiding

principles that lays the foundation of a continuously

improving and customer driven organization

The first job we have is to turn out quality merchandise that consumers will buy andThe first job we have is to turn out quality merchandise that consumers will buy andkeep on buying. If we produce it efficiently and economically, we will earn a profit, in whichkeep on buying. If we produce it efficiently and economically, we will earn a profit, in which

you will share.you will share.

- William Cooper Procter- William Cooper Procter

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TQM IS

Encompassing and mobilizing entire organization to satisfy the customer

Improving each individual and groups within the organization

Integrating the philosophy and practices in day to day approach to work

Influencing all product, services, systems, process & technology Long term and continuous and is sensitive to the social responsibilities of

the enterprise

Supporting High Performance Culture through teamwork, trust &

leadership

IT IS NOT A program, that has a beginning & an end.

It is a continuous journey.

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History

Craftsmen Early days, generations learning, own inspector.

Early 20th Century Unskilled repetitive, start of interchangeability.

Ford Story.Standardization, concepts for quality, Mass Mfg.

Post War..American Society for Quality 1944

Safety, Public interest producer beware

Dr. Joseph Juran & Dr. Edward Demming story

Pioneering work in Total Quality ( in Japan )

Demming returns to US (1980-1993)

Product Quality to Performance Excellence

Quality of Management as important as Management of Quality

American Society for Quality identifies future challenges Partnering, Learning system, Adaptability and speed of change

Environmental Sustainability, Knowledge Focus, Globalization

Customization & Differentiation, Shifting Demographics

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Some leaders of Quality

Malcom Baldrige

Joseph M Juran

Deming
http://www.google.co.in/imgres?imgurl=http://www.hkbu.edu.hk/~samho/tqm/deming.gif&imgrefurl=http://www.hkbu.edu.hk/~samho/tqm/index.htm&usg=__nCx1BASDOvqKHNZ9_xLG6T9QDzU=&h=367&w=311&sz=34&hl=en&start=12&um=1&itbs=1&tbnid=D4fs65_OGvVnVM:&tbnh=122&tbnw=103&prev=/images%3Fq%3Ddeming%2Baward%26um%3D1%26hl%3Den%26sa%3DN%26tbs%3Disch:1

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Jurans Quality management Ideas

. The following table outlines the major points of Dr. Juran's quality management ideas:

Quality Trilogy: Quality Planning

Identify who are the customers. Determine the needs of those customers. Translate those needs into our language. Develop a product that can respond to those needs. Optimise the product features so as to meet our needs and customer needs. Quality Improvement Develop a process which is able to produce the product. Optimise the process.

Quality Control Prove that the process can produce the product under operating conditions with minimal

inspection. Transfer the process to Operations.

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The Baldrige Award is given by the USPresident to businesses (manufacturing as

well as service) and

to education and healthcare organisations

that apply and are

judged to be outstanding in seven areas:

(1) leadership,(2) strategic planning, (3) customer and

market focus,

(4) measurement, analysis and knowledge

management,

(5) human resource focus, (6) process

management and

(7) results

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Edward Deming

International Activities Statistician, Allied Mission to Observe the Greek Elections, January-April 1946; July-

October 1946 Consultant in sampling to the Government of India, January andFebruary 1947; December 1951; March 1971Delegate from the A.A.A.S. to the Indian Science Congress, New Delhi, January 1947Adviser in sampling techniques to the Supreme Command of the Allied Powers,Tokyo, 1947 and 1950

Teacher and consultant to Japanese industry, through the Union of JapaneseScientists and Engineers 1950, 1951, 1952, 1955, 1960, 1965Member of the United Nations Sub-Commission on Statistical Sampling, 1947-52Consultant to the Census of Mexico, to the Bank of Mexico, and to the Ministry ofEconomy, 1954, 1955Consultant., Statistisches Bundesamt, Wiesbaden, 1953Consultant to the Central Statistical Office of Turkey, 1959-1962Lecturer, London School of Economics, March 1964Lecturer, Institut de Statistique de l'Universite de Paris, March 1964Consultant to the China Productivity Center, Taiwan, 1970, 1971Lecturer in Santiago, Crdoba (Argentina), and Buenos Aires, under the auspices ofthe Inter American Statistical Institute, 1971.

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TQM

All Employees involved

Empowerment

TeamworkQuality Strategy

Quality Assurance

Quality Systems ISOQuality Planning

Quality PolicyQuality ControlsProblem Solving

Journey to TQM.

Quality Control

Quality StandardsStatistical ControlsProcess PerformanceTreat Quality Problems

Inspection

Error DetectionRectificationUnhappy Customer

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1313

History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)

Quality awareness in U.S. manufacturing industry duringQuality awareness in U.S. manufacturing industry during

1980s: from Little Q to Big Q - Total Quality1980s: from Little Q to Big Q - Total Quality

ManagementManagement

Malcolm Baldrige National Quality Award (1987)Malcolm Baldrige National Quality Award (1987)

Disappointments and criticismDisappointments and criticism

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1414

Emergence of quality management in service industries,Emergence of quality management in service industries,

government, health care, and educationgovernment, health care, and education

Evolution of Six SigmaEvolution of Six Sigma

Current and future challenge: keep progress in qualityCurrent and future challenge: keep progress in quality

management alivemanagement alive

History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)

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Contemporary Influences on QualityContemporary Influences on Quality

Partnering

Learning systems

Adaptability and speed of change

Environmental sustainability Globalization

Knowledge focus

Customization and differentiation

Shifting demographics

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1616

Definitions of QualityDefinitions of QualityDefinitions of QualityDefinitions of Quality

Transcendent definitionTranscendent definition: excellence: excellence

Product-based definitionProduct-based definition: quantities of product attributes: quantities of product attributes

User-based definitionUser-based definition: fitness for intended use: fitness for intended use

Value-based definitionValue-based definition: quality vs. price: quality vs. price

Manufacturing-based definitionManufacturing-based definition: conformance to specs: conformance to specs

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1717

Quality PerspectivesQuality Perspectives

CustomerCustomer

DistributionDistribution

productsproducts

andand

servicesservices

needsneeds

transcendent &transcendent &

product-basedproduct-based user-baseduser-based

manufacturing-manufacturing-

basedbased

value-basedvalue-based

MarketingMarketing

DesignDesign

ManufacturingManufacturing

InformationInformationflowflow

ProductProductflowflow

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Paradigm Shift

From.

Management of Quality

to

Quality of Management

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Criteria

Leadership

Strategic Planning

Customer & Market Focus

Information & Analysis

Human Resources Development

& Planning

Process Management

Business Results

Weightage

12%

8%

8%

8%

10%10%

44%

Malcolm Baldrige

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Understanding of Criteria

1. Leadership Leadership System.. How the senior leaders guide the company in setting directions

and in developing and sustaining an effective leadership system.

Company Responsibility & Citizenship How the company addresses the its

responsibility to the public and how it practices good citizenship.

1. Strategic Planning

Strategy Development Process.. How the company sets strategic directions to betterdefine and strengthen its competitive position and how the development process leads

to action plan for deploying and aligning key plan and performance requirements.

Company Strategy.. How the performance requirements and measures align with the

human resource plan and how the plans project the cos future as compared to the

competitors and key benchmarks.

1. Customer & Market Focus Customer & Market Knowledge.. How the company determines the long term

requirements and preference of target and potential customers and market and

anticipate needs to develop business opportunities .

Customer Relationship & Satisfaction Enhancement..How the company determines

and enhances the satisfaction of customers to strengthen relationships to improve

current offerings and to support customer and market related planning.

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4. Information & Analysis

Selection & Use of Information & DataHow the co. selects, manages and uses theinformation and data needed to support key company process and improve the cosperformance.

Selection & use of comparative information & data.. How the company selects,manages and uses comparative information data to improve cos competitive position.

Analysis & Review of Companys Performance..How the co. analyses and reviewsoverall performance to assess the progress relative to plans to identify key areas of

improvement.

5. Human Resources Development & Management

Work Systems.. What is the companys work & job design and its compensation andrecognition approaches to enable and encourage all employees to contribute effectivelyto achieve the cos performance and learning objective.

Employee Education Training & Development.. How the cos training and educationaddresses its plan and needs including building knowledge & capabilities & contribute toimproved employees performance and development.

Employee Well-Being & Satisfaction..How the company maintains its workenvironment and work climate to support the well-being, satisfaction and motivation ofall its employees

Understanding of Criteria (contd.)

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6. Process Management

Management of Product & Service Processes..How the significantly modified and

customized products and services are designed. How the product/services delivery

systems are designed, implemented and improved.

Management of Support Process.. How the cos key support processes are designed,

managed and continuously improved.

Management of Supplier and Partnering..How the cos supplier and partnering

processes, performance and relationships are managed and improved.

7. Business Results

Customer Satisfaction Results..How the co. performance on Customer Satisfaction

Financial & Market Results.Cos key financial & marketplace performance

Human Resource ResultsCos Human Resource results including employee well-being, satisfaction, development and work system performance

Supplier & Partner ResultsCos supplier and partner results

Company-Specific ResultsHow the companys key operational performance and

results significantly contribute to key company goals- customer satisfaction, operational

effectiveness and financial/market place and performance.

Understanding of Criteria ( Contd.)

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LeadershipLeadership

The ability to positively influence people andThe ability to positively influence people and

systems under ones authority to have a meaningfulsystems under ones authority to have a meaningful

impact and achieve important resultsimpact and achieve important results

A it B i S h l

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The Baldrige Leadership TriadThe Baldrige Leadership Triad

Leadership

Strategic

Planning

Customer andMarket Focus

Operations

A it B i S h l

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Executive LeadershipExecutive Leadership

Defining and communicating business directionsDefining and communicating business directions

Ensuring that goals and expectations are metEnsuring that goals and expectations are met

Reviewing business performance and taking appropriateReviewing business performance and taking appropriate

actionaction Creating an enjoyable work environmentCreating an enjoyable work environment

Soliciting input and feedback from customersSoliciting input and feedback from customers

Ensuring that employees are effective contributorsEnsuring that employees are effective contributors

Motivating, inspiring, and energizing employeesMotivating, inspiring, and energizing employees Recognizing employee contributionsRecognizing employee contributions

Providing honest feedbackProviding honest feedback

A it B i S h l

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Key IdeaKey Idea

Effective leadership requires five core

leadership skills:

vision

Empowerment

Intuition

self-understanding

and value congruence.

A it B i S h l

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2727

LeadingLeading Practices LeadershipLeadingLeading Practices Leadership

Create a customer-focused strategic vision and clear qualityvalues

Create and sustain leadership system and environment forempowerment, innovation, and organizational learning

Set high expectations and demonstrate personal commitmentand involvement in quality

Integrate quality values into daily leadership andmanagement and communicate extensively

Review organizational performanceReview organizational performance Create an environment and governance system that fostersCreate an environment and governance system that fosterslegal and ethical behaviorlegal and ethical behavior

Integrate public responsibilities and community support intoIntegrate public responsibilities and community support intobusiness practicesbusiness practices

A it B i S h l

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Leadership SystemLeadership SystemLeadership SystemLeadership System

Leadership SystemLeadership System

.. how decisions are made, communicated, and.. how decisions are made, communicated, and

carried out at all levels; mechanisms for leadershipcarried out at all levels; mechanisms for leadership

development, self-examination, and improvementdevelopment, self-examination, and improvement

Effectiveness of Leadership SystemEffectiveness of Leadership System

depends in part on its organizational structuredepends in part on its organizational structure


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Key IdeaKey Idea

AnEffective Leadership System respects the

capabilities and requirements of employees

and other stakeholders, and sets highexpectations for performance and

performance improvements.


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GovernanceGovernance

Governance

. The system of management and controls

exercised in the stewardship of an organization.Approving strategic directionMonitoring and evaluating CEO performance

Succession planning

Financial auditingExecutive compensation

Disclosure

Shareholder reporting


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Leadership and SocialLeadership and Social

ResponsibilitiesResponsibilities

EthicsEthics

Health, safety, and environmentHealth, safety, and environment Community supportCommunity support


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Key IdeaKey Idea

Practicing good citizenship refers to

leadership and supportwithin the limits of

an organizations resourcesof publiclyimportant purposes, including improving

education, community health, environmental

excellence, resource conservation,community service, and professional

practices.


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Leadership ..TQM relevance

Definition Traditional

Leadership for Quality Assortment of behaviors

vision, hope, stimulation, mission, transformation dreams toreality, stewardship, Integration, courage, communication,consensual, conviction, empowering

deploying, motivating, motivating and tenacity.

Executive Leadership-not the only one

Changed Business Scenario & New Economy demanding Unit,Team, Project and Transformational Leadership

No more the one or few men show

Strategic Plan Integration

Quality is the key element to strategic planning for Qualitymanagement and Performance Excellence under the currentbusiness environment

Identification of such competitive advantages that is driven bycustomer and market.


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Leadership ..TQM relevance

Effective Leadership

Five Core Skills vision, empowerment, intuition, self-understanding & valuecongruence

Leadership Practices

Customer Focus, Strategic vision, Quality value

Creating sustainable leadership, environment, empowerment, innovate

Setting high expectations, demonstrate substantial personal commitment andinvolvement, missionary zeal and constancy of purpose

Integrating quality values in daily values, extensive communication

Integrate public responsibility and community support in business practices

TQ Leadership Contrasts.. Details

Leadership & Public Responsibilities

Public Health, safety & environment

Compliance

Corporate Citizenship, Community education, welfare, conservation

Industry Obligation to Community


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TQ Leadership Contrasts

Traditional

Plan Projects

Make plans

Organize resource

Preach M.B.O Push Products

Lip service to quality

Sell to customer

Perform R&D

Control People

Control through systems

Reward conformance punishdeviation

Maintain status QUO

TQ Leaders

Practice

Envision the future

Optimize the resource

Participative management Produce

Exemplary quality Service the customer

Innovate

Motivate people Development, talent & system

Reward effort, skilldevelopment and empower

Continuous improvement


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Strategic PlanningThe process of envisioning organizations future and

developing necessary procedures and operations to shape andachieve that future

Concept Plan that integrates an organizations major goals

Policies and actions sequences in alignment and supporting the goals

Marshalling and allocating organizations resources into an uniqueand viable posture

Based on ones relative strengths and competencies and anticipatedchanges in the environment

Counter measures and actions anticipating contingent moves byintelligent opponents


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Leading Practices

Top management, employees & even customers actively participate inthe planning process

Systematic planning process for strategy development and deploymentincluding measurement, feedback and review.

Gathering and analysis of variety of data external & internal factors

Alignment of short-term action plans with long term strategic objectives. Derive human resource plans from strategic objectives and action plansDerive human resource plans from strategic objectives and action plans

Strategic Planning Influence of TQ culture

Vision

Mission

Guiding Principle

Strategies ObjectivesAction

Plans

Environmental

Scan

Strategy Development


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MissionMission

Definition of products and services, markets,Definition of products and services, markets,

customer needs, and distinctive competenciescustomer needs, and distinctive competencies

SolectronSolectron: : to provide worldwide responsiveness to ourto provide worldwide responsiveness to our

customers by offering the highest quality, lowest totalcustomers by offering the highest quality, lowest total

cost, customized, integrated, design, supply chain, andcost, customized, integrated, design, supply chain, andmanufacturing solutions through long-term partnershipsmanufacturing solutions through long-term partnerships

based on integrity and ethical business practices.based on integrity and ethical business practices.


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VisionVision

.Where the organization is headed and.Where the organization is headed and

what it intends to be.what it intends to be. Brief and memorable - grab attentionBrief and memorable - grab attention

Inspiring and challenging - creates excitementInspiring and challenging - creates excitement

Descriptive of an ideal state - provides guidanceDescriptive of an ideal state - provides guidance

Appealing to all stakeholders - employees can identify withAppealing to all stakeholders - employees can identify with

Solectron:Solectron:Be the best and continuously improveBe the best and continuously improve


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Values (Guiding Principles)Values (Guiding Principles)

Defines attitudes and policies for all employees, whichDefines attitudes and policies for all employees, which

are reinforced through conscious and subconsciousare reinforced through conscious and subconscious

behavior at all levels of the organization.behavior at all levels of the organization.

Pepsico:Pepsico: Integrity, Honesty, Teamwork, Balance,Integrity, Honesty, Teamwork, Balance,

AccountabilityAccountability

Whirlpool:Whirlpool: Respect, Integrity, Teamwork, TrustRespect, Integrity, Teamwork, Trust

Leadership, Customer PassionLeadership, Customer Passion


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y

Environmental AssessmentEnvironmental Assessment

TEMPLES or PESTLE

Customer and market requirements, expectations and opportunitiesCustomer and market requirements, expectations and opportunities Technological and other innovationsTechnological and other innovations

Organizational strengths and weaknessesOrganizational strengths and weaknesses

Financial, societal, ethical, regulatory and other potential risksFinancial, societal, ethical, regulatory and other potential risks

Changes in global or national economyChanges in global or national economy

Factors unique to the organization, such as partner and supplyFactors unique to the organization, such as partner and supply

chain needschain needs


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y

Key Idea

Strategies are broad statements that set the direction

for the organization to take in realizing its mission

and vision.

Strategic objectives are what an organization must

change or improve to remain or become competitive.

Action plans are things that an organization must doto achieve its strategic objectives.


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y

Converting the strategies into small doable goals and then ultimately

deployed to the right teams & people in form of SMART objectives

Balance Scorecard Hoshin Kanri or Hoshin Planning or Policy Deployment

Management by Planning

Team based deployment is most suited to TQ environment

Strategic Deployment TQ way


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y

Balance Scorecard


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y


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4646

Policy Deployment

(Hoshin Kanri)

Policy Deployment

(Hoshin Kanri)

Top management vision leading to long-termTop management vision leading to long-term

objectivesobjectives

Deployment through annual objectives and actionDeployment through annual objectives and actionplansplans

Negotiation for short-term objectives and resourcesNegotiation for short-term objectives and resources

(catchball)(catchball) Periodic reviewsPeriodic reviews


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Leadership and OrganizationalLeadership and Organizational

StructureStructure

Basic types of organizational structuresBasic types of organizational structures

Line organizationLine organization

Line and staff organizationLine and staff organization

Matrix organizationMatrix organization


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Key Idea

As more and more companies accept the process view of

organizations, they are structuring the quality organization

around functional or cross-functional teams.


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Strategic Planning Customer & market driven quality integrated into bloodstream

Integrated into the product, operations and service processes

Operational Excellence to deliver on above

Deployment Deployment to the right people with smart objectives

Organizations ability to translate strategic objective into action plans

Caliberations What the auditor will look for

Customer DrivenQuality

Operational

Excellence

TQM way to implement strategy

TQ aspects include

EmpowermentDiffused Leadership

Institutionalized

LearningInnovation and

Experimentation


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5050

Focusing on CustomersFocusing on Customers


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Key IdeaKey Idea

To create satisfied customers, the organization

needs to identify customers needs, design the

production and service systems to meet thoseneeds, and measure the results as the basis for

improvement.


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5252

Importance of CustomerImportance of Customer

Satisfaction and LoyaltySatisfaction and Loyalty

Satisfaction is an attitude; loyalty is a behavior

Loyal customers spend more, are willing to pay higherprices, refer new clients, and are less costly to do businesswith.

It costs five times more to find a new customer than to keep

an existing one happy.

A firm cannot create loyal customers without first creatingsatisfied customers.


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Key IdeaKey Idea

Customer wants and needs drive competitive

advantage, and statistics show that growth in

market share is strongly correlated with

customer satisfaction.


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Customer Satisfaction ModelCustomer Satisfaction Model

Perceived

quality

Customer

complaints

Perceived

valueCustomer

satisfaction

Customer

expectations Customer

loyalty


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5555

Customer-Driven Quality CycleCustomer-Driven Quality Cycle

measurement and feedback

Customer needs and expectations

(expected quality)

Identification of customer needs

Translation into product/service specifications

(design quality)

Output (actual quality)

Customer perceptions (perceived quality)

PERCEIVED QUALITY is a comparison of

ACTUAL QUALITY to EXPECTED QUALITY


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Key IdeaKey Idea

Many organizations still focus more on

processes and products from an internal

perspective, rather than taking theperspective of the external customer.


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Leading PracticesLeading Practices

Define and segment key customer groups andDefine and segment key customer groups andmarketsmarkets

Understand the voice of the customer (VOC)Understand the voice of the customer (VOC)

Understand linkages between VOC and design,Understand linkages between VOC and design,production, and deliveryproduction, and delivery

Build relationships through commitments, provideBuild relationships through commitments, provideaccessibility to people and information, set serviceaccessibility to people and information, set service

standards, and follow-up on transactionsstandards, and follow-up on transactions Effective complaint management processesEffective complaint management processes

Measure customer satisfaction for improvementMeasure customer satisfaction for improvement


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Key Customer Groups

Organization levelOrganization level consumersconsumers

external customersexternal customers

employeesemployees societysociety

Process levelProcess level internal customer units or groupsinternal customer units or groups

Performer levelPerformer level individual internal customersindividual internal customers


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Identifying Internal CustomersIdentifying Internal Customers

What products or services are produced?What products or services are produced?

Who uses these products and services?Who uses these products and services?

Who do employees call, write to, or answerWho do employees call, write to, or answer

questions for?questions for?

Who supplies inputs to the process?Who supplies inputs to the process?


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6060

AT&T Customer-Supplier ModelAT&T Customer-Supplier Model

Requirements

and feedback

Requirements

and feedback

Your

Suppliers

Your

Processes

Your

CustomersInputs Outputs


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Key IdeaKey Idea

The natural customer-supplier linkages among

individuals, departments, and functions build

up the chain of customers throughout anorganization that connect every individual and

function to the external customers and

consumers, thus characterizing the

organizations value chain.


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Customer SegmentationCustomer Segmentation

DemographicsDemographics

GeographyGeography

VolumesVolumes

Profit potentialProfit potential


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Key IdeaKey Idea

Segmentation allows a company to prioritize

customer groups, for instance by considering

for each group the benefits of satisfying their

requirements and the consequences of failing to

satisfy their requirements.


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Key Dimensions of QualityKey Dimensions of Quality

Performance primary operating characteristics

Features bells and whistles

Reliability probability of operating for specific timeand conditions of use

Conformance degree to which characteristicsmatch standards

Durability - amount of use before deterioration orreplacement

Serviceability speed, courtesy, and competence ofrepair

Aesthetics look, feel, sound, taste, smell


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Key Dimensions of Service QualityKey Dimensions of Service Quality

ReliabilityReliability ability to provide what was ability to provide what waspromisedpromised

AssuranceAssurance knowledge and courtesy of knowledge and courtesy ofemployees and ability to convey trustemployees and ability to convey trust

TangiblesTangibles physical facilities and appearance physical facilities and appearanceof personnelof personnel

EmpathyEmpathy degree of caring and individual degree of caring and individualattentionattention

ResponsivenessResponsiveness willingness to help customers willingness to help customersand provide prompt serviceand provide prompt service


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6666

Kano Model of Customer NeedsKano Model of Customer Needs

Dissatisfiers:Dissatisfiers: expected requirementsexpected requirements

Satisfiers:Satisfiers:

expressed requirementsexpressed requirements

Exciters/delighters:Exciters/delighters: unexpected featuresunexpected features


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Key IdeaKey Idea

As customers become familiar with them,

exciters/delighters become satisfiers over

time. Eventually, satisfiers becomedissatisfiers.


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6868

Customer Listening PostsCustomer Listening Posts

Comment cards and formal surveysComment cards and formal surveys

Focus groupsFocus groups

Direct customer contactDirect customer contact

Field intelligenceField intelligence

Complaint analysisComplaint analysis

Internet monitoringInternet monitoring


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Key IdeaKey Idea

Companies use a variety of methods, or

listening posts, to collect information about

customer needs and expectations, theirimportance, and customer satisfaction with the

companys performance on these measures.


l f Cl if i C

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Tools for Classifying CustomerTools for Classifying Customer

RequirementsRequirements

Affinity diagram Tree diagram


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Moments of TruthMoments of Truth

Every instance in which a customer comes inEvery instance in which a customer comes incontact with an employee of the company.contact with an employee of the company.

Example (airline)Example (airline)Making a reservationMaking a reservation

Purchasing ticketsPurchasing tickets

Checking baggageChecking baggage

Boarding a flightBoarding a flight Ordering a beverageOrdering a beverage

Requests a magazineRequests a magazine

DeplanesDeplanes

Picks up baggagePicks up baggage


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Key IdeaKey Idea

An organization builds customer loyalty by

developing trust, communicating with

customers, and effectively managing the

interactions and relationships with customers

through approaches and its people. Companies

must carefully select customer contact

employees, train them well, and empower them

to meet and exceed customer expectations.


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Customer Relationship ManagementCustomer Relationship Management

Accessibility and commitmentsAccessibility and commitments

Selecting and developing customer contactSelecting and developing customer contact

employeesemployees Relevant customer contact requirementsRelevant customer contact requirements

Effective complaint managementEffective complaint management

Strategic partnerships and alliancesStrategic partnerships and alliances

Exploiting CRM technologyExploiting CRM technology


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Key IdeaKey Idea

To improve products and processes

effectively, companies must do more than

simply fix the immediate problem. They needa systematic process for collecting and

analyzing complaint data and then using

that information for improvements.


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Measuring Customer SatisfactionMeasuring Customer Satisfaction

Discover customer perceptions of businessDiscover customer perceptions of business

effectivenesseffectiveness

Compare companys performance relative toCompare companys performance relative to

competitorscompetitors

Identify areas for improvementIdentify areas for improvement

Track trends to determine if changes result inTrack trends to determine if changes result in

improvementsimprovements


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Key IdeaKey Idea

An effective customer satisfaction

measurement system results in reliable

information about customer ratings ofspecific product and service features and

about the relationship between these ratings

and the customers likely future market

behavior.


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Survey DesignSurvey Design

Identify purposeIdentify purpose

Determine who should conduct the surveyDetermine who should conduct the survey

Select the appropriate survey instrumentSelect the appropriate survey instrument

Design questions and response scalesDesign questions and response scales


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Key IdeaKey Idea

The types of questions to ask in a survey

must be properly worded to achieve

actionable results. By actionable, we meanthat responses are tied directly to key

business processes, so that what needs to be

improved is clear; and information can be

translated into cost/revenue implications to

support the setting of improvement

priorities.


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Performance-Importance AnalysisPerformance-Importance Analysis

Performance

Impor

tance

Low High

Low

High

Who cares? Overkill

Vulnerable Strengths


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Key IdeaKey Idea

Appropriate customer satisfaction measurement

identifies processes that have high impact on

satisfaction and distinguishes between lowperforming processes low performance and

those that are performing well.


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Difficulties withDifficulties with

Customer Satisfaction MeasurementCustomer Satisfaction Measurement

Poor measurement schemesPoor measurement schemes

Failure to identify appropriate quality dimensionsFailure to identify appropriate quality dimensions

Failure to weight dimensions appropriatelyFailure to weight dimensions appropriately

Lack of comparison with leading competitorsLack of comparison with leading competitors

Failure to measure potential and former customersFailure to measure potential and former customers

Confusing loyalty with satisfactionConfusing loyalty with satisfaction


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Customer Perceived ValueCustomer Perceived Value

CPV measures how customers assess benefitsCPV measures how customers assess benefits

such as product performance, ease of use, orsuch as product performance, ease of use, or

time savingsagainst costs, such as purchasetime savingsagainst costs, such as purchase

price,installation cost or time, and so on,inprice,installation cost or time, and so on,in

making purchase decisions.making purchase decisions.


Loyalty grid

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Loyalty grid


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CUSTOMER LOYALTY RELATIONSHIPS

Non-competitive zone

Regulated, Monopoly or few

substitutes. Dominant Brand

Equity. High cost of

switching. Powerful Loyalty

Prog.

Proprietary Technology.

Highly competitive zone.

Commoditization or low

differentiation. Consumer

Indifference. Many

substitutes. Low cost of

Switching

Relationship of Customer Satisfaction and Profitability

Total Satisfaction for captive customers

Tyranny of Averages

Satisfying Target Segments

Ultimate Source of Focus: affinity Groups


Customer Loyalty Grid

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Customer Loyalty Grid


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THE IMPORTANCE OF FOCUS

Organization that have not identified the customers they are targeting have a

special handicap in achieving total customer satisfaction and create many merely

satisfieds.

Customer tell about only extra-ordinary experience

BPSM Mod1 (2)

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