July 1996 € Volume 6 € Number 7

Customer Satisfaction -- A Strategic Issue

Keeping customers satisfied is a sound strategy for manufacturers. and making customer satisfaction a key strategic initiative requires only a clear vision, sound leadership and eight simple steps.


By Sam Tomas, CFPIM, CIRM, C.P.M.



It has been suggested that customers buy more than a product or a service -- they buy benefits. This would indicate that customers are more interested in what they perceive as the value received rather than just the product or service itself. If this is indeed true, then customer service takes on a new meaning. Customer service activities must now go beyond responding to customers only when they seek information or report problems. A company must now be prepared to offer customers outstanding values before, during and after sales by helping them solve whatever problems they might have and, in addition, for those customers that have customers of their own, by helping them to solve their customers' problems.

There are a number of very important reasons why companies should do everything they can to keep existing customers, but one in particular stands out. Studies have indicated that it costs more to attract new customers than to keep old ones, and that continuing customers purchase more products and services on a regular basis, are willing to pay premium prices because they are satisfied, are less expensive to service since they represent repeat business, and become excellent references for attracting new customers. Based on these observations, a very important customer service objective should be to do whatever is necessary to maintain ongoing customer relationships.

Today, however, providing satisfaction as a means of keeping customers may not be adequate, since competitors are becoming very adept at duplicating their competitors' products and services and offering their own excellent services before, during and after sales are made. As a result of this competitive environment, customers are already accustomed to receiving excellent service, but they dare to expect more in the future, and not even the distant future. As customers obtain access to all sorts of information from a variety of sources, such as the Internet, they are becoming aware of new products and services that are being offered, new technologies, environmental hazards, government product warnings, what's available, what's not available, and what to watch out for.

Armed with this newly acquired knowledge, customers now see the differentiating factors between competing companies. These factors include: What do customers want?
To understand customers, companies should start with an awareness of what their requirements and priorities are. It was reported in a recent issue of the Harvard Business Review that the best way to find out what customers think of a company's products and services is to ask the defectors, the ones that have stopped buying those products and services. The article pointed out that when customers become dissatisfied, many of them don't bother to complain since they don't believe it will do any good. Instead, their reaction is to buy the product or service somewhere else. Since feedback from defectors is important in understanding the reasons why customers are dissatisfied, companies need to develop ways to make it easy for customers to voice their complaints.


Strategic significance of customer service
Companies are beginning to recognize that customer service is now becoming a strategic (survival) factor in determining how a company should be managed. It goes beyond the product's or service's price, delivery, reliability and quality issues. Outstanding service is now recognized as one of the major distinguishing strategic factors that separates a company from its competitors. As such, it becomes a significant contributor to the achievement of the company's profitability, return on investment, and market share goals.


What are the benefits of satisfying customers?
Customer satisfaction has often been explained in terms of being satisfied with the quality of a product, where quality is defined as "anything the customer says it is." According to a PIMS letter on Business Strategy, No. 33, by the Strategic Planning Institute, companies that have higher perceived quality command a price premium of 10 percent or more, increase market share by an average of 6 percent per year, and have an average return on sales of 12 percent. Companies with lower perceived quality average only a 1 percent return on sales and lose market share by as much as 2 percent per year.

By providing customer satisfaction, another benefit results. Every customer that is satisfied tells four or five others about the product or service, while every one that is dissatisfied tells nine or 10 others about what they perceive were the problems.


How is customer satisfaction achieved?
Customers are satisfied through a process in which customer information is continuously used to manage the company's business. Steps in this process include:
1. Determine customer requirements, expectations, future requirements, complaints, suggestions. It is important to understand their perceptions of the quality of products and services. If possible, determine your competitors' abilities to satisfy customers for comparison purposes.

2. Determine what the customer purchasing criteria are and the relative importance of each.

3. Decide on company performance level required to satisfy the customer's purchasing criteria.

4. Determine which company process is used to provide the product or service.

5. Evaluate the process's ability to satisfy the customer's criteria.

6. Initiate appropriate changes to the process.

7. Measure customer satisfaction to determine success in meeting purchasing criteria.

8. Start over with Step 1 to keep up with changing customer requirements.
How are customer requirements determined?
The needs of your customers are determined by making it consistently easy for them to complain when they have problems and by consistently and systematically using different tools and methods for gathering customer satisfaction data throughout the product's or service's life. There are a variety of data collecting tools available, including surveys, market research, customer inquiry and complaint collection systems, and systems for recording information collected by sales, customer service and field service personnel at a minimum.

Customer requirements center around the criteria the customer uses to purchase products and services. Focus groups and interviews can be used to determine what these key purchase criteria are and their relative importance. Surveys can also be used to determine customer perceptions of how well organizations are meeting their criteria and how well the criteria are being met by the competition.

To measure customer satisfaction, objective standards must first be deployed. Each metric that is then developed should satisfy the following criteria:
1. It is acceptable as meaningful to the of the measurement.

2. It tells how well the goals and objectives are being met.

3. It is simple, understandable and repeatable.

4. It shows a trend.

5. It is unambiguously defined.

6. Its data is economical to collect.

7. It is timely.

8. It drives the appropriate action.
Measurements on company processes will help determine if a company is doing the things that will provide customer satisfaction correctly, while measurements of customer satisfaction will help determine if the things the company is doing are the correct things.

One effective technique for ensuring that customer requirements are understood by company personnel is to involve customers in identifying the issues. This can be done by holding joint meetings or by teaming efforts. Employees and customers working together can be very effective in pinpointing specific requirements and in developing mutually acceptable solutions, not just in the short term, but into the future. The use of quality function deployment as a tool can also enhance the process tremendously in group meetings or when teaming.


Developing and managing a customer satisfaction culture
Permeating a culture that makes customer satisfaction a key strategic objective starts with executive leadership and support. Leadership should develop a customer-focused vision and should share the vision with employees and customers alike. Leaders should further demonstrate the vision through their own behavior. The vision must steer the organization from thinking about its own needs to encouraging thinking about the needs of the customers. It should cause the organization to think about ways to cut customer costs instead of emphasizing only internal cost-cutting; encourage ways to increase customer sales, not just its own; look for ways to improve the customer's operations, develop ways to improve the customer's productivity and determine how to help customers to help their customers, and not look for ways to satisfy only its own customers.

The new customer-focused business procedure that companies should be developing is one that will make it easy for customers to complain when they have a problem and to receive assurance that their problem will be resolved. In this procedure, be cautious of handing the customer off to someone else too many times. Customers apparently don't mind receiving one hand-off, provided it is to an expert that will resolve their problem. More hand-offs than that creates the dissatisfaction that results in customers taking their business elsewhere.

Training on all aspects of customer satisfaction is another important requirement for providing value-added customer service. All company business and manufacturing processes that relate to customer purchases should be identified, reviewed and improved, whether there are currently any customer complaints or not. This becomes an excellent area for training. Also, since quality is always a customer satisfaction issue, quality improvement processes should also be identified, measured to determine correct performance, and corrected or improved if required.


The bottom line
The purpose of manufacturing is to produce quality products in a relatively short time to satisfy customer orders, and to meet customer expectations at a minimum, but preferably, to exceed them. Manufacturing understands that it must meet the challenges profitably. To ensure that, manufacturing concerns must never lose sight of the key factor-customer satisfaction.


Sam Tomas is an adjunct faculty member at the University of Phoenix where he teaches in the Management of Technology graduate program.

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