THE CUSTOMER IS KEY

colorfuleggnogSoftware and s/w Development

Feb 17, 2014 (3 years and 5 months ago)

51 views



THE CUSTOMER IS KEY
Gaining An Unbeatable Advantage
Through Customer Satisfaction
Milind M Lele
With
Jagdish N Sheth
Published 1987


Nothing Else Comes Close

New Inventions Don’t

Technology Doesn’t

Lower Labor Costs Don’t

Regulation Doesn’t

Size Doesn’t
1. Happy Customers: The
Unbeatable Advantage


The Idea Is Not New

Keeping customers happy is the very basis of the
marketing concept that many firms claim to follow.


The view that an industry is a customer-satisfying
process, not a goods-producing process, is vital for all
businessmen to understand. An industry begins with a
customer and his need, not with a patent, a raw material or
a selling skill. A truly marketing-minded firm tries to
create value-satisfying goods and services that consumers
will want to buy.”
Ted Levitt –1960 –Article in HBR
1. Happy Customers: The
Unbeatable Advantage


1. Happy Customers: The
Unbeatable Advantage
Authors conducted a two year research, surveyed
different industries and identified 15 “Winners”.
Conclusions:

The Marketing Concept Works

The Key Issue is Cost versus Customer

Most Companies are Cost-Focused

The Winners’ secret is their holistic approach


1. Happy Customers: The
Unbeatable Advantage
The Basic Conflict: Cost versus Customer.
1.
Firm can Cut Costs
2.
It Can Maximize Customer Satisfaction
They are not the same – Key Difference is that cost
minimization takes an internal, production-centered
view. It treats the customer’s need as a given and make’s
the organization’s goal that of meeting these needs as
efficiently as possible.
The alternative, customer-oriented approach is
externally focused. It challenges the firm to find ways of
making and keeping customers as satisfied as possible,
subject to the requirement that the firm be profitable.


1. Happy Customers: The
Unbeatable Advantage
When Maximizing Customer
Satisfaction is not Important

When the buyer has no recourse.

When the buyer has an extremely short memory.

When the buyer cannot or will not pay a price premium for
higher levels of satisfaction.

When the customer faces penalties for expressing
dissatisfaction.

When other purchasers ignore the dissatisfied customer.

When the incremental costs outweigh the additional profit.


1. Happy Customers: The
Unbeatable Advantage
When does it make sense to
Maximize Customer Satisfaction

When the buyer has legal recourse.

When the buyer has verbal recourse.

When the buyer has economic
recourse.


2. Customer Satisfaction Creates
Market Success
Companies that adopt the strategy of
maximizing Customer Satisfaction obtain
several vital competitive advantages

Higher Long-Term Profitability
1.
Less wasted motion (false starts).
2.
The firm gets a price advantage.
3.
Customers come back more often.
4.
Transaction Costs are lower.
5.
Communications costs are lower.


2. Customer Satisfaction Creates
Market Success

Better protected from Competitors
1.
Customers don’t jump immediately to a new
product.
2.
Customers don’t switch at once to a lower-
priced entrant.

Better protected against shifts in Customer
Needs

Able to regain lost markets


3. How the Winners Do It: The
Characteristics of Success
The Characteristics of Success

Profile of Winners

Mercedes-Benz of North America
Automobile

Subaru
Automobile

Jaguar
Automobile

Boeing Commercial Aircraft Company
Aerospace

Federal Express
Overnight Delivery

Northwestern Mutual Life Insurance
Insurance

Kraft Foodservice
Food Distribution

Xerox
Office Equipment

Kodak
Film, Office Equipment

Swissair
Passenger Airline

Deere & Company
Farm Equipment

Century 21
Real Estate Services

IBM
Computer & Office Equipment

Maytag
Home Laundry Equipment

Six Flags
Recreation


3. How the Winners Do It: The
Characteristics of Success
The Characteristics of Success

Customer Not Cost

Six Key Characteristics

They set themselves “Impossibly High” Standards.

They’re Obsessive about knowing, even better than
Customers themselves, what the customers want.

They create and manage Customer’s Expectations.

They Design their Products or Services to Maximize
Customer Satisfaction.

They put their money where their mouth is.

They make Customer Satisfaction everybody’s
business.


4. The Four Fundamentals of
Customer Satisfaction

Product

Design

Messages

Sales & Support Effectiveness

Feedback & Incentives

Sourcing & Manufacturing

Customer Contact

Quality

Cost


4. The Four Fundamentals of
Customer Satisfaction

Sales Activity

Messages

Overt

Covert

Attitudes

Salesforce Training

Salesforce Rewards

Intermediaries

Incentives

Selection

Training

Monitoring


4. The Four Fundamentals of
Customer Satisfaction

After-Sales

Support Services

Coverage

Quality & Performance

Feedback & Restitution

Coverage

Responsiveness


4. The Four Fundamentals of
Customer Satisfaction

Culture

Formal Symbols and Systems

Mission Statements

Performance Standards

Compensation

Informal Symbols and Systems

Beliefs

Values


5. It Begins With the Product
What constitutes a Good Product, one that
will Maximize Customer Satisfaction?

Customers maximize Total Value

Packaging and Features and Functions are
Equally Important

Total Value can be divided into 3 parts:

Value-in-Purchase

Value-in-Use

Value-in-Disposal


5. It Begins With the Product
Factors Affecting Total Value
Value-in-Purchase
Value-in-Use
Value-in-Disposal
Packaged
Goods
Packaging
Positioning
Performance
Quality
Safety/ Reliability
Ease of Disposal
Systems/ procedures for
disposal
After-effects
Consumer
Durables
Design
Styling
Hi-tech,/ Hi-touch
Channel choice
Reliability
Ease of Use
Repair Costs
Overall Durability
Trade-in prices
Replacements
Disposal systems
Industrial &
Business
Equipment
Design
Styling
Feature/
Functionality
Hi-tech/ Hi-touch
Channel choice
Reliability
Ease of Use
Ease of Training
Duration of Failures
Total maintenance
Expandability
Trade-in prices
Upgrades/ Replacements
Protection of existing
investments in spares,
software


5. It Begins With the Product
Total Value: The Key

Values are determined by Costs

Total Value is related to Perceived Costs

No Perceived Costs implies No Value

Some Costs are external costs – borne by society as
taxes, increased pollution etc.

When external costs are charged back Total Value
changes

Customers want the most Total Value

Customer Satisfaction is related to Total Value


5. It Begins With the Product
Why Products Fail to Satisfy
Companies make the following mistakes

They don’t think beyond the point of sale.

They don’t ensure that design, manufacturing, and
marketing all understand what customers want.

They don’t go below the surface when designing
products.

They don’t provide proper feedback to designers
and manufacturing.

They don’t have a top-management commitment
to customer satisfaction.


5. It Begins With the Product
How the Winners do it

Their design, engineering, and manufacturing personnel
know the customer needs intimately.

They create internal alliances during product development.

They create customer alliances during product
development.

They want their products and services to beat BOB (Best
of Breed).

They have strong, responsive customer feedback systems.

They provide incentives to designers and manufacturing
for improving customer satisfaction.

They are constantly innovating or improving their products
to increase customer satisfaction.


6. Understanding and Managing
Customer Expectations

Few firms appreciate how Customer expectations
are affected by:

How they advertise their products,

The atmospherics that are present at the point of sale,

The attitudes of their salesforce and/or intermediaries,
and

How the actual sale is conducted.

Customer Satisfaction =
Performance

Expectations


6. Understanding and Managing
Customer Expectations

Most Companies mismanage Expectations:

They Overpromise

They Oversell

They try to Manipulate expectations

They Conceal bad news

These problems occur because:

They Misunderstand Customer Expectations

They Don’t Understand how Atmospherics affect Expectations

They Force-Fit Expectations to Internal Capabilities


They Succumb to Internal Pressures and Disregard the Impact on
Expectations

They Confuse Advertising with Expectations


6. Understanding and Managing
Customer Expectations

What Winners Do:

They’re careful about the Expectations they
create

They control Atmospherics, Attitudes, and
Incentives carefully

They Communicate extensively with the
Customer

They Emphasize Meeting Commitments to
Customers almost regardless of Cost


7. Intermediaries: Ambassadors
or Assassins?

Vast majority of products and services are
sold through third-party Intermediaries –
Distributors, Dealers, Franchises,
Merchandisers, Department Stores, Retail
Outlets, Supermarkets and so forth.

Ideally the Intermediary should act as an
Ambassador for the firm it represents.


7. Intermediaries: Ambassadors
or Assassins?

Intermediaries are a Critical element in ensuring
overall Customer Satisfaction. Specifically
Research indicates:

Satisfaction with the Dealer and Overall Satisfaction go
Hand-in-Hand

Dealer’s determine Customers’ Attitudes and
Expectations

Dealers affect Product Performance

Dealers influence Customer Feedback and Restitution


7. Intermediaries: Ambassadors
or Assassins?

A well-run, well-organized network of
Intermediaries when coupled with products
geared towards high customer satisfaction
provides several long-term competitive
advantages:

It deters new entrants

It provides timely feedback

It smoothens out “Stumbles”

It stretches product life


7. Intermediaries: Ambassadors
or Assassins?

What Winners Do:

They select Intermediaries with great care

They work hard to make the channel succeed

They set and enforce high standards for their
Intermediaries

They build long-term relations with their
Intermediaries


8. The Real Sale Begins After the
Sale

The Critical Difference – Support

Winners view after-sales support as an opportunity to
strengthen their Relationship with the Customer.

They know the Right Product Design is necessary in
meeting after-sales support needs.

They realize that an Integrated Approach is essential to
maximize satisfaction with after-sales support and,
ultimately, with the overall product.

After-sales support coupled with a good product yields
an unbeatable combination.


8. The Real Sale Begins After the
Sale
Product Design
Good
Poor
Good
Unbeatable

IBM

Caterpillar

Maytag
Time Bombs

IBM vs Tandem

Xerox in mid-1970s
After-Sales Support
Poor
Walking Wounded

Olivetti

Fiat
Dead On Arrival

Burroughs B-8

Belarus Tractors


8. The Real Sale Begins After the
Sale

Generic Support Strategies

Product or Design-related Strategies

Reliability Improvement

Modular Design

Built-in Redundancy

Support system-related Strategies

Improvements in system response time

Reduction in equipment repair times

Strategies that reduce Customer’s Risk

Warranties

Service Contracts


8. The Real Sale Begins After the
Sale

The need for an Integrated Approach. The
reasons behind lack of Integration:

An Explicit Strategy is Lacking

Responsibility for Support is Diffused

Support needs are considered late in the
Development Cycle

Management Focuses on Individual Support
Attributes


8. The Real Sale Begins After the
Sale

Designing Unbeatable Strategies
Disposables
Toasters
Radios
Low or no repair cost
Cheaper to replace
Repairables
Washers & Dryers
Automobiles
Large TVs
Significant repair costs
Rarely scrapped rather than
repair
Rapid Response
Tractors
Combines
Copiers
Significant repair costs –
Downtime costs
substantially higher
Never Fails
Airplanes
Large Frames
Hospital IC
Equipment.
Very high service &
interruption costs
Failure can be catastrophic


9. Feedback and Restitution

Apparent Paradox – Customer Complaints as both
Threat and Opportunity

Businesses must recognize the following:

Customers don’t complain

Customers are pessimistic about how companies will
deal with their problems

Corporate behavior tends to confirm their pessimism

Customers want to be treated fairly

How companies respond to complaints greatly affects
customer satisfaction and loyalty

Companies must shift from handling complaints to
communicating with customers to maximize customer
satisfaction


9. Feedback and Restitution
Customers Don’t Complain

Why don’t they complain?

Lack of knowledge

Frustration with the complaint mechanisms

Who complains and When?

Poor & less educated less likely to complain

Higher-income & more educated customers more likely
to complain. Propensity to complain linked to:

Level of political activity and awareness

More expensive the product or problem the more likely people
will complain


9. Feedback and Restitution

To Whom do Customers Complain?

Vast majority to someone at the point of sale,
they are more favorably disposed towards the
manufacturer

Third parties such as Government or Consumer
agencies

The Manufacturer

When they don’t complain to these three
then they:

Switch to other brands, manufacturers, products

They tell their friends, neighbors and relatives


9. Feedback and Restitution

Companies are often defensive. Typical
symptoms of negative corporate attitude
include:

Cumbersome or complex complaint procedures

Slow and grudging approach to refunds and
repairs

Numerous exceptions in warranty policies

An adversarial approach to dealing with
customer complaints

Delays in making necessary changes in
products or services


9. Feedback and Restitution

Complaint handling affects repeat
Purchases and Loyalty

Poor complaint handling reduces customer
loyalty, often dramatically.

Effective responses to customer complaints
increase satisfaction and brand loyalty

Customers who complain often are repeat
purchasers and powerful influencers

Customers want genuine attention, not token or
form-letter response


9. Feedback and Restitution

Move from Complaint Handling to Customer
Communications

What Unhappy Customers Do

They suffer in silence – Not Good

Switches in silence – Not Good either

Tells friends and neighbors – Worse

Talks to third parties – Worst of all

Talks to the Company – The Only Positive Outcome

Company Choices

Deflect Complaints

Give Lip Service

React to Needs

Build Bridges


9. Feedback and Restitution

Customer Communication recognizes:

Customer complaints are an outward expression
of Customer Dissatisfaction

Most customer dissatisfaction occurs because
Customers’ expectations have not been met,
and

It is in the firm’s long-term interest that
dissatisfied customers be encouraged to
communicate with the company,as opposed to
suffering in silence, switching, or telling others
of their complaints.


9. Feedback and Restitution

Making It happen

Top-Down Commitment

Innovative Strategies

Extensive Investment in Customer Feedback
Systems

Managerial Incentives and Measurements that
emphasize the importance of Customer
Feedback


10. Corporate Values: The
Software

The firms researched fully understand the
importance of Corporate Values in their efforts to
keep customers happy and each has its specific
approach but the authors identified the following
common characteristics:

They made Customer Satisfaction central to their
beliefs and values.

They used formal symbols and systems to communicate
the importance of customer satisfaction within the firm.

They used informal symbols and sysytems to ensure
that the firm achieved its goal of keeping customers
happy.


10. Corporate Values: The
Software

Values Define Culture

Values Drive Behavior

Values Overlay Incentives and
Measurements


10. Corporate Values: The
Software

Making It happen

Visible Symbols

Mission Statements

Incentives and Measurements

Measurements were externally focused

Emphasis was on output variables

Information was shared widely

Rewards were clearly linked

Other symbols

Committees, Representatives,and Councils

Token Awards

Invisible Systems

Selection Training and Tenure

Top Management contact with Customers