Managing for Quality and Performance Excellence: Chapter 3 Summary

Managing for Quality and Performance Excellence, 11th Edition
Summary of Key Points and Terminology
Chapter 3 – Focusing on Customers
Customer focus might be the most important principle of quality management.
World-class organizations are obsessed with meeting and exceeding customer
expectations. Perceptions of value and satisfaction are influenced by many factors
throughout the customer’s overall purchase, ownership, and service experiences.
Customer focus is a key requirement of ISO 9000.
Creating satisfied and loyal customers is perhaps the most important aspect for
long-term competitive success. Customer wants and needs drive competitive
advantage, and statistics show that growth in market share is strongly correlated
with customer satisfaction.
Key customer-focused practices for performance excellence include identifying
the most important customer groups and market segments; understanding the
voice of the customer through effective listening and learning strategies;
understanding the linkages between customer needs and
design/production/delivery processes; creating a customer-focused culture that
contributes to customer engagement; managing customer relationships to build
loyalty and engagement, measuring customer satisfaction, engagement, and
dissatisfaction, and acting on the results to improve organizational processes.
Customer satisfaction is “the result of delivering a product or service that meets
customer requirements.”
Customer engagement refers to customers’ investment in or commitment to a
brand and product offerings. Characteristics of customer engagement include
customer retention and loyalty, customers’ willingness to make an effort to do
business with the organization, and customers’ willingness to actively advocate
for and recommend the brand and product offerings.
The American Customer Satisfaction Index (ACSI) is a national measure of
customer satisfaction, linking expectations, perceived quality, and perceived value

to customer satisfaction, which in turn is linked to customer loyalty and
profitability. The econometric model used to produce ACSI links customer
satisfaction to its determinants: customer expectations, perceived quality, and
perceived value. Customer satisfaction, in turn, is linked to customer loyalty,
which has an impact on profitability.
Consumers are end users of products and services. External customers are
outside organizations that fall between the organization and the consumer, and
who have distinct needs and expectations. Internal customers are people,
departments, or processes that depend on others to serve consumers and external
customers.
The customer-supplier model advocated by AT&T facilitates the identification of
customers at the organization, process, and performer levels, and helps the
organization to build up the “chain of customers” that characterizes the
organization’s value chain.
Customer needs differ, requiring organizations to segment their customers into
logical groups that have unique needs or value to the organization and must be
managed differently. One way of segmenting customers is by profitability as
measured by the net present value of the customer (NPVC).
Customer needs revolve around many different dimensions of quality, such as
performance, features, reliability, conformance, durability, serviceability, and
aesthetics. For services, five key dimensions are reliability, assurance, tangibles,
empathy, and responsiveness.
The Kano model segments customer requirements into dissatisfiers (“must
haves”, satisfiers (“wants”), and exciters/delighters (“never thought of”). Most
successful companies take special efforts to understand the last category and
develop products and services that truly delight customers.
Product quality dimensions include performance, features, reliability,
conformance, durability, serviceability, and aesthetics. Service quality
dimensions are reliability, assurance, tangibles, empathy, and responsiveness.

The Kano model segments customer requirements into dissatisfiers, satisfiers, and
exciters/delighters. As customers become familiar with them, exciters/delighters
become satisfiers over time. Eventually, satisfiers become dissatisfiers.
Customer requirements, as expressed in the customer’s own terms, are called the
voice of the customer. Gathering the voice of the customer is accomplished by
various methods, or “listening posts,” including comment cards and formal
surveys, focus groups, direct customer contact, field intelligence, complaint
analysis, and Internet and social media monitoring. Affinity diagrams are
helpful tools for classifying customer requirements.
The linkage of the VOC to internal processes is often described by the gap
model. Customers form perceptions (perceived quality) of the quality of goods
and services by comparing their expectations (expected quality) with outcomes
they receive (actual quality). Differences between these can result in unexpected
satisfaction dissatisfaction. Thus, careful attention must be paid to design and
production processes, as well as customer feedback.
An organization fosters customer engagement by developing trust,
communicating with customers, and effectively managing the interactions and
relationships with customers through its processes and its people. Four key
processes are making sincere commitments, ensuring quality customer contact,
selecting and developing customer contact employees, and managing complaints
and service recovery.
Moments of truth are all interactions between a customer and the organization.
At moments of truth, customers form perceptions about the quality of the service
by comparing their expectations with the actual outcomes.
Customer contact requirements are measurable performance levels or
expectations that define the quality of customer contact with representatives of an
organization. Companies need to communicate these requirements to all
customer-contact employees.
Service recovery is a vital element to maintaining customer relationships. Loyal
customers are most likely to lose loyalty when problems are not resolved but are