Chapter 3 Customer Focus Lecture Notes 2025 - Part 2 PDF

TOTAL QUALITY MANAGEMENT CHAPTER 3 (part 2) CUSTOMER FOCUS LECTURE NOTES DR. AMIRA OMAR Customer Retention Customer retention is a company's ability to keep its customers over time. It measures a company's success at turning customers into repeat buyers and preve...

TOTAL QUALITY MANAGEMENT CHAPTER 3 (part 2) CUSTOMER FOCUS LECTURE NOTES DR. AMIRA OMAR Customer Retention Customer retention is a company's ability to keep its customers over time. It measures a company's success at turning customers into repeat buyers and preventing them from switching to competitors. Many factors can contribute to customer retention, including: Product quality: Customers are more likely to stay with a company if they are satisfied with the products or services they receive. Customer service: Customers who have a positive experience with customer service are more likely to stay with a company. Price: Customers are likelier to stay with a company if they feel they are getting good value for their money. Brand loyalty: Customers who are loyal to a brand are more likely to stay with the company even if better deals are available elsewhere. Customer retention is essential for businesses because it can lead to several benefits, including: Increased sales: Customers who stay with a company are more likely to make repeat purchases. Reduced marketing costs: Companies that retain their customers spend less on marketing to attract new customers. Improved customer lifetime value: Customers who stay with a company for a long time are more valuable to the company. Stronger brand reputation: Companies with high customer retention rates have a more substantial brand reputation. There are several things that businesses can do to improve customer retention, including: Focus on customer satisfaction: Companies should strive to provide excellent customer service and ensure customers are satisfied with their products or services. TOTAL QUALITY MANAGEMENT 2  Personalize the customer experience: Companies should personalize the customer experience as much as possible to make customers feel valued. Offer loyalty programs: Companies can offer loyalty programs to reward customers for their loyalty. Make it easy to do business with the company: Companies should make it easy for customers to do business with them by offering online ordering and easy returns. Customer retention is an essential factor for businesses of all sizes. By focusing on customer satisfaction and providing a great customer experience, businesses can improve customer retention and reap the many benefits that come with it. Various methods, such as satisfaction surveys, focus groups, interviews, and observations, are used to determine customer feedback. But it's important to note that what customers express and what they do may differ. For instance, a customer may admire the luxurious tropical oils and scents in an expensive hair-care product yet ultimately choose to buy a cheaper generic alternative. To accurately measure customer satisfaction, tangible metrics such as market share, customer retention rates, and the number of recommendations from satisfied customers must be considered. Successful companies recognize the correlation between customer satisfaction and financial success. Companies should prioritize their current employees and carefully consider whom they hire to effectively manage customer retention. Customer retention Vs. customer loyalty Customer retention and loyalty are related but distinct concepts in business strategy. Understanding their differences is key for businesses that build long- term customer relationships. TOTAL QUALITY MANAGEMENT 3 Customer Retention: Customer retention refers to a company's strategies and actions to keep existing customers and encourage them to continue purchasing products or services. Focus: The company's focus is on reducing the number of customers who leave and maintaining a steady customer base. Measurement: It is typically measured by the retention rate, which indicates the percentage of customers who remain with the company over a certain period. Key Drivers: o Effective customer service o Regular communication and follow-up o Quality of product/service delivery o Convenience and ease of use Customer Loyalty: Customer loyalty is a deeper concept that refers to a customer's emotional commitment and preference for a particular brand or company. Loyal customers are more likely to choose the brand over competitors, even if similar alternatives are available. Focus: The focus is on building a strong emotional connection and brand attraction, which will lead to repeated and exclusive purchases. Measurement: It can be assessed through metrics like repeat purchase rates or customer satisfaction scores. Key Drivers: o High perceived value and consistent quality o Positive customer experience and engagement o Emotional connection and trust in the brand o Personalized offerings and rewards programs TOTAL QUALITY MANAGEMENT 4 Key Differences: Aspect Customer Retention Customer Loyalty Focus Keeping customers from Building an emotional bond leaving with customers Motivation Practical reasons (e.g., Emotional reasons (e.g., convenience) brand preference) Measurement Retention rate Loyalty programs, repeat purchases Strategies Discounts, special offers, Personalized experiences, follow-ups brand engagement Retention is about keeping customers from leaving. Loyalty is about creating customers who choose your brand over others and are likely to advocate for it. UNDERSTANDING CUSTOMER NEEDS Organizations first need to understand the drivers of customer satisfaction. Do customers want or expect from our goods and services? For example, customer expectations for a restaurant would include good food, attentive service, a comfortable atmosphere, and accurate bills. Quality Dimensions of Goods and Services David A. Garvin suggested that products have multiple dimensions of quality: 1. performance: A product's primary operating characteristics. Using an automobile as an example, characteristics would include acceleration, braking distance, steering, and handling. 2. Features: The "bells and whistles" of a product. For example, a car may have power options, a CD player, and iPod connections. TOTAL QUALITY MANAGEMENT 5  3. Reliability. The probability of a product surviving over a specified period under stated conditions of use. Reliability factors are a car's ability to start on cold days and the frequency of failures. 4. Conformance: The degree to which a product's physical and performance characteristics match pre-established standards. A car's fit, finish, and freedom from noises and squeaks can reflect this dimension. 5. Durability: A product's use before it physically deteriorates or until a replacement is preferable. Bora cars might include corrosion resistance. 6. Serviceability: The speed, courtesy, and competence of repair work. An automobile owner might be concerned with access to spare parts, the number of miles between major maintenance services, and the service expense. 7. Aesthetics: How a product looks, feels, sounds, tastes, or smells. For example, a car's color, instrument panel design, control placement, and "feel of the road" may make it aesthetically pleasing. Customers today pay more attention to service issues than the physical goods themselves. One study found that customers are five times more likely to switch because of perceived service problems than for price concerns or product quality issues; another estimated that the average company loses as many as 35 percent of its customers each year and that about two-thirds of these are lost because of poor customer service. Thus, an understanding of service-related needs and expectations is important. For services, research has identified five principal dimensions that contribute to customer perceptions of quality: 1. Reliability: The ability to reliably and accurately deliver what was promised. Examples include customer service representatives responding within the promised time, following customer instructions, providing error-free invoices and statements, and making repairs correctly the first time. 2. Assurance: Employees' knowledge, courtesy, and ability to convey confidence. Examples include the ability to answer questions, the TOTAL QUALITY MANAGEMENT 6  capability to do the necessary work, monitoring credit card transactions to avoid possible fraud, and being polite and pleasant during customer transactions. 3. Tangibles: The physical facilities and equipment and the appearance of personnel. Tangibles include attractive facilities, well-dressed employees, and well-designed forms that are easily read and interpreted. 4. Empathy: The degree of caring and individual attention provided to customers. Some examples might be the willingness to schedule deliveries at the customer's convenience, explaining technical jargon in a layperson's language, recognizing regular customers, and calling them by name. 5. Responsiveness: The willingness to help customers and provide prompt services. Examples include quickly resolving problems, promptly crediting returned merchandise, and rapidly replacing defective products. Translating Needs into Requirements (KANO MODEL) According to Peter Drucker, customers do not purchase specifications but rather products or services that serve a purpose. They buy outcomes, not just products. For instance, they may purchase transportation or status. To win customer loyalty, a company must provide the best solution for achieving its desired results. It is not enough to meet customers' needs; an organization must strive to exceed their expectations. Noriaki Kano suggested segmenting customer requirements into three groups: 1. Dissatisfiers ("must-haves”): Basic needs that customers expect in a product or service. In an automobile, a radio, heater, and basic safety features are examples, which are generally not stated by customers but assumed as given. If these features are not present, the customer is dissatisfied. 2. Satisfiers ("wants”): Requirements that customers expressly say they want. Many car buyers want a sunroof, satellite radio, or navigation system. Although these requirements are generally not expected, fulfilling them creates satisfaction. TOTAL QUALITY MANAGEMENT 7  3. Exciters/ delighters ("never thought of”): New or innovative features that customers do not expect or even anticipate, such as separate rear- seat video controls that allow children to watch DVD movies or Wi-Fi capabilities in a car but love once they have them. Providing dissatisfiers and satisfiers is often considered the minimum required in business. These can usually be identified from surveys, complaints, and interviews with lost customers. To be competitive, however, organizations must surprise and delight customers by going beyond basic requirements and expressed desires. Innovations, however, are not exciters/delighters for long. As customers become familiar with them, exciters/delighters become satisfiers over time. For instance, antilock brakes and traction control were exciters/delighters when they were first introduced, but now many car buyers expect them when buying a new car. Likewise, navigation systems, originally exciters/delighters, are probably considered satisfactory today. As technology TOTAL QUALITY MANAGEMENT 8 evolves, consumer expectations continually increase. Eventually, satisfiers become dissatisfiers. In the Kano classification system, routine marketing research makes dissatisfiers and satisfiers relatively easy to determine. TOTAL QUALITY MANAGEMENT 9