Customer Satisfaction

Published in The Beacon--NIQR Bangalore Newsletter, July-Sep 2005

Customer Satisfaction Management in Service Industry M. Madhukar Reddy, Quality, Progeon Ltd

Introduction st In this 21 century the digital revolution has transformed the economy in to a new economy which empowered the customer with new set of capabilities such as; 1.Access to greater amount of information, 2. Wider variety of available good and services, 3. Greater ease of interacting with the service provider. This new capability in the new economy led the customer to market the marketing and plays a very vital role in the growth of the market. It is essential in the service industry in particular, place greater emphasis on the enablers leading to customer satisfaction and customer retention. It is in this context is very important to understand the customer requirements to provide value-(QSP Quality, Service and Price) and track and manage the customer satisfaction for retention and creation of new customers. In Service industry it is not enough if the product meets the functional requirements of the customer, it should also meet certain other customer expectations like the behaviour/attitude of the person who provides service. The customer satisfaction is the combination of both technical features & human behavioural aspects. The quality management only addresses the systems and processes; service addresses the customer service independently. In today’s new economy, it is essential to address the enablers for customer satisfaction for business growth with utmost importance as they are interdependent in nature. Customer satisfaction Customer satisfaction can be represented as follows. Customer satisfaction=Performance Features + Behavioural Features + Price. Performance features address the issues on Conformance to the standards and Variability and the behavioural aspects of service provider deals with the following components of service which is a major enabler for the growth of the business as indicated in the research publications. 1. Responsiveness 2. Courtesy 3. Timeliness 4. Complete Resolution 5. Communication (Empathy) 6. Credibility -

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Readiness of employee to provide service. Respect, Friendliness of contact personnel. Delivery on Time, First Contact Resolution. Listening to Customers. Speaking to the Customers in their language Taking Ownership in Resolving the Complaints.

If customer experience matches customer expectations, leads to customer satisfaction and if customer experience doesn’t match Customer Expectation, leads to Customer dissatisfaction. On similar lines if it exceeds expectation leads to Customer Delight.

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Why a business losses customers? According to the US news and world report market research on lost customers by major companies shows that 14% for better product, 9% for cheaper product, 68% left because of poor service (service provider’s attitude) which can be easily avoided by designing effective customer service process which enables the company to respond . The study clearly demonstrates the significance of soft service quality in relation to product quality.

Reason Dissatisfied with the Personnel’s attitude Disappointed with the Quality of the Product Find the price too high Adopt new habits Move Die

Percentage 68%

Percentage Die Move

Dissatisfied with the Personnel’s attitude

Adopt new habits

14%

Disappointed with the Quality of the Product

Find the price too high

Find the price too high

9% 5% 3% 1%

Disappointed w ith the Quality of the Product

Adopt new habits

Move Dissatisfied w ith the Personnel’s attitude

Die

It is in this context we need to stress on the service quality part as 68% of the customers desert the service provider. The behavioural/attitude component of service is major determining factor on the growth of the company which complements the performance for complete customer satisfaction.

Performance/Perception: The performance/perception grid helps us evaluate the organization where it stands with respect to the customer expectations. Low

High

Perception

Needs to Improve Customer Service

High

Customer Advantage – Customer Retention Business growth

Performance

Low

Customer DeceptionShrinkage

Additions of Product Features – Short Term Sales

1. Product with low performance and low perception (L/L): The product doesn’t provide basic features and the customer service is poor- leads to the customer drain. This calls for improvement on two dimensions of performance and perception or exit from the business.

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2. Product with high performance and low perception (H/L): The product provides basic features and meets the expectations of the customer but with poor customer service. This type of situation calls for effective marketing with focus on target groups. This suggests the focus on improvement of customer service. 3. Product with high perception and low performance (L/H): The product provides basic features with superior customer service .The product needs to be improved with addition of new features which develops edge over the competitor. 4. Product with high perception and high performance (H/H): The product meets the stated and un-stated features with superior customer service. The organization need to be constantly innovative and exploit the strengths of the product and service to improve the customer retention rate and creation of new customers. The organization needs to focus on customer satisfaction management and strategically plan to be in the fourth quarter to ensure its sustained and continued growth.

Customer satisfaction and retention: Customer satisfaction and retention results from meeting and exceeding the customer expectations. The focus should shift from the quality of product to the optimization of three enablers QSP (quality, service and quality) to meet and exceed expectations. Customer satisfaction/retention demands the continuous improvement in organization capability in terms of QSP (quality, service and productivity) This process should be customer centric and includes following capabilities 1. Capturing the voice of customer and understanding complete requirements includes stated needs and also other value adding requirements which would delight the customers.. 2. Benchmarking and re-designing of processes to meet the customer expectations. Encourage innovation to add facilitating features. 3. Training and development: Good customer relationship management largely depends on communication. Training on customer service skills helps the service providers to address the emotional needs. It also ensures the consistent approach production and effective resolution of problems that enriches the customer experience – leading to customer loyalty. The focus on people skills improves the organizational capability to address the challenges. 4. Develop customer retention process: The organization needs to develop a framework which measures and tracks the customer satisfaction and to address the customer issues from time to time and improve the degree of satisfaction which leads to customer retention and new customer creation. 5. Continuous improvement: Various quality improvement tools like Six sigma, Business process re-engineering, Business process management system, value chain analysis and various lean tools would help the organization to address the challenges related to effectiveness and efficiency.

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What do we focus on? As the degree of satisfaction increases the retention value rate increases. Thus it is important to increase the rate of delighted customers – as this leads to loyal customers and the profits increases as illustrated in the table below. No.of No.of Custome Custome Scenario- rs in No.of Probabilit Scenario- rs in scenarioscenario- 3: Type of Custome y of Scenario- 2: Improved 3 Customer rs retention 1: As Is Improved 2 Delighted 15 0.9 13.5 60 54 80 72 Satisfied 60 0.5 30 30 15 15 7.5 Dissatisfied 25 0.05 1.25 10 0.5 5 0.25 Total 100 44.75 100 69.5 100 79.75 Revenue @Avg customer value 1000 100000 44750 69500 79750 This illustrates the need of improving the degree of satisfaction from one level to the other ensures the increase in the profits and the loyal customer base and continued market leadership Conclusion: Nowadays any firm offering service loses their customers because of the poor customer service. Studies have shown that firms can boost their profits by almost 100% by retaining 15% more of their customers than their competitors retain. This is because the cost of acquiring new customers is much higher than the costs associated with retaining customers. Firms with loyal, long time customers can financially out perform competitors with higher customer turnover, even when their costs in limit. It is not enough to attract new customer, it is like adding water to a leaking bucket. The top management need to focus on customer satisfaction management which calls for focus on enhancing organizational capability to address service(human behavioural) related issues which is a significant factor in customer retention and creation of new customers(business growth) and would enable the organization to establish clear differentiation with the competitor.

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