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Customer Satisfaction

HAROLD E. EDMONDSON

The phrase “customer satisfaction” seems to appear in print more frequently than any other catch phrase used to describe a new-found magic for industrial success. This phrase not only is used by most business authors, but also finds its way into virtually every annual report and statement of business strategy published by companies, large and small, across our land. I do not want to downplay the importance of customer satisfaction. In fact, I believe it is the cornerstone of our rebirth as an industrial nation. I do, however, feel that a thorough understanding of this topic is missing from the minds of most of the people that claim to be practicing proponents.

To help us to think clearly about this complicated topic, I would like to propose several important elements of customer satisfaction that need careful thought. Reading this chapter certainly will not make you an expert on customer satisfaction, but I hope at least to highlight some of the pitfalls. Clearly, other readings would be helpful. The difference between providing customer satisfaction expertly and doing it poorly is frequently the difference between success or failure of your company.

In the ensuing paragraphs when I refer to customer satisfaction or to customers in general, I am including two large bodies of people. The first falls under the traditional description of a customer, that is, those people outside of your firm who buy your service or products and reward you with money in return. One very important task, and one we will assume you have already done, is to segment your market carefully. In other words, I



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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE Customer Satisfaction HAROLD E. EDMONDSON The phrase “customer satisfaction” seems to appear in print more frequently than any other catch phrase used to describe a new-found magic for industrial success. This phrase not only is used by most business authors, but also finds its way into virtually every annual report and statement of business strategy published by companies, large and small, across our land. I do not want to downplay the importance of customer satisfaction. In fact, I believe it is the cornerstone of our rebirth as an industrial nation. I do, however, feel that a thorough understanding of this topic is missing from the minds of most of the people that claim to be practicing proponents. To help us to think clearly about this complicated topic, I would like to propose several important elements of customer satisfaction that need careful thought. Reading this chapter certainly will not make you an expert on customer satisfaction, but I hope at least to highlight some of the pitfalls. Clearly, other readings would be helpful. The difference between providing customer satisfaction expertly and doing it poorly is frequently the difference between success or failure of your company. In the ensuing paragraphs when I refer to customer satisfaction or to customers in general, I am including two large bodies of people. The first falls under the traditional description of a customer, that is, those people outside of your firm who buy your service or products and reward you with money in return. One very important task, and one we will assume you have already done, is to segment your market carefully. In other words, I

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE assume that you have defined your marketplace and properly understand the differentiation between the people you view as customers and those you view as being outside of your intended marketplace. The second set of people whom I view as customers, but who are not always given this revered title, are those departments within your company who are served by your department or yourself. It is entirely appropriate (virtually necessary) that every suborganization within a company view the recipients of their work with as much awe and reverence as you do their outside customers. This set of internal customers is probably hardest of all to satisfy in that fairly often departments within the same firm or division take each other for granted. The assumption is erroneously made that everybody knows what everybody else needs and, by virtue of having the same name on the paycheck, all departments will work in glorious harmony. This is seldom true. This lack of goal congruence between departments of the same firm can have its roots in a variety of cultural elements. Sometimes teamwork is not practiced as well as it should be. Sometimes capabilities and expectations are not in concert. But most often, I feel, departments do not worry about the needs of their partners simply out of ignorance. I think, in general, people want to do as good a job as they can, but often it simply does not occur to them to walk across the aisle and ask how well their department meets the needs of their partner departments. Meeting the needs of these internal customers is just as important as concentrating on your outside customer needs, and most of the comments made in the ensuing paragraphs will address both types of customers. WHO REALLY IS THE CUSTOMER? The question of defining who your customers are seems fairly easy, particularly if you have segmented your market properly and understand who you are trying to satisfy. However, a subtlety that frequently goes undetected by many firms is that the customer set can be divided into two parts—the apparent customer and the user. The apparent customer is the person or group of people who decide what product to buy and basically have control over the purse strings. The user is the person or group who physically uses the product or is the direct recipient of a service. One way to illustrate this significant difference is to relate a new product story from the history of a well-known dog food manufacturer. After surveying their customers carefully, the manufacturer decided that the greatest unfulfilled need their customers had was to somehow provide a food that overcame the greatest disadvantage of man's best friend, specifically, the dog's bad breath. It did not take the research department long to come up with a chlorophyll additive to their regular product, and they went into

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE production quickly. The first several weeks after the product introduction were quite successful for the firm in that they sold lots of their product. They smilingly congratulated themselves for having accurately ascertained their customers' needs and then satisfying that need. Unfortunately, the story does not have a happy ending in that the repeat sales of this product were virtually zero and rather shortly the product turned into a dismal failure. The simple reason; the dogs would not eat the product. Remarkably, the firm put all their bets on understanding the customer and spent no time understanding the user. The point of all this is that, to truly capture the fancy of your customer you must recognize that both the apparent customer and the user must be satisfied. Forgetting the apparent customer will probably preclude your making even the first sale, and forgetting the user will undoubtedly, as with the dog food company, preclude your getting any follow-up sales. WHAT DOES “SATISFACTION” REALLY MEAN? As in defining “customer” above, defining “satisfaction” also appears simple. However, as with “customer” there is a subtlety that needs addressing. Satisfaction, by most definitions, simply means meeting the customer's requirements. However, these requirements frequently fall into two categories—needs and wants. I would define needs usually as the real requirement to which the customer should be putting the product, or, the true requirement of the customer. Wants, on the other hand, are the perceived needs the customer feels should be met. If you are lucky, the customer 's needs and wants are synonymous. But this is seldom true in real life. The situation is further complicated by the multiplicity of features that a customer looks for. Seldom is a buying decision made on a single feature of a product. More often several factors, both needs and wants, influence the decision. There are a number of ways in which this complicated wants-versus-needs syndrome can cause problems. Three of the most troublesome of these illustrate the difficulty involved in sorting out this part of your product definition. The first is the customer who knows what he wants but does not know what he needs. This scenario is particularly troublesome if the customer thinks that his wants are, in fact, actual needs. Getting to the core of what your customer's real requirements are takes a great deal of patience and skill, but it is obviously imperative that you pursue this process until you are absolutely certain you understand the customer's situation. The second difficulty is the customer who has a hidden want but purposely masks it as a need. This customer may have an affinity for a competitor 's product and chooses an obscure feature from one of your competitor 's prod-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE ucts and labels it as an absolute need with the hope that you will go away and not bother him since you do not have a similar feature. This customer may be so enamored with your competitor's product that you never will make a sale, but it is vitally important that you not chase phantom specs only to spend your money on something the customer really does not need. The third pitfall in distinguishing wants from needs is finding a customer who is all too willing to tell you what your next-generation product should be in terms of your traditional product. You will be miles ahead if you can discipline yourself to concentrate on understanding what customers plan to accomplish with your product, as expressed in their terms. Do not let them describe your product to you by using your specifications; this certainly will deprive you of breakthrough opportunities. If you are creatively trying to construct a product to meet a customer goal, you need to start with an open mind, not one cluttered by thoughts of simply extending the features of an existing product. It is true that customers certainly can be creative, but, in general, that creativity is diminished dramatically when they describe their solution in terms of your traditional product specifications. There probably is no simple way to differentiate between your customers ' needs and wants, but one helpful way to look at the problem is to rephrase your objective; set your sights on helping your customers meet their goals. This rather concise objective should require you to understand both their needs and their wants and, further, nudge you into a much more open-minded approach toward providing truly imaginative products. Sometimes it may appear that “wants” are not at all what the customer needs and are put on this earth only to deceive well-meaning product managers. Whether that is true or not I will not debate. However, I will state unequivocally that at the time the customers state their needs, whether they are needs or wants does not matter much. They are both perceived to be needs in the eyes of the customers and must be dealt with either by providing them to the customer or, in some case where they are very far-fetched, by persuading the customer that there is a better way to meet their goals. WHAT DO YOU WANT OUT OF IT? Somewhere along the line, before getting down to your actual product definition, it seems appropriate to sit back and consider what your objectives are in this endeavor to satisfy your customer. Are you interested in short-term sales, or are you interested in a longer-term relationship, or both? Do you want to make high profits on a few sales or lower profits in a larger marketplace? Are you interested in providing the customer with some value that you may not get paid for in the short term but, through a closer customer partnership, will earn your return over a longer period? It is not my intention to suggest which of these is best for you or that any of the pos-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE sible approaches is somehow better business or even more ethical business conduct than the others. I am simply suggesting that it is important for you to understand yourself as well as it is for you to understand your customer. At Hewlett-Packard we prefer to aim our relationships with our customers toward the long term. Generating a customer's loyalty is probably the single most important goal we can hope to achieve. Certainly we are interested in growth and profit and market share, but we feel that building customer loyalty is probably the best way to accomplish all of our objectives. THE CRITICAL STEP—THE PRODUCT PLAN By far the most critical step, in my opinion, on the way toward customer satisfaction is the skill with which you engage in product definitions. The foundation of good product definition methodology, in HP's opinion, is the quality function deployment (QFD) approach brought to us by the Japanese and Americanized through the efforts of a number of excellent U.S. authors (see Hauser and Clausing, 1988). For the purpose of this chapter, it is sufficient to say that the description of a product with QFD, or any process, needs to be detailed and based on a thorough understanding of the customer's requirements on a feature-by-feature basis. Additionally, the description must reflect complete understanding of what your competitors are offering today and are likely to be offering in the future—once again, on a feature-by-feature basis. Although other reading will help you understand this process, some important elements are not covered in most of the QFD texts. These elements generally are concerned with how information is obtained for product definition. One of the common failings of a firm engaging in product definition is to assign a single person or function to do the job. Many firms feel that marketing is the function that should be responsible for product definition, while others feel that the engineering department is responsible. It is my very strong view that both departments must act in partnership to gather the information necessary to form a clear, concise product definition. There is an appropriate division of duties between R &D engineering and marketing within the task of product definition. I suggest that the marketing people be held responsible for understanding the marketplace, that is, knowing who are the dominant customers and users of products similar to the one you are trying to define. Further, marketeers should have a good idea of which customers are the innovative leaders and best suited to describe future needs for the industry. Additionally, the marketing people are more likely to have insights into what competitors are about to do. On the other hand, the engineering department is best qualified to bring technical expertise to bear on customer problems and potential solutions. Engineers also probably have a better idea about the technical suitability of

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE the products that are currently being offered by competitors. Stated more succinctly, the marketing people should be responsible for developing the market research plan and managing the places where information is sought, while the engineers should be responsible for providing the technical creativity and working with customers' technical people to develop a set of features for the new product. As engineering and marketing go about establishing their product definition, somewhere there exists a role for manufacturing. Depending on the products and the expected customer benefits, manufacturing can be brought in at a variety of points in the process—usually the sooner the better. This is not to suggest that manufacturing will play as critical a role as marketing and engineering, but there are quite a number of products where some manufacturing creativity can, and has, dramatically improved the customer's acceptance of a product. The advantage in requiring that all three departments (marketing, product engineering, and manufacturing) be involved in the product definition phase is twofold. The obvious advantage is that the chance of success is much better if a task is viewed from these three distinct viewpoints rather than through only one set of eyes. The second advantage is somewhat less obvious but possibly even more important. It is that, when constructed in this fashion, the product definition becomes owned by all three functions. Any disagreement they have must be hammered out by all three functions, and the final definition is supported by all of them because their names are on the dotted line. When dealing with inside customers, there are two facets to customer satisfaction; the first is of a technical nature and the second is of a business nature. It is conceivable that some department managers understand both facets of satisfying the customer, but frequently it is necessary to do this sort of research with a business manager (often the department head) and a technically responsible person (usually an engineer). At this point in defining your product, it is important to remember that customer satisfaction does not stop when the customer receives the product. You have an ongoing responsibility that includes training, support, and service long after the sale has been made. These features need to be incorporated in the original product definition to be of maximum competitive impact. All too often HP and others in our industry have added service and support considerations after the product has been invented. This almost always leads to a marginal customer benefit—marginal either in its effectiveness to the customer or in its cost to you, or both. Another overlooked potential pitfall is that the crucial elements of a good product definition analysis (i.e., customer needs and competitor offerings) can, and usually do, change dramatically with time. Thus, truths that were virtually self-evident a year ago may be completely outmoded today.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE This is not to imply that you should continuously refine your list of product specifications. Once you have started designing a product (unless something catastrophic happens in the marketplace), you should severely limit the changes you make in that product. However, when it comes time for the next-generation product, you do need to reassess and revalidate all the assumptions that went into your product definition analysis. A significant example of this phenomenon is a product that HP invented a few years ago. This product provided the customer with eight channels of input into a digital analyzer. We carefully talked to leading customers before inventing the product and were assured that, yes, eight channels were perfectly adequate. We invented the product that way and enjoyed rather substantial initial sales. After a year or two, however, we began to hear that eight channels were not what the customers wanted and that sixteen channels would be much better. When we questioned the very people who led us down the eight-channel path, they defended their position by saying that, at the time, eight channels were so dramatically better than the one channel they had been used to that it seemed perfectly adequate to them. However, after using the eight channels for a year or so they recognized that their needs were far more complex. In other words, their expectations had changed. Ironically, we had been the ones to change them but yet did not recognize the full implication of our product offering. One last warning flag. In our view, it is important to be aware of what we think of as functional filtering. In almost any firm, consciously or unconsciously, manufacturing, R&D, or marketing is viewed as the premier or dominant function. Historically, through the 1950s and 1960s, U.S. firms tended to view product engineering (R&D) in this dominant role. We all know this led to a less than competitive set of manufacturing skills. The Japanese were quick to reverse this and installed manufacturing as the dominant function. In my view, while this has not been as devastating as our choice of R&D, there are some signs that the Japanese are overly obsessed with manufacturing considerations. The best example of this is in the consumer electronics business, where both compact disc players and videocassette recorders have an extremely low selling price but carry with them a rather poor record of mechanical reliability. I suspect, although I cannot prove it, that this phenomenon is driven by the manufacturing people who dominate the product-definition decisions and who are horrified at the engineering department's suggestion that another $20 on the selling price might provide a much more reliable product. Thus, in a few cases in Japan, and in many cases in the United States, the dominant function has filtered good product ideas that could have been delivered unobstructed to the customer by the secondary function. In our view, to completely satisfy the customer in the future it will be necessary for successful companies to learn that whatever will benefit the

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE customer should be provided directly by the function best equipped to provide it and that other functions cannot be allowed to filter those good customer ideas with their own traditional thinking. THE LAST PIECE OF THE PRODUCT PLAN—METRICS As with any business plan, it is necessary to establish ahead of time some benchmarks to make sure that the product plan really is a good one. Obviously we could wait until the product is introduced to the market and see if it sells well—if it does, the plan was satisfactory. Obviously, sales are the ultimate test, but it seems prudent, considering the high cost of most new product programs, to set some benchmarks or tests along the way to make sure that you were right in establishing of your product definition. We suggest that there are two important times when you can take a meaningful “health check” of your program. Both checks involve returning to your customer set (or at least the most important parts of it) as the only source of meaningful reaction to your plans. In each case, the check occurs when you have significant additional information to share with the customer. Obviously you cannot call back every five minutes and ask another question about a feature. Thus, you should limit questions to times when you really have a significant question to ask. The first checkpoint is when you have completed your product definition. During your initial meeting with the customers, you were simply asking for features they wanted. Although there was undoubtedly some technical exchange with your engineers, the customers really have not had an opportunity to see the entire feature set put together as a complete product plan until you have concluded this phase of your work. Thus, it can be very productive to take those complete plans back to your key customers with the simple question, “Is this what you had in mind?” The second checkpoint is when you have a good working prototype so that you can show the customer a tangible product that came from the definition arrived at earlier. The question is much the same: “Is this what you had in mind?” But this time the customer can answer with a much better idea of your intentions, and you can be much surer that you are getting a thoughtful response. All this clearly takes a lot of work and effort on your part and some imposition on the customer. Some firms might be tempted to establish metrics that they can generate and test from within the firm itself, such as meeting 80 percent of the customers ' needs as shown on the QFD chart, or bettering three-fourths of their competitors' specifications. Metrics of this sort can give some indication of how well you are meeting your product definition but certainly seem to be a poor substitute for a real, live customer reaction. After all, in the final analysis the customer's

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE reaction to your product has a nearly 100 percent correlation with whether or not your product will sell. SANITY CHECKS Now that we have established our plan for achieving customer loyalty, there are a couple of things that we need to revisit in order to make sure that the product plan we have just constructed has a good chance at success. The first question we need to ask ourselves is, Do we have the resources and skills necessary to carry it off? Frequently, aggressive people (whether they be in marketing, engineering, or manufacturing) tend to engage in wishful thinking when it comes to assessing how a new product program will affect market share. While I am a proponent of setting high objectives for ourselves, I think that there comes a point when the hoped-for results are unrealistic, and now is a good time to assess that. Another thing that needs to be questioned is whether the product plan is consistent with your company's basic business strategy and charter. It may be a good plan, but, if it varies widely from your basic business, there can be far-reaching, disastrous effects in financial or sales-channel issues. I am not proposing that product plans never vary from our charter and strategy, but I am strongly suggesting that, if they do, we need to take another cut at a much broader set of issues and make sure we understand what we are letting ourselves in for. The last sanity check is a simple question, but it needs to be asked. That is whether this product plan that we have just meticulously constructed will lead us to an overall performance that is expected by our bosses, whether they be department heads, company presidents, or boards of directors. Will this plan lead us to the proper profitability, the proper market share, proper growth rate, or whatever else has been deemed important by the people that sign our paychecks? If the answer is yes, then full speed ahead. IMPLEMENTATION—THE EASY STEP? Now that we have constructed our product plan, we are faced with a simple matter of implementing it. I believe that this chapter outlines the most difficult tasks facing industry today. However, I do not think that implementation is easy by any stretch of the imagination. Implementation is certainly difficult and has been addressed aptly by the authors in other chapters of this book.