Regulation – 2018 (CBCS Scheme) Total Quality Management – 18ME734

Module 3
Customer Satisfaction

The most important asset of any organization is its customers. An organization’s success depends on
how many customers it has, how much they buy, and how often they buy. Customers that are satisfied
will increase in number, buy more, and buy more frequently

The customer’s needs are represented by the circle, and the square depicts the product or service offered
by the organization. Total satisfaction is achieved when the offer matches the need, or the circle is
superimposed on the square. The goal is to cover the expected performance level better than the
competitors.

Who is the Customer?

There are two distinct types of customers-external and internal.

An external customer can be defined in many ways, such as the one who uses the product or service, the
one who purchases the product or service, or the one who influences the sale of the product or service.

For instance, McDonald’s determined the customer to be the child when they introduced their Happy
Meals. The child never paid for the meals but the child influenced the sale. Oftentimes, parents
purchase mobile phones and yet the teenage children use the mobile phones.

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The identity of the external customer is not always easy to determine. An external customer exists
outside the organization and generally falls into three categories: current, prospective, and lost
customers.

Each category provides valuable customer satisfaction information for the organization. Every
employee in the organization must know how their job enhances the total satisfaction of the external
customer. Performance must be continually improved in order to retain existing customers and to gain
new ones.

An internal customer is just as important. Every function, whether it be engineering, order processing,
or production, has an internal customer-each receives a product or service and, in exchange, provides a
product or service.

Every person in a process is considered a customer of the preceding operation. Each worker’s goal is to
make sure that the quality meets the expectations of the next person. When that happens throughout the
manufacturing, sales, and distribution chain, the satisfaction of the external customer should be assured

Customer Perception of Quality

One of the basic concepts of the TQM philosophy is continuous process improvement. This concept
implies that there is no acceptable quality level because the customer’s needs, values, and expectations
are constantly changing and becoming more demanding

An American Society for Quality (ASQ) survey on end user perceptions of important factors that
influenced purchases showed the following ranking:
1. Performance
2. Features
3. Service
4. Warranty
5. Price
6. Reputation

The factors of performance, features, service, and warranty are part of the product or service quality;
therefore, it is evident that product quality and service are more important than price .

1) Performance

Performance involves “fitness for use”—a phrase that indicates that the product and ser-vice is ready
for the customer’s use at the time of sale. Other considerations are (1) availability, which is the
probability that a product will operate when needed; (2) reliability, which is freedom from failure over
time; and (3) maintainability, which is the ease of keeping the product operable.

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2) Features

Identifiable features or attributes of a product or service are psychological, time-oriented, contractual,

ethical, and technological. Features are secondary characteristics of the product or service. For example,
the primary function of an automobile is transportation, whereas a car stereo system is a feature of an
automobile.

3) Service

Providing excellent customer service is different from and more difficult to achieve than excellent
product quality. Organizations that emphasize service never stop looking for and finding ways to serve
their customers better, even if their customers are not complaining.

4) Warranty

The product warranty represents an organization’s public promise of a quality product backed up by a
guarantee of customer satisfaction. Ideally, it also represents a public commitment to guarantee a level
of service sufficient to satisfy the customer.

5) Price

Today’s customer is willing to pay a higher price to obtain value. Customers are constantly evaluating
one organization’s products and services against those of its competitors to determine who provides the
greatest value.

6) Reputation

Most of us find ourselves rating organizations by our overall experience with them. Total customer
satisfaction is based on the entire experience with the organization, not just the product. Good
experiences are repeated to six people and bad experiences are repeated to 15 people; therefore, it is
more difficult to create a favorable reputation.

Customers are willing to pay a premium for a known or trusted brand name and often become
customers for life

Customers Complaint

Organizations make all efforts to satisfy its customers, but still every business experiences unhappy
customers.

A dissatisfied customer can easily become a lost customer. Many organizations use customer
dissatisfaction as the primary measure to assess their process improvement effort.

In reality, the customer is giving the organization a second chance. Some actions organizations can take
to handle complaints are as follows:

• Investigate customers’ experiences by actively soliciting feedback, both positive and negative, and
then acting on it promptly.

• Develop procedures for complaint resolution that include empowering front-line personnel.

• Analyze complaints, but understand that complaints do not always fit into neat categories.

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• Work to identify process and material variations and then eliminate the root cause. “More inspection”
is not corrective action.

• When a survey response is received, a senior manager should contact the customer and strive to
resolve the concern.

• Establish customer satisfaction measures and constantly monitor them.

• Communicate complaint information, as well as the results of all investigations and solutions, to all
people in the organization.

• Provide a monthly complaint report to the quality council for their evaluation and, if needed, the
assignment of process improvement teams.

• Identify customers’ expectations beforehand rather than afterward through complaint analysis

EXTERNAL CUSTOMER SATISFACTION.

An external customer is one who isn’t a part of an organization, rather is one who receives service or
product from the organization. They are the ones who pay for a service or product and can make or
break an organization. They have a choice.

If a particular product or service does not please them, they can easily find another company that offers
a better product or services. Quality must be incorporated into all activities with a clear customer focus.
Customers usually compare perceptions of what they actually received from the organization with their
expectations (what they were expecting to get from the organization).

Customer delight arises when perceptions exceed expectations. External customer satisfaction shows
the extent to which the organization;
· Uses methods for determining and monitoring external customer's perceived quality and value.
· Uses customer feedback to improve product/service quality.
· Handles complaints, resolves them, and uses complaint information for quality improvement
and
prevention of recurrence of problems.
· Measures performance against customer targets.
· Compares its customer satisfaction results with that of main competitors.

INTERNAL CUSTOMER SATISFACTION.

An internal customer can be anyone within an organization. It could be another department, another
branch or even a co-worker.

Getting the internal relationships working is essential if external customers are to be satisfied. Every
single person in the organization has an effect on the external customers. Internal co-operation needs to
be stimulated to enhance organizational performance. The most effective leadership style tends to give
high importance to teams and employee participation.

A summary of steps to improve Internal Customer Satisfaction is given below

 Treat employees as you would treat your customers – They are valuable members of
your organization and they must feel important for the organization.
 Share your vision – Communicating the company’s vision with the employees will make them feel

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a part of the company. It can help them align their goals with those of the company.
 Surpass their expectations – To make your employees happy, offer unexpected gifts or bonuses,
arrange team parties, take them out for a team lunch or dinner, etc.
 Take feedback and suggestions – To better understand your employees; you must know what they
feel about their jobs, or their work environment.
 Show appreciation for good work – Appreciate a good work done.

Feedback

Customer feedback must be continually solicited and monitored. Customers continually change. They
change their minds, their expectations, and their suppliers.

Customer feedback is not a one-time effort; it is an ongoing and active probing of the customers’
mind. Feedback enables the organization to:
 Discover customer dissatisfaction.
 Discover relative priorities of quality.
 Compare performance with the competition.
 Identify customers’ needs.
 Determine opportunities for improvement.

Listening to the voice of the customer can be accomplished by numerous information-collecting tools.
The principal ones are
 Comment cards,
 Questionnaires,
 Focus groups,
 Toll-free telephone lines,
 Customer visits,
 Report cards,
 The Internet,
 Employee feedback,
 Mass customization and the
 American Customer Satisfaction Index

Comment Card

A low-cost method of obtaining feedback from customers involves a comment card, which can be
attached to the warranty card and included with the product at the time of purchase. The intent of the
card is to get simple information, such as name, address, age, occupation, and what influenced the
customer’s decision to buy the product.

Comment cards are also used in the hospitality industry. Restaurants and hotels provide them at the
ends of tables and in hotel rooms. They can even be found on the bottom of restaurant sales

Customer Questionnaire

A customer questionnaire is a popular tool for obtaining opinions and perceptions about an
organization and its products and services. However, they can be costly and time-consuming. Surveys
may be administered by mail or telephone. In the form of questionnaires, the customer is asked to
furnish answers relating to the quality of products and services. Most surveys ask the customer to

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grade the question on a one-to-five scale or a one-to-ten scale, where the highest number typically has
a description like “highly satisfied.”

Focus Groups

Customer focus groups are a popular way to obtain feedback, but they too can be very expensive.
These groups are very effective for gathering information on customer expectations and
requirements.

A group of customers is assembled in a meeting room to answer a series of questions. These

carefully structured questions are asked by a skilled moderator, who probes into the participants’
thoughts, ideas, perceptions, or comments. The moderator has a clear understanding of the type of
information wanted and a plan for obtaining it. Meetings are designed to focus on current, proposed,
and future products and services.

Toll-Free Telephone Numbers

Toll-free (1800/1600) telephone numbers are an effective technique for receiving complaint
feedback. Organizations can respond faster and more cheaply to the complaint. Such a number does
not, however, reach those who decided not to buy the product or those who discovered some likable
feature on a competitor’s product. Toll-free numbers are in use by at least 50% of all organizations
with sales of at least $10 million

Customer Visits

Visits to a customer’s place of business provide another way to gather information. An organization
can proactively monitor its product’s performance while it is in use and thereby identify any specific
or recurring problems. Senior managers should be involved in these visits and not delegate them to
someone else

Report Card

Another very effective information-gathering tool is the report card. It is usually sent to each
customer on a quarterly basis. The data are analyzed to determine areas for improvement

The Internet and Computers

Some managers are beginning to monitor discussions that take place on the Internet to find out what
customers are saying about their products. Internet users frequently seek advice regarding their
everyday activities

There are even Internet sites that take consumer complaints and compliments about businesses and
gives organizations grades based on their ratio of complaints to compliments

Employee Feedback

Employees are often an untapped source of information. Companies are listening more to the
external customer but still are not listening to employees. Employees can offer insight into conditions
that inhibit service quality in the organization. Employee groups can brainstorm ideas to come up
with solutions to problems that customers have identified

Mass Customization

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The ultimate in customer satisfaction is giving customers exactly what they want. Customers
determine what type of seat coverings, color, and stereo system they want. Mass customization is
now being used in many other industry

The American Customer Satisfaction Index

The American Customer Satisfaction Index (ACSI), established in 1994 as a joint project between
the University of Michigan and the American Society for Quality

ACSI looks at products sold in the United States and not just those produced in the United States. In
this way, the United States’ quality is compared to international quality

Service Quality

Strategies that have produced significant results in production are often harder to implement in a
service environment. Thanks to the teachings of Deming, Juran, and others, significant strides have
been made in manufacturing. The same results have been slower in service organizations or service
activities in manufacturing.

Customer service is the set of activities an organization uses to win and retain customers’
satisfaction. It can be provided before, during, or after the sale of the product or exist on its own.

Elements of customer service are:

Organization
1. Identify each market segment.
2. Write down the requirements.
3. Communicate the requirements.
4. Organize processes.
5. Organize physical spaces.

Customer Care
6. Meet the customer’s expectations.
7. Get the customer’s point of view.
8. Deliver what is promised.
9. Make the customer feel valued.
10. Respond to all complaints.

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11. Over-respond to the customer.

12. Provide a clean and comfortable customer reception area.

Communication
13. Optimize the trade-off between time and personal attention.
14. Minimize the number of contact points.
15. Provide pleasant, knowledgeable, and enthusiastic employees.
16. Write documents in customer-friendly language.

Front-line people
17. Hire people who like people.
18. Challenge them to develop better methods.
19. Give them the authority to solve problems
20. Serve them as internal customers.
21. Be sure they are adequately trained.
22. Recognize and reward performance.

Leadership
23. Lead by example.
24. Listen to the front-line people.
25. Strive for continuous process improvement.

Translating Needs into Requirements

The Kano model, which is shown in Figure, conceptualizes customer requirements. The model
represents three major areas of customer satisfaction.

The first area of customer satisfaction, represented by the diagonal line, represents explicit
requirements. These include written or verbal requirements and are easily identified, expected to
be met, and typically performance related. Satisfying the customer would be relatively simple if
these were the only requirements.

The second area of customer satisfaction represents innovations, as shown by the curved line in
the upper left corner of the figure. A customer’s written instructions are often purposefully vague
to avoid stifling new ideas during conceptualization and product definition. Because they are
unexpected, these creative ideas often excite and delight the customer. These ideas quickly
become expected.

The third and most significant area of customer satisfaction represents unstated or unspoken
requirements, as shown by the curve in the lower right corner of the figure. The customer may
indeed be unaware of these requirements, or they may assume that such requirements will be
automatically supplied.

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Customer Retention

Customer retention refers to a company's ability to turn customers into repeat buyers and prevent
them from switching to a competitor.

Customer retention is more powerful and effective than customer satisfaction. Customer retention
represents the activities that produce the necessary customer satisfaction that creates customer loyalty,
which actually improves the bottom line.

Your best customers don’t just buy one product or use your service once. They come back again and
again for more. Customer retention increases your customers’ lifetime value and boosts your revenue.

Customer satisfaction surveys, focus groups, interviews, and observations can help determine what
customers think of a service or a product. However, what people say and think is often different from
what they do.

The following steps are important for customer retention.

 
1.     Top management commitment to the customer satisfaction.
2.     Identify and understand the customers what they like and dislike about the organization.
3.     Develop standards of quality service and performance.
4.     Recruit, train and reward good staff.
5.     Always stay in touch with customer.

Employee involvement

It is one approach to improving quality and productivity. Its use is credited for contributing to the
success enjoyed by the Japanese in the world marketplace. Employee involvement is not a
replacement for management nor is it the final word in quality improvement.

Motivation

Knowledge of motivation helps us to understand the utilization of employee involvement to achieve

process improvement

Maslow’s Hierarchy of Needs

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One of the first and most popular motivational theories was developed by Abraham Maslow.

He stated that motivation could best be explained in terms of a hierarchy of needs and that there were
five levels. These levels are survival, security, social, esteem, and self-actualization

Level 1 (survival) means food, clothing, and shelter, which is usually provided by a job. In the
workplace, Level 1 needs include proper lighting, heating/air conditioning, ventilation, phone system,
data/voice access, and computer information system

Level 2 (security) can mean a safe place to work and job security, which are very important to
employees. A threat of losing one’s job certainly does not enhance motivation. Level 2 is not limited
to job security also having a safe work environment that may include ergonomic adjustable furniture.

Because we are social animals, Level 3 (social) relates to our need to belong. Isolation is an effective
punishment to any employee. Conversely, giving an individual the opportunity to be part of the group
by feeling important and needed will motivate that person.

Level 4 (esteem) relates to pride and self-worth. Everyone, regardless of position or job assignment,
wants to be recognized as a person of value to the organization.

Level 5 (self-actualization) says that individuals must be given the opportunity to go as far as their
abilities will take them

McGregor Theory X & Theory Y

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Hertzberg’s two factor theory

Hygiene factors are needed to make sure that an

employee is not dissatisfied. Motivation factors
are needed for ensuring employee's satisfaction
and employee’s motivation for higher
performance.

Mere presence of hygiene factors does not

guarantee motivation, and presence of motivation
factors in the absence of hygiene factors also does
not work

Employee Surveys

A manager should take in initiating employee empowerment is to survey their employees to determine
their current level of perceived empowerment.

Employee surveys help managers assess the current state of employee relations, identify trends,
measure the effectiveness of program implementation, identify needed improvements, and increase
communication effectiveness.

The survey include personality characteristics, management styles, job attitudes, and the work.

Examples of each include:

• Personality characteristics -anxiety, self-esteem in the organization, and ability to participate in the
organization.
• Management styles -consideration of subordinates, initiating structure, commitment to quality.
• Job attitudes -job satisfaction, social support at work and co-worker’s commitment to quality.
• The work -task variety, autonomy and importance.

Empowerment

The dictionary definition of empowerment is to invest people with authority. Its purpose is to tap the
enormous reservoir of potential contribution that lies within every worker.

Empowerment is an environment in which people have the ability, the confidence, and the
commitment to take the responsibility and ownership to improve the process and initiate the necessary

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steps to satisfy customer requirements within well-defined boundaries in order to achieve

organizational values and goals.

In order to create the empowered environment, three conditions are necessary.

1. Everyone must understand the need for change.
People fear change. They need to understand the role they will play in the change process. Senior
management must understand that people change for their own reasons, not for reasons of the
organization. People who are older, well educated, highly skilled, and experienced are more likely
to accept increased demands and expectations associated with empowerment

2. The system needs to change to the new paradigm.

The system needs to change to reinforce and motivate individual and group accomplishments.

3. The organization must enable its employees

Enablement means providing information, education, and skill. To ask people to change work
habits without providing them with the tools for change only increases resistance to the change
process.

Teams

Employee involvement is optimized by the use of teams. A team is defined as a group of people
working together to achieve common objectives or goals. Teamwork is the cumulative actions of the
team during which each member of the team subordinates his individual interests and opinions to
fulfill the objectives or goals of the group.

Types of Teams

1. Process improvement team. The members of a process improvement team represent each operation
of the process or sub-process. Usually the scope of the team’s activity is limited to the work unit.

A team of about six to ten members will come from the work unit and, depending on the location of
the sub-process, an external or internal supplier and external or internal customer would be included
on the team. During the course of the team’s life, additional expertise from other work areas may be
added on a permanent or temporary as-needed basis.

2. Cross-functional team. A team of about six to ten members will represent a number of different
functional areas such as engineering, marketing, accounting, production, quality, and human
resources. It may also include the customer and supplier.

3. Natural work teams. This type of team is not voluntary–it is composed of all the members of the
work unit.

4. Self-directed/self-managed work teams. They are an extension of natural work teams without the
supervisor. Thus, they are the epitome of the empowered organization-they not only do the work but
also manage it

Characteristics of Successful Teams

In order for a team to be effective, it should have certain characteristics, listed below.

1. Sponsor. In order to have effective liaison with the quality council, there should be a sponsor.
Preferably the sponsor is a member of the quality council, thereby providing organizational support.

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2. Team charter. A team charter is a document that defines the team’s mission, boundaries, the
background of the problem, the team’s authority and duties, and resources

3. Team composition. The size of the team should rarely exceed ten people except in the case of
natural work teams or self-directed teams.

4. Training. As the need arises, members should be trained in problem-solving techniques, team
dynamics, and communication skills. A later section discusses training in detail.

5. Ground rules. The team must develop its rules of operation and conduct. There should be open
discussion on what will and will not be tolerated. Periodically the ground rules should be reviewed
and revised when appropriate.

6. Clear objectives. Without clear objectives and goals, the team will have difficulty. In addition, the
criteria for success should be agreed on with management

7. Accountability. The team is accountable to perform. Periodic status reports should be given to the
quality council. In addition, the team should review its performance to determine possible team
process weaknesses and make improvements.

8. Well-defined decision procedures. Effective, acceptable, and timely decisions have to be made by
the team.

9. Resources. Not only is funding and employee release time for the project important, but also
important is access to information. The team cannot be expected to perform successfully without the
necessary tools.

10. Trust. Management must trust the team to perform the task effectively. There must also be trust
among the members and a belief in each other.

11. Effective problem solving. Decisions are based on the problem-solving method. They are not
made on hunches or quick fixes.

12. Open communication. Members actively listen, without interruption, to other members, speak
with clarity and directness, ask questions, and say what they mean.

13. Appropriate leadership. All teams need leadership-whether imposed by the quality council, or
whether someone emerges as a leader figure as the life of the team progresses, or whether the
leadership changes as the team matures.

14. Balanced participation. All members must become involved in the team’s activities by voicing
their opinions, lending their knowledge, and encouraging other members to take part.

15. Cohesiveness. Members should be comfortable working with each other and act as a single unit,
not as individuals or sub-groups

Suggestion systems

They are designed to provide the individual with the opportunity to be involved by contributing to
the organization. Most of the ideas for continuous improvement will come from the team approach.

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However, once the foundation for a TQM organization has been established, a suggestion system can
operate effectively and in parallel to the team approach.

Management must make it easy for employees to suggest improvements. Management should then
review them promptly and if feasible, implement them. Stimulating and encouraging employee
participation starts the creative process.

There are five ground rules:

1. Be progressive by regularly asking your employees for suggestions. Merely putting up a

suggestion box will not create the necessary motivation.

2. Remove fear by focusing on the process and not on the person. When employees know that
punitive actions will not occur, they are more likely to respond.

3. Simplify the process so it is easy to participate. Stamp out superfluous paperwork, review, and
procedures.

4. Respond quickly to suggestions and within a specific period of time. The evaluation process must
be simple and effective. The response, in writing, has three possible responses-acceptance, rejection,
or referral to a committee for further evaluation. If accepted, a time frame for implementation should
be given; if rejected, the reason for the rejection should be stated; and if referred to a committee, the
evaluation time should be stated.

5. Reward the idea with published recognition so that everyone knows the value of the contribution.

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