www.bradford.ac.uk/management

Customer Relationship

Management

Performance Management Fundamentals

Lecture 2

Customer Relationship

Management

Managing a customer means you
understand every aspect of:
• Customer acquisition
• Customer encounters
• Customer retention

2

CRM

– not just an IT system

CRM involves:
• Keeping promises
• Ensuring all communication is free of

errors

• Ensuring all facilities clean/fit for purpose
• Providing effective knowledge of products,

services and solutions to problems

• Empathising with customers – treating

them as individuals

3

Why listen to customers

Quality of Design, (Oakland, 1993:11)

4

Customer Loyalty

• More important than customer

satisfaction?

• Cheaper than mass marketing

campaigns?

• Tangible or intangible?

5

Satisfaction - Loyalty links

Zone of affection

Zone of indifference

Zone of defection

1

20%

40%

60%

80%

100%

Loyalty

Satisfaction

5

10

Apostle

Terrorist

Source: Professor J. Heskett, Harvard Business School

Customer Satisfaction and

Loyalty

6

Why satisfied customers?

Satisfied Customers affect the

bottom line

Satisfied

Customers Make

companies more

profitable



Buy more often



Buy more (range)



Pay more (9% less price

sensitive)



Recommend more



Free advertising



Referred customers are best



Stay longer

7

Customer satisfaction pays

• Customer loyalty is a better predictor of profit

than market share (Harvard)

• Dow Chemicals: 1% increase in loyalty

generates 1.2% increase in account share

• IBM: 1% gain in customer satisfaction index

results in $100 million extra sales over 5 years

Satisfied Customers and

Profit

8

Why measure satisfaction?

• Traditional measures not adequate

– Customer complaints

• Most dissatisfied customers don’t complain
• Most complaints don’t reach senior

management

– Sales force

• Selective feedback of information
• Subjective knowledge based on

relationships

• Only objective third party surveys provide a

reliable customer satisfaction indicator

• Requirement of ISO 9001:2000

9

• A 5-percent increase in loyalty can increase profits by

25%-85%

• A satisfied customer is nearly six times more likely to be

loyal and to repurchase and/or recommend your product
than is a customer who is just satisfied

• Only 4%of dissatisfied customers will complain

• The average customer with a problem eventually tells

10-20 other people

• Satisfied customers tell 5 other people about their good

treatment.

Customer Satisfaction Measurement Facts

Customer Satisfaction Facts …

Fitzsimmons and Fitzsimmons, 2008:128

10

11

Expectations

1.What does my customer expect of me ?

2.What do I expect from my customer ?

One supplier

Three customers

Twelve expectations

Wherever possible

make expectations explicit.

Machin J L J., 1980. Expectations Approach.
Improving Managerial Communication and Performance. McGraw Hill.

1

2

2

2

4

4

4

1

1

3

3

3

3.

What do I think my customer expects of me?

4.

What does my customer think my expectations are?

12

Collecting The ‘Voice

’

Critical - Complex - Difficult - Expensive

o

How is the voice heard?

– Government reports
– Consumer reports
– Warranty data - returns - repairs
– Interviews - focus groups - individuals
– Location - point of use or purchase

o

Who is the customer?

– Internal - next process - peers - other

departments - other divisions

– External - purchaser - first user - second user -

13

Customer Information Source

Solicited

Quantitative

Structured

Complaint reports
standards
Gov. Regulations
Lawsuits

Focus Groups

Hot lines
Surveys
Customer tests
Trade trials
Preferred customers
QM testing
Service use survey
Customer audits

Unsolicited

Qualitative

Random

Trade visits
Visits by customers
Consultants
Standards Authorities

Sales force
Training prog’
Conventions
Trade journals
Suppliers
Academic
Employees

LAGGING

LEADING

14

Measuring the ‘Voice

’ (cont.) (SERVQUAL)

7

6

4

3

2

1

5

KEY BUYING FACTOR

WHAT THE CUSTOMER WANTS

WHAT ORGANISATIONS CAN PROVIDE

The Kano Model

Offers some insight into product or service attributes
which are perceived to be important to customers. Kano
suggests there are three categories of human perception

• the ‘must be’

• the ‘more is better’

• the ‘delighters’

….. an excellent method for supporting product or service

specification, since each of these perception levels lead
to ‘service quality’ .

15

The Kano Model

Product characteristics can be classified as:

• Threshold – Basic attributes:

Attributes that must be present in order for

the product or service to be successful, can be viewed as the

‘price of entry’

or as

‘satisfaction qualifiers

’. However the customer will remain neutral

towards the product even with improved execution of these aspects.

• One Dimensional Attributes (performance – linear

):

These

characteristics are directly correlated to customer satisfaction. Increased
functionality or quality of execution will result in increased customer
satisfaction. Conversely, decreased functionality results in greater
dissatisfaction. Product price is often related to these attributes.

• Attractive Attributes (Exciters – Delighters):

Customers get great

satisfaction from a feature

– and are willing to pay a price premium.

However satisfaction will not decrease (below neutral) if the product lacks
the feature. These features are usually not expected by customers, can be
difficult to establish as needs up front. Sometimes called unknown or latent
needs.

16

17

Kano Model - Method

o

Determine the main features that need to be classified. ‘The features of interest’

o

Devise a questionnaire. The questionnaire aims to understand how potential customers
would feel if a feature was either present or not present. This is achieved by asking two
questions for each feature

– a functional question (i.e. the feature is present) and a dys-

functional question

– the feature is not present.

o

Sum responses. As with any questionnaire a sufficient response must be found. Average
response should be calculated.

o

Identify classification. Based upon the responses, the type of feature can be identified
from a simple look up table.

o

Indifferent responses. These are attributes to which the customer pays no attention.

‘If

they are present it is nice, if they are not it does not matter’

o

Questionable responses and reversals. Responses that contradict each other.

o

Plot features on a Kano graph

18

Kano Charts

-

1

If the phone

has SMS text

Capability

– how

Would you feel?

If the phone does

Not have SMS text

Capability

– how

Would you feel?

1.

Like

2.

Must

3.

Do not care

4.

Can live with it

5.

Dislike

1.

Like

2.

Must

3.

Do not care

4.

Can live with it

5.

Dislike

Functional form

of question

Dysfunctional form

of question

X

X

19

Kano Charts

-

2

o

O

= One dimensional or linear

feature

o

I

= Indifferent response

o

A

= Attractive feature

o

E

= Expected feature

o

R

= Reversal

– not consistent

response

o

Q

= Questionable response

X

Customer

requirements

Dys - Functional

F

u

n

cti

o

n

al

2. Must

1. Like

3. Do not

care

4. Can
Live with it

5. Dislike

2.

M

u

st

1.

L

ike

3.

D

o

n

o

t

car

e

4.

C

an

L

iv

e

w

ith

i

t

5.

D

isl

ike

Q

A

O

I

E

R

A

A

R

R

R

R

R

I

I

I

I

I

I

I

I

Q

I

E

E

Kano charts: SMS texting is a must for
a mobile phone

The Kano Model

Noriaki Kano (1976)

Characteristic

Cus

tomer

Satisfac

tion

1

Physically

fulfilled

condition

Satisfied feeling

One

dimensional

quality

Expected

quality

Exciting
quality

Absent quality
or performance
not achieved

Indifferent

2

3

4

5

20