gkgureja.com

Customer Satisfaction: Act before it is too late

Paper presented at the CEOs Conference at Port Blair

May 1998

• It is stating the obvious that every business needs customers. However, what is not so obvious is that most businesses need existing customers as much as they need the new ones. Marketing function has traditionally, directed all its activities at seeking new customers with the result that many companies suffer from the “leaking bucket” effect. The existing customers, dissatisfied by lack of responsiveness, begin to defect to competitors. In the present day context marked by severe competition and shrinking demand companies can ill afford customer defections.
• The subject of customer satisfaction has already forced itself into the CEOs’ thinking process and in to the board room discussions for many years now. A survey[1] carried out in 1994 revealed that as many as 74 % of the CEOs of the Indian companies rated the importance of quality as high as 9 or 10 on a scale of 0 to 10. Filling the quality-gap is in itself a strong surrogate for customer satisfaction. Quality improvement, therefore, straightway justifies priority number one. However, it has been realised that catching up with quality standards only places the company’s products at par with others. It no longer means an edge over competition. What is also needed is a much sharper customer focus.
• Another study[2] in 1994 confirmed that 56 % of the CEOs indeed considered sharper customer focus as the most critical initiative. A number of complimentary initiatives have been taken by many Indian organisations with varying degree of success. Apart from other things they are all aimed at improving customer satisfaction and overall competitiveness. But are we making successful transformation? Is the pace of progress good enough? No, reveals the latest WEF Competitiveness Report 1997 (Annexure l).
• What explains the phenomenon that while many countries like Thailand, Indonesia, China and others, have leap-frogged in competitiveness ranking, India is sliding downwards year after year? Hopefully, some answers will emerge during this conference.
• The primary responsibility of a CEO is to manage the future of an organisation. So, let me take you a few years ahead into the future In early 1995, Arthur D. Little, management consultants to the world, put together some top notch executives, from some of the most renowned US companies considered as best of the best in terms of their customer management practices. The objective was: an exchange of knowledge about how do they currently manage customers’ expectations and what emerging changes do they foresee over a period of ten years. One of the most interesting outcome of this colloquium was what they call ‘Timeline for Change’. Shown in Annexures 2 and 3 are some the observations particularly relevant to the current topic. “
• All that should re-establish the criticality of the need for developing an organisational culture that motivates people to assess customers’ expectations; find out the extent to which they are being met; set new standards of performance that meet or in fact exceed the expectations; to do every thing reasonably possjble to retain the existing customers as much as to attract new ones. 
• Quality of customer-relationship essentially, is a function of the value a customer perceives during various encounters that occur with the seller during the period the relationship lasts. The turn-around story of the SAS from $ 8m loss in 1981 to $71m profit in two years is widely known as an outstanding example of how a customer centric philosophy dedicated to offering superior service while handling these encounters can change a company’s fortunes. Jan Carlzon, the CEO who brought about this turnaround also immortalised the phrase ‘Moments of Truth’ as an apt description of the customer/seller encounters. 
• A moment of truth (MOT) occurs every time the customer comes in contact with some aspect of the organisation and uses that opportunity to judge the quality of service the organisation is providing. The MOTs arise from the business processes applicable during three distinct phases of customer / seller relationship. These phases are
  • The order booking phas
  • The order execution phase an
  • The post -sales phase.

• Every moment of truth involves a deliverable -some thing tangible like some material, some  documents, a delivery schedule, rectification of a fault or an action plan. The customer makes, at the first level, an assessment of value addition under five different dimensions as shown in the annexure 4.
• These dimensions apply throughout the relationship though the value signals are phase- specific. For instance, in the first phase ‘cycle time’ manifests itself in the proposed commitments on delivery, documentation, response to technical and commercial queries, etc. However, in the second phase, the value perception on ‘cycle time’ dimension comes from postponements or preponement of the negotiated time frame related to specified activities. In the third phase time taken to respond to the request for after-sales service or supplies come in to the customer focus of value perception.
• At the second level, the customer evaluates the process of delivery – the way the whole transaction is handled by the customer-contact people. He perceives additional positive or negative value by using a new set of dimensions of service quality described as follows
  • Tangibles: Physical attributes of products, offices, manufacturing facilities, users’ installations, literature and people
  • Accuracy: Accuracy and completeness
  • Assurance: Courtesy, technical competence, respect for the customer
  • Responsiveness: Willingness to help, promptness of response, flexibility in dealing with situations
  • Reliability: The ability to perform the promised service dependably and consistently

• In a fiercely competitive environment a company cannot go too far if the tangibles do not meet the customer’s expectations. You begin to gain an edge in quality of service only when you meet if not exceed customer’s expectations, at a higher level of hierarchy of needs. Accuracy of data is very important. Assurance matters a great deal. Responsiveness and empathy go a long way in gaining customer’s loyalty
• Responsive, value added after-sales service offers a long time prospect for sustaining an ongoing quality relationship. It impacts overall customer satisfaction primarily through the following two measures:
• Responsiveness – in all its facets, right after the sale is made and all along
  • Product quality and reliability – by providing professional technical help required to  improve plant availability and effectiveness:
  • It is in this sense that the service department of a company has a large role to play in achieving higher levels of customer satisfaction.
•  Responsiveness is a measure of customer satisfaction with the company as an innovato and not with the product. It is an all-inclusive measure combining all forms of interpersonal relations, including complaints resolution
• Responsiveness creates the biggest impact on overall customer satisfaction. According to a research study every one percent increase in overall performance rating ( on overall satisfaction) resulted from:
  • 2.5% higher satisfaction rating on responsivenes
  • 3.6 % higher satisfaction rating on technolog
  • 5.1 % higher satisfaction rating on product quality and reliability
• Placing long-term relationship in sharper management focus and treating after-sales service as an ongoing opportunity for value addition to the customer value chain creates a solid base. A base from where, relationship improves from one level of intrinsic quality to another. This way of managing customer relations turns new customers into repeat purchasers. It helps to progressively move them through being strong supporters of the company and its products to finally being active and vocal advocates for the company, thus playing an important role as a referral source
• If, the foregoing makes out a case for the CEOs to initiate meaningful action with some sense of urgency, here is a broad road map suggested for action.
  • Make unequivocal commitment (a commitment that goes way beyond mission statements)
  • Re-assess customers’ requirements (use focus groups, internal assessment and customers’ surveys)
  • Set goals and performance measures (use dimensions of value perception as guide lines)
  • Revise relevant processes to meet the set goals.
  • Satisfy internal customers.
  • Train, motivate and empower customer contact people.
  • Use communication to full advantage.
  • Identify some one to act as customer representative.
  • Process feedback and communicate.
  • And organise for feed forward. Customers are moving targets. Hence monitor their emerging needs continuously and organise to meet them.
• If all this is done you may well be offering a Centurion service to your customers. But it is well to remember that clear product differentiation that a company can create by providing superior service can come about at the CEO’s pleasure. Without the CEO’s attention and support it can be neglected and can wither away. With visible and explicit support you can take your company in to the 21st century with more confidence.

[1] A Business Today -IMRB study, Business Today Jan 7- 21,1995, p. 41

[2] Business Today – Indica Research, Oct. 1994.

Gopal K. Gureja, a Pune based customer-service consultant is the author of Creating Customer Value (Tata M~Graw-Hill), a book that forcefully brings out the strategic importance of quality customer service.