Click on the equation for an enlarged view.
Customer satisfaction/dissatisfaction is determined by customers’ cumulative experiences at all of their points of contact with a supplier organization. The characteristics of these points of contact determine the customer’s level of satisfaction/dissatisfaction. Two critical processes internal to a supplier determine the characteristics of each point of contact and, thus, are the root causes of customer loyalty and level of customer satisfaction/dissatisfaction. These two internal processes are market research and the management of those organizational variables that control employee job performance (performance management).
The equation below describes how customer loyalty and disloyalty result from customer experiences at six critical points of contact with a supplier company and, ultimately, from the supplier’s market research and performance management processes.
Traditional assessments of customer satisfaction, by definition, require customers to have had experiences with a supplier organization. Traditional assessments of customer level of satisfaction/dissatisfaction are a reactive approach to managing customer loyalty because a company’s managers make appropriate adjustments to the points of contactafterfeedback from customers has been obtained. At best, companies that use this type of assessment revise their market research and performance management processes in response to customers’ feedback about their experiences at the six points of contact. The traditional assessment of customer satisfaction/dissatisfaction does not directly analyze and evaluate the two key processes that are the root causes of customer level of satisfaction and dissatisfaction with the six points of contact.
In stark contrast, a proactive approach directly examines the market research and performance management processes. A proactive approach involves a comprehensive analysis and evaluation of the market research and performance management processes for the purpose of identifying where opportunities exist to improve them, then taking appropriate corrective actions.
Proactive assessment of the market research and performance management processes requires a template or model to guide and direct the analysis and evaluation of each process.
For example, a comprehensive market research process would provide five kinds of information about each of the six points of contact:
• Customers’ expectations.
• Customers’ level of satisfaction/dissatisfaction.
• Customers’ suggestions to improve.
• Key attributes that influence customers’ selection of a supplier and the importance of each key attribute.
• Strengths and weaknesses relative to other suppliers, as judged by customers.
Guided by this model of market research, a proactive analysis and evaluation of the market research process for a company’s products would show how well the company’s actual market research process conforms to the model by asking whether the actual market research provides each of the five kinds of information. For example, does our current (less than two years old) market research provide us with specific, detailed information about the characteristics our customers and prospects expect our products to have, the relative importance of each characteristic in selecting a vendor, customers’ level of satisfaction/dissatisfaction, customers’ suggestions to improve our products, and the competitive strengths and weaknesses of our products? Similar questions would be asked for each of the other five points of contact.
A model of the process for managing performance that impacts customer loyalty shows that 13 factors, acting together, control the job performance of individual employees, the output of work processes, and the job performance of all employees.
Seven factors control the job performance of individual employees.
Expectations:The standards that customers expect a product or service to meet and how customers expect to be treated by employees.
Feedback:Data that tell employees how closely their job performance meets customers’ standards.
Consequences:What happens to employees when their job performance meets or exceeds customers’ expectations and when it doesn’t.
Abilities:The skills and knowledge required for job performance to meet customers’ standards.
Resources:The tools, supplies, materials, equipment, procedures, and physical space required for job performance to meet customers’ standards.
Capacity:The physical capabilities required for job performance to meet customers’ standards.
Preference:Whether an employee is willing to perform as expected under the physical and social conditions that exist at the job site, for the rewards that are available when job performance meets or exceeds expectations, and for the compensation and fringe benefits.
Three factors control the output of a work process.
Complexity:The number, sequence, and difficulty of steps in a work process; interference from competing assignments.
Internal Supplier/Internal Customer Relations:How well the work of internal suppliers (individuals and departments) meets the requirements of their internal customers (individuals and departments) who contribute to the same work process.
Process outcome specifications:How closely specifications for the output of a process match the expectations of the internal and external users of that output.
Three factors influence a company’s entire workforce.
Customer Focused Mission:A mission statement which clearly dedicates a company to satisfying its customers, then living up to the intent of the statement.
Compensation:Bonuses, salary/wage increases, and promotions given to employees who regularly satisfy internal and external customers.
Performance Appraisal:Every employee is held accountable in some specific way for meeting the expectations of their internal and/or external customers.
The following five steps illustrate a proactive approach to determine if opportunities exist to strengthen your company’s process for managing performance that impacts customer loyalty.
1.Select a position in your company that has significant impact on customer loyalty.
2.Answer these questions as they apply to the employees in the position you selected in Step 1. (Note: Space limitation prevents including all the diagnostic questions for each of the 13 factors that control customer loyalty.)
Do these employees know in specific detail those features your core products and/or services must have in order for prospects and customers to buy from you instead of from a competitor?
- Do these employees know the standards their work unit must achieve in order to consistently meet the requirements of prospects, external customers, and internal customers?
- Do these employees know in specific detail how prospects and customers expect to be treated by these employees?
- Do these employees have current information about how closely:
Your core products and/or services meet customer expectations?
Their work unit’s performance meets the requirements of its internal customers?
- When the job performance of these employees consistently meets the requirements of their external and internal customers, are these employees regularly given non-financial recognition such as appreciation, praise, and thanks?
- When these employees consistently annoy or upset their external or internal customers, do their managers deal effectively with this poor performance?
- Do the current procedures for selecting people for this position show whether candidates have all the skills and knowledge needed to meet the requirements of the external and internal customers of this position?
- Do these employees always have the equipment, materials, supplies, work space, procedures, and tools in the quantity and quality needed to consistently meet the requirements of their external and internal customers?
- Are the work procedures used by these employees regularly reviewed to determine if their outcomes would improve by eliminating unnecessary steps, combining steps, changing the sequence of steps, simplifying the steps, or eliminating boring repetition?
- Does the performance appraisal/review process clearly and explicitly hold these employees accountable for how well their individual job performance meets the requirements of their external and/or internal customers?
3.Answer the questions in Step 2 as they apply to the position that manages the position you selected in Step 1.
4.For each ‘No’ answer in Steps 2 and 3, identify how the current situation could hurt your company’s efforts to attract first-time buyers, convert first-time buyers into customers, retain existing customers, and increase the value of purchases by existing customers.
5.If the negative consequences identified in Step 4 are unacceptable, revise as appropriate your company’s process for managing this position’s performance.
Applying a proactive assessment of the market research and performance management processes provides managers with direct evidence about weaknesses in these two processes. When used in conjunction with a traditional assessment of customer satisfaction/dissatisfaction, weaknesses will be uncovered that threaten your company’s success attracting first-time buyers and creating loyal customers - weaknesses that previously might have been unknown.
By eliminating these weaknesses, you’ll be better able to sustain accelerated growth in customer base and sales. Other benefits include strengthened competitive position, fewer fires created by upset customers, and fewer resources spent acquiring new customers to replace those who have switched to your competitors.
Publication date:07/07/2008
