Principle 3: Customer Perception of Value (Item 10)
Providing what your customers value – now and in the future –
must be a key influence in your organization's direction, strategy and
action.
As you will see in Principle 5 (`Improved Decisions') and Principle
6 (`Variability'), you can achieve a great deal through measurement. For Principle 3, three different types of measurement
are needed: two for perceptions and one for specifications.
First, you must measure how satisfied the customers are with what they
receive — their perception of value received. This tells you how
successful your work is at eliminating dissatisfiers, building relationships,
creating value and keeping up with technological changes in the market.
The diagram attempts to explain that you have several customer segments.
Your products and services, in the general case, will not exactly meet
the needs and expectations of any of them.
Second, you must measure the gap between what they value and what you
provide. These gaps can be measured by survey.
Both of these measurements are all about perceptions. Perceptions are
important and must be gathered and quantified – an increasingly
complex task. Your response to the perceptions of customers and other
stakeholders will increasingly influence and alter the entire structure
of your business.
When gathering customer satisfaction information, you should identify
any important differences between your different customer groups or
market segments. Try to find factors that influence your customers'
market behaviors – repurchase decisions, new business and positive
referrals.
You should also record your customers' satisfaction with recent transactions.
You may need to design a process of following up recent transactions
to do this.
It is also important to determine customer satisfaction relative to
your competitors. The easiest way to do this is to ask your customers
"Are we better than our competitors?" The information you
get from such an analysis can be used to better understand the factors
that influence your market and improve your performance relative to
your competitors.
To be meaningful, you should measure customers' perception formally.
By this we mean, have a process for asking, recording responses, analyzing
responses and modifying the way your company goes about its business.
By all means record the anecdotes and compliments "Bill Smith
said we did very well". These help with the warm inner glow. However,
you need graphs that shows increasing satisfaction and decreasing dissatisfaction.
The third measurement is more technical. You need to measure how closely
your products meet your customers' "specifications". If you
were a cement manufacturer, your customers would specify how much ash
and lime they want in the cement you deliver to them. They might even
impose penalties if you go outside those limits. You would need to manage
your processes to deliver within those specifications and measure as
you go. (We will deal with the technical phpect of this in Principles
4 `To Improve the Outcome, Improve the System' and 6 `Variability'.)
This type of measurement is usually well beyond a perception. Notice
also that you can (and should) measure it before your product or service
reaches your customer.
The customers of most organizations have specifications of some form
or another. The commonest specifications are speed of response and accuracy
– often called `cycle time' and `defects'. (Even the ash example
above is a form of defect measurement – acceptable within a range.)
This means that you need to translate your customers' needs into operational
characteristics. These should be measurable, monitored and controlled.
That is, a `performance-based' approach to meeting your customers' needs.
For example, for shoppers standing in the queue is (usually) not a
valued part of shopping. The queue is something added-on by the supplier.
Something the customer has to endure. The supplier should measure the
queuing time in order to control and reduce it.
Customer issue: minimum delays at supermarket checkouts
Measure: delay in minutes
Customer perception of value is a strategic concept. It is directed
toward customer retention, market share gain and growth. It demands
constant sensitivity to changing and emerging customer and market requirements,
and the factors that drive customer perception of value and retention.
It demands awareness of developments in technology and of competitors'
offerings, and rapid and flexible response to customer and market requirements.
When you a working to provide what customers value, you must take into
account all phpects of the product and service that do and do not contribute
value to customers and lead to customer satisfaction, preference and
retention.
Customer perception of value and satisfaction may be influenced by
many factors throughout the customer's overall purchase, ownership and
service experiences. These factors include your company's relationship
with the customer that helps build trust, confidence and loyalty. Customer
perception of value also includes those characteristics that differentiate
products and services from competing offerings.
Customer perception of value means much more than defect and error
reduction, merely meeting specifications or reducing complaints; even
though defect and error reduction and elimination of causes of dissatisfaction
make important contributions to the customers' perception of value.
Your success in recovering from defects and mistakes ("making things
right for the customer") is crucial to building customer relationships
and to customer retention.
The systematic approach to Principle 3 is:
- Understand what your customers want.
- Eliminate what they dislike. Actively hunt for complaints and dissatisfiers.
- Turn their needs and wants into clearly stated `specifications'.
If possible, these should be specified in formal agreements (eg Service
Delivery Agreements).
- Segment your market – some customers may pay more.
- Make access to you and your products and service easy for your customer.
- Actively try to make everything about your organization work to
deliver value to your customers.
- Enable your customer contact employees (by providing skills, knowledge
and authority) to "make things right for the customer".
- Measure customer perception of value, satisfaction and loyalty.
- Work to close the gaps between what your customers value and what
you provide - by modifying your products and services.
- Measure how well you meet your customers' specifications (including
the ones you guessed at).
- Work to get closer and closer to your customers' specifications
- by modifying your processes.
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