Chapter 4: Understand and involve customers

Question 1

I. Concept of customer centricity

Key role of the customer for the company’s success

Answer 1

For a company to be successful in the long term = it must understand, engage and satisfy its customers

Companies that successfully meet and exceed customer expectations have an effective “Customer Listening Organizational Culture”:

• Continuous collection of customer information
• Continuous measurement of customer perceptions and satisfaction

Decisive for the loyalty of a customer = the intangible, peripheral components of the service

Competitive advantages = service excellence and differentiation

Customer focus and service orientation = two prerequisites for the company’s success

Question 2

Customer centricity

Answer 2

Peter Drucker (1973, p. 79): "To satisfy the customer is the mission and purpose of every business"
Paradigm shift away from product centering (semiconductors, phones, chairs) to customer centering (government, large firms, consumer).

How can companies be customer-centered?

• Commitment of corporate governance (leaders)
• Organizational realigment
• Changes in the system and process support
• Customer-centric financial metrics

Service quality is defined as the extent to which a service meets or exceeds customer expectations. Companies must first identify customer expectations

Question 3

Guestology @ Disney

Answer 3

Disney has a strong reputation as a customer-centric business

Concept of “Guestology” describes Disney’s systematic view of the customer experience from the perspective of the customer point of view (i.e. door handle is at the size of the children)

Disney collects feedback from its customers through various channels:

• Personal talks with customers on site
• Letters, e-mails and calls from customers
• Website and Social Media

Question 4

Customer categories

Answer 4

1. Internal customers
2. External customers
3. External customers of the competitors (would like to attract)
4. Former external customers (ex-customers)
5. Potential future external customers
   3, 4, and 5 are not actual customers.

Question 5

II. External customers and customer research

External Customers: relevance of customer information

Answer 5

Continuous research on the expectations and perceptions of customers
Communication of the research results to the employees
Exemplary questions to be answered by customer research:
- Why did a customer (not) buy a particular service?
- Is the customer satisfied with the service or not?
- Will the customer buy again in the future?
- What expectations did the customer have of the service before buying and consuming?
- How do customers perceive the different components of a given service?
- What are the trends in customer preferences over time?
- Would the customer recommend the service to someone else?
- What do customers like in a particular market segment?
- Etc.

Question 6

Customer research

Answer 6

Types: Qualitative and quantitative research

Objective: To identify the characteristics of a service that are most important to the customer in order to differentiate themselves from competitors and gain a competitive advantage

Methods:

• In-depth interviews with individual customers
• focus groups
• General customer surveys
• Customer satisfaction surveys on service consumption
• Net Promoter Score (NPS)
• Critical Incident Technique / Complaint Analysis
• Mystery shopper
• Customer-to-customer communication

Question 7

In-depth interviews with individual customers

Answer 7

Type: qualitatively
Procedure: Interviewer interviews a customer on all aspects of the service using an interview guide
Advantages: Relevant, up-to-date and detailed information. Interviewer can ask for details in some aspects (active listening).
Challenges: Small sample of customers. Time and cost.

Question 8

Focus group

Answer 8

Type: qualitatively
Procedure: Moderated group discussion with approx. 6 to 10 participants
Advantages: View the shared impressions and perceptions of a group of customers. Mutual inspiration of the participants
Challenges: identification and localization of appropriate participants. Limited control of the moderator on generated data

Question 9

Customer surveys

Answer 9

Type: Quantitatively
Procedure: Standardized questionnaire (mainly closed questions), data collection often electronic
Advantages: Large sample of customers. Statistic analysis of the data
Challenges: Competences in statistical data analysis required (software, analysis method). Representativeness of the sample.

Question 10

Customer satisfaction surveys

Answer 10

Type: Qualitative or quantitative
Procedure: Questionnaires or commentary cards (e.g. in hotel rooms, hotel lobbies or restaurants); invitation to survey, via SMS or e-mail
Advantages: Direct, feedback on time. Possible high return rate through convenient and easy use
Challenges: Competencies in statistical data analysis required (software, analysis method). Representativeness of the sample. Time to answer the customer feedback

Question 11

Net Promoter Score (NPS)

Answer 11

Type: Quantitatively
Procedure: Customer answers “How likely are you to recommend us to a friend or colleague?” On a scale from 0 (“not at all likely”) to 10 (“most likely”)
Advantages: A single question. Effective and accurate way to measure customer satisfaction and predict business growth
Challenges: The reasons for the answers of the customers remain unclear. Full assessment of the company, therefore it is less adequate for the analysis of individual service aspects.
0 – 6: detractors
7 -8: Passives
9 – 10: Promoters
NPS = Promoters (%) – detractors (%)

Question 12

Critical Incident Technique / Complaint Analysis

Answer 12

Type: qualitatively
Procedure: Systematic investigation (e.g. in an interview or as an open question in the questionnaire) of critical events in the customer experience (events that deviate significantly from expectations either positively or negatively)
Advantages: Identification of relevant customer experiences.
Identification of problems in service delivery.
Starting point for improvement
Challenges. As detailed as possible a description of the customer desirable, possibly difficult due to incomplete memories.

Question 13

Mystery shopper

Answer 13

Type: Qualitative or quantitative
Procedure: Anonymous assessor tests the service provision as a “customer” and evaluates it on the basis of a questionnaire
Advantages:
identification of “gaps” in service provision. Force a firms to clearly communicate standards and expectations to employees.
Regular (positive and negative) feedback to employees and management.
Continuous motivation
Challenges: Subjectivity of the reviewers.
Possibly limited generalizability.
Expensive.

Question 14

Customer-to-customer communication

Answer 14

Type: Qualitative (or quantitative)
Procedure: Customers interact online and share information about companies
(e.g. Social Media, Blogs, Chat Rooms, Online Communities, Mobile Apps)
Advantages: Companies learn about trends and general perceptions of the customer experience. Opportunity to respond to customer comments in public
Challenges: Loss of control over customer communication through the company. Representativeness and credibility of customer reviews. Frequently still lacking expertise in companies.

Question 15

Current challenges of customer research

Answer 15

“Feedback fatigue” of the customers (customers are tired of giving feedback)
Management response to customer feedback (best feedback comes out complaints)
Collection, storage, processing and analysis of “Big Data” (lots of data available)

Question 16

III. Internal customers and employee research

Internal Customers: Relevance of employee information

Answer 16

Concept of internal marketing: company must first “sell” service philosophy to its internal customers

Concept of internal services: interdependence of services makes essential the cooperation between functions and employees (cross-functional organization)

Staff Research:

• Internal service quality and employee satisfaction
• External service quality and customer satisfaction (employees as listeners and lawyers of external customers)

Service providers/”Back office” → Internal customer → Front Office/Line → External customer

Employee research (feedback from internal customers) is an important and valuable source of information for customer research (feedback from external customers).

Question 17

Summary of Understand and involve customers

Answer 17

In addition to service orientation, customer focus is the key to the success of a service company

There are five different categories of customers:

(1) internal customers,
(2) external customers,
(3) competitors’ external customers,
(4) former external customers,
(5) potential future external customers

Customer research serves to systematically collect information on the expectations and perceptions of external customers

Customer research includes numerous qualitative (e.g. in-depth interviews, focus groups) and quantitative (e.g. customer surveys, Net Promoter Score) methods

The concept of internal services describes the relevance of collaboration between functions and staff in the provision of services due to the interdependence of services

Employee research is used to systematically collect information on the expectations and perceptions of internal customers (employees) and external customers