• Market knowledge
• Proactive customer systems
• Use of all listening posts:
  - surveys
  - product/service follow-up
  - complaints
  - customer turnover
  - all staff
  
• Requirements of market segments:
  - surveys that go beyond current customers
• Front-line empowerment
• Strategic infrastructure support for front-line employees
• Focus on relationship management and enhancement
• Attention to hiring, training, attitude, and morale of all employees
• High levels of satisfaction customer awards

Source NIST

3.1	Customer and Market Knowledge (40 points)
	Describe how your organisation determines short- and longer-term requirements, expectations, and preferences of customers and markets to ensure the relevance of current products/services and to develop new opportunities.

Key words and phrases

• Customer groups and market segments
• Listening and learning strategies
• Important product and service features
• Keeping current with business needs and directions

3.1a	Customer and Market Knowledge

• Start with a high-level explanation of who your customers are.
• Sometimes that’s not as simple as it seems - if you get your products to end-users through third-party distributors (IBM Rochester and 3M Dental call them channel partners) then who are your customers? The distributors or the end users? This was a subject of some debate in the early days of 3M Dental’s Baldrige journey. Their decision - that dentists, not the channel partners, are their customers - had great strategic importance.
• Then explain what your market is. Solectron’s Rich Allen, for example (see the Solectron case study), explains that Solectron has 115-120 original equipment manufacturer (OEM) customers. This number has stayed more or less constant over the years. Solectron will do $6-7b worth of business in fiscal 1999, growing at $2b per year; the firm operates in a $800b sector; and ‘there’s no problem with the size of the sandbox - it’s huge.’
• And how you find and target your customers, and your customer and market segments. Explain how you divide your customers into segments. For an example of segmentation, see the IBM Rochester case study
• The particular strategy is not important, what matters is that you accurately identify market segments; have sound reasons for what you do, and a process for doing so.
• Brown suggests that listing the requirements and expectations of your different customer groups will win points - perhaps in a matrix with customer requirements and expectations down the left side, and market segments along the top. See Writing an application for matrix templates that can be tailored for this purpose.

Example

HP's new (October 1999) approach to customer relationship management, with the Peppers and Rogers' 1 to 1 spin ...

• Formal processes for capturing customer preferences and picking apart their reasons for making purchase decisions are core functions for all the Baldrige winners in the case studies collection.
  
• the objectivity and reliability of your information, and factors such as sample size, frequency of sampling, variety of methods used and use of material from third-party sources will all influence examiners in this area
  
• data about customers who leave, or buy elsewhere, and data from new customers should also be included here.
  

Examples

Satisfaction at Solectron

Customer knowledge valuable at 3M Dental

For another best-practice example, see the Boeing A&TP case study

• Note the clinic worksheet breaks this area into 14 separate questions
  
• The core question is, how do you use your knowledge about customer and market preferences to plan future marketing strategies and future products and services?
  
• How do you find which features customers value the highest æ and how does this ranking influence your introduction of new products?
  
• Explain the methods you use to conduct research on customer priorities, and how this information is fed into your new product introduction processes
  
• See the exhibit Customer value for a summary of a recent Harvard Business Review article on understanding what customers value.
  

Key words and phrases

• Accessibility and complaint management
  
• Building relationships
  
• Customer satisfaction determination
  
• Competitive performance

3.2a	Customer Relationships

• The key question: How do you set up the processes that you use to make it easy for your customers to do business with you, ask for your help, and tell you what they think of your goods or services?
  
• My interpretation of this question (and similar questions that ask how you ‘determine’ something) is that you need to provide a description of how you discovered and decided which processes to use. It’s not enough to say ‘we do this and this and whatever …,’ you have to say something like ‘this is the process we used to establish our key processes for doing this and this and whatever…’
  
• An example: There are customer complaints processes that work - that provide actionable information - and there are complaints processes that don’t. The latter are surprisingly common. Your response in this area should explain why you chose the complaint process you use, show that you understand why it’s superior to some other processes, and give some examples to illustrate what you mean. You might also explain why you think gathering complaints data, at all, is a good idea - what do you intend to do with the data (this may have an impact on the access mechanism you choose).
  
• For more on this subject, see the exhibit Customer relationships.
  
• You would include the detailed workings of this particular process in 3.2a(3), below.
  
• Summarise your chosen access mechanisms - if possible with diagrams.

Example

Read what Hal Moyers of ShawResources has to say about following up complaints

• How do you determine (discover and decide) what sorts of contacts your key customers want with you? And when you’ve found out, how do you make sure that everyone who deals with customers knows what they want?
  
• Answers that score well will explain or demonstrate how you’ve incorporated customer preferences in your practices.
  - A bad practice example - a medical insurance company that decided 30 days was fast enough for a claim response because that was the industry standard.
  - Better? An insurance company that talks to it’s customers, discovers they would like seven days, and engineers it’s processes so that a response in less than seven days becomes the standard for all departments.
  
• Deploying customer’s requirements to all employees in the ‘response chain’ recognises that it’s not just those with direct customer contact who influence the quality of a product or service. A complete answer would include an explanation or demonstration of how your processes are deployed down the response chain so that everyone is involved.
  

Example

Solectron's customer relationship processes

• High scores here require a well thought out and robust process, tailored to your circumstances, and demonstrated by process diagrams; evidence that the process works æ provided by data-sets showing high performance - and evidence of a rationale and processes for aggregating the raw data and using them to drive improvement in both the complaints process itself and the root causes of complaints.
  
• A flow chart, algorithm, or a list of steps should be included, suggests Brown (1998, p 136) depicting your processes for responding to and correcting customer complaints. Also explain how complaints are escalated upwards when a customer feels a complaint has not been resolved satisfactorily at the first point of contact.
  
• A common mistake is to answer this item with a general description, explaining what happens, but not how. Brown provides a summary poor response which goes something like this:
  
• Each complaint received is analyzed by a customer services representative… to determine its cause. The cause is recorded in a log. Monthly summary reports list causes of complaints and provide statistics on numbers of complaints and causes. Reports go to department managers responsible for correcting the causes …
  
• Too vague, says Brown, doesn’t explain:
  - how customer complaint representatives analyze complaints
  - what resources (knowledge, skills and ownership) the representatives have available to solve problems and prevent recurrences
  - how corrective actions occur
  - evidence of aggregation of complaint data to identify trends and opportunities for improvement …
  

Example

Solectron's customer complaint resolution process

Customer complaints at Dominican Hospital, Santa Cruz, CA

Boeing A&TP C17 Globemaster III

Solectron's customer assurance program

IBM Rochester keeping it simple

See the exhibit Keeping current with business needs and directions

3.2b	Customer Satisfaction and Determination

Satisfaction is NOT the same as a lack of complaints. It’s common for entry-level business excellence awards applicants to write something like … we only had 12 complaints last year, and shipped 2,500 products … from this we deduce that our customers are very satisfied.

As Sae Jae Cho of Solectron explains, this is not only wrong, it’s dangerous. See the exhibit Customer relationships for an extended discussion.

According to Brown, it’s rare to find organisations that do a great job of measuring customer satisfaction … many do conduct surveys, but most of them provide misleading data.

See the exhibit Survey methods for an extended discussion of this subject.

Linking measured customer satisfaction to customer’s future buying intentions, or to positive referrals (recommending your products or services to other potential users) is the problem. One survey found that while 90% of customers of a major car manufacturer were either satisfied or very satisfied with the car they purchased, on 40% bought the same brand next time.

Comments/feedback cards (like those often left in hotel rooms, or handed to you in airports) and annual mail surveys are a common but insufficient approach. They don’t adequately measure what your customers think, because response rates are very low, and those which are filled in are usually completed in a hurry and without much thought - the information is poor quality. See Miller’s list at the top of this category for some of the common problems with surveys of this sort.

The most objective way to measure customer satisfaction is to analyse customer’s behavior.

The amount of repeat business you receive is one of the best measures of customer satisfaction (but be careful if you’re still the only game in town - there’s a ‘Walmart’ in everyone’s future!).

Examiners will score you well if you gather data from a variety of sources, have large and frequently updated data-bases, and can explain why the approach you’ve chosen is the best in your circumstances.

Examiners look for frequent contacts with customers, a variety of contact methods, and for evidence of high quality information. Relationship building æ keeping the relationship alive, or as Boeing A&TP say - keeping the product sold’ - will also score well.

Good indicators might include process diagrams with hard targets for customers contacts (say as percentages of total customers), a process to drive informal contacts to build relationships, and an explanation of how you manage the process so that customers don’t feel hassled.

For a best practice example, see the IBM Rochester customer satisfaction material in the Customer relationships exhibit.

When IBM Rochester do their telephone survey of all new AS/400 customers, they also ask a parallel set of questions about their major competitors.

Every three or four years, each division of Granite Rock conducts an extensive survey of its customers, asking what they want and need from each of the company's product lines. Among other things, the survey asks customers to rank the most important factors in choosing a supplier. To compare its performance with that of its competitors the company also conducts an opinion survey that amounts to an annual report card from customers. All customers receive a short survey form on which they are asked to grade their top three suppliers for product quality and customer service. Granite Rock then combines the long-survey data on customer priorities with the short-survey data on competitive performance to produce graphs that are posted on bulletin boards around the company. The graphs show employees at each plant how they measure up in the eyes of their customers.