[SysOp note: This article was uploaded without the figures refered to in the text. The charts are presented as they were arranged in the upload. I recognize that they are not aligned. -- Tom Glenn, SysOp, The TQM BBS.] DEFINING CUSTOMER REQUIREMENTS Service quality deployment Mark Graham Brown -- Mark Graham Brown and Associates It's a tragedy that the judges for the Malcolm Baldrige Annual Quality Award were unable to find a service company that met enough of the criteria to receive an award in 1989. While many manufacturing companies have shown major improvements in quality over the last ten years, many American service companies continue to have problems providing customers with high quality service. There are examples of service companies that provide exceptionally high quality. In fact, Ron Zemke and Dick Schaff's recent book, The Service Edge, profiles 101 service companies of all types that consistently provide high levels of service quality. One of the factors that differentiates exceptional service companies from their mediocre competition is how well they identify customer requirements, and are able to consistently deliver on those requirements. Within this article we will outline a process for defining a service quality strategy that begins with a definition of customer requirements. In manufacturing businesses, this process is called quality function deployment. The House of Quality -- The major tool for quality function deployment (QFD) is a process developed by John Hauser and Don Clausing called The House of Quality. The House of Quality is a conceptual process for cross-functional planning to develop and manufacture products that meet customer requirements. This process has been extensively used with great success in major North American manufacturing companies such as Ford, AT&T, Digital Equipment, and others. Service quality is elusive Service quality is more elusive than product quality. Because human behavior plays such an important role in service quality, it cannot be dealt with with as much rigor and precision as one would engineer a manufacturing process so as to produce consistent products. However, as consumers and users of both products and services, we have no trouble identifying what is important to us. Achieving exemplary levels of service quality begins the same way one begins with a product, by defining the attributes of the service that customers care about. The House of Quality approach for doing this works well in a manufacturing or product-based business, but does not work well in a service business without modifications. This article presents a modified form of the House of Quality process that has been adapted specifically for service businesses: service quality deployment (SQD). Service quality deployment process The diagram depicts the five phases in the service quality deployment process. The five phases in this process allow you to systematically define what customers want and expect from the services you provide. However, everything the customer wants may not be feasible, and the customer might not be willing to pay more to receive a higher caliber of service. Part of the process includes an evaluation of the benefits, costs, and feasibility of meeting customer requirements. The output of this entire process is a clear definition of the service quality goals of an organization, and an identification of the various functions involved in achieving those goals. Beginning below is a description of each of the five phases in the SQD process. Phase I: define customer requirements -- Service quality deployment begins with defining what customers want and expect from the services your organization provides. These are called customer requirements, following Phil Crosby's definition of quality as "conformance to requirements." The first step in this process is to decide how to separate the different services performed by your organization and examine each one individually. Defining distinct, measurable services Even a small service business like a dry cleaning establishment might separate services as: dry cleaning, laundry and tailoring/alterations. A large service organization might have 20 or 30 different services it performs for its customers, and each service needs to be examined individually. A large hotel chain for example might decide to separate its services as follows: catering, restaurants, front desk, housekeeping, sales/meeting planning and guest services. Further definition within a service unit Each of these functional areas would then need to be further broken down into specific services or groupings of services. For example, we might divide guest services into the following service groupings: bellman, concierge, security and operator/messages. The figure above depicts the hierarchy of information in a breakdown of an organization's services. Gathering customer information Once you've identified the best way of dividing up the services performed by your organization, the next step is to gather information about customer requirements. In their 1989 book called Service Quality: A Profit Strategy for Financial Institutions, Berry, Bennett, and Brown talk about using a survey instrument called Servqual, for assessing customer expectations and requirements. Surveys versus focus groups While surveys are a good way of gathering information from a large number of customers, the quality and depth of information gleaned from a survey is poor. Focus groups and individual interviews with customers are the best way of gathering information about customer requirements. Using techniques like brainstorming, a facilitator leads a group of customers through the process of identifying what is important to them about a particular service. It is important to document the requirements using the customers' own words rather than industry jargon. Customer requirements are documented by the facilitator in the meetings on flip charts. Rather than starting with a blank sheet of paper, it is sometimes helpful to begin by listing some categories relating to the quality of service. Some example categories would be: Timeliness Consistency Accuracy/absence of errors Flexibility Courtesy/friendliness The following list presents some examples of customer requirements for first class service on domestic airline flights. Customer requirements: first class airline service/domestic flights: Flight attendant behavior Greets passengers at door Offers to hang jacket Finds space for carry-on luggage Offers soft drink before take off Offers newspaper/magazine Takes drink order promptly at take off Uses passenger's name Once you have completed your focus group meetings, you may decide to gather additional information on customer requirements via individual interviews or using a survey. This first phase in the service quality deployment process is complete when you have defined all of the customer requirements for the services you have targeted. Ranking of customer requirements Participant's Group Requirements rankings ranking Total Flight attendant AS TM JH SS SB GW behavior Greets passengers at door 11 8 11 4 1 7 42 7 Offers to hang jacket 7 2 7 2 2 6 26 2 Finds space for carry-on luggage 8 1 8 3 3 8 31 3 Offers soft drink before take off 9 5 3 1 7 9 34 4 Offers newspaper/ magazine 3 3 9 5 6 11 37 5 Takes drink order at take off 2 4 1 6 4 4 21 1 Uses passenger's name 10 7 10 11 8 10 56 9 Phase II: weigh importance of customer requirements -- As customers, we want many things from the products and services we buy. Some things are much more important than others, however, We're willing to put up with a grease smudge on the steering wheel, for example, if our car was fixed correctly and on time. The next step in the process is to get customers to weigh the importance of the customer requirements that were identified in phase one. Because each individual differs in what he or she considers important, it's a good idea to gather data on the importance of customer requirements in a number of ways, and from a fairly large number of customers. One way of evaluating the importance of customer requirements is to have focus group participants evaluate the importance of each requirement they identified. This can be done in one of several ways: Voting on importance of customer requirements One method that works well is to have participants vote on the importance of each requirement. The facilitator selects the first requirement, and asks each participant to vote whether it is high, medium, or low in importance. A high vote is worth 3, a medium 2, and a low 1. If there are eight participants in the meeting, the highest score a customer requirement can receive is a 24, (8 x 3) if everyone thinks it is high in importance. The voting process is fairly quick, but people tend to be influenced by how others are voting so it is not very objective. Ranking customer requirement Another technique for gathering information on the relative importance of various customer requirements is to have each participant in a focus group meeting rank order each customer requirement from most to least important on a sheet of paper. The facilitator then collects the rankings from each participant and posts them on a flip chart as shown in the next figure. By adding the rankings for each customer requirement, totals can be used to determine how the group ranked the requirements. Those with the lowest scores are the most important. Using surveys to supplement focus group data Once all of the customer requirements have been identified, it is a good idea to supplement the focus group data on the importance of each requirement with telephone or mail surveys. The survey should list all of the customer requirements and request that respondents either rate each requirement as high, medium or low in importance, or rank order them from most to least in importance. Rank ordering provides more useful data, but it is difficult to do if there are more than 15 customer requirements. After collecting data from a variety of sources, the final step in this phase is to summarize the results by preparing a master list of the customer requirements and either rank ordering them, or assigning them a rating based on their relative importance. An approach that appears to work best is to group them into five categories: 1. Important to some customers, but not others 2. Nice to have 3. Important customer requirement 4. Extremely important customer requirement 5. Customer will go elsewhere if this requirement is not met Phase III: evaluate us versus the competition -- At the beginning of this third phase in the SQD process, you have a complete list of customer requirements that have been sorted based upon their relative importance. Now that you know specifically what customers want from your organization's services, you need to evaluate how well both your company and your major competitors do on satisfying the customer requirements. The information needed to do this assessment should come from both customers and from your own employees. Gathering competitor data Begin by selecting the two or three major competitors that provide the same services to the same type of customers you're after. If your organization is a bank, for example, there may be 25 other banks that compete for the same business in your city. Just select the two or three major competitors, however. Once you've selected your major competitors, get to work gathering data on how well you and the competition meet each requirement. Hiring a reputable market research firm, or using your own market research department is the best way of gathering this type of data. Make sure that they use the same scale to evaluate each requirement. A ten point scale is good, because it is simple, and provides for enough variability in evaluating the performance of three or four different organizations. Competition analysis -- auto dealer serviceÉ Customer requirement Evaluation Convenient hours ¨ Å D 10 9 8 7 6 5 4 3 2 1 6 Evenings + Saturday No Evening + No Saturday Clean waiting room D Å ¨ 10 9 8 7 6 5 4 3 2 1 Immaculate Terrible Car ready when promised D ¨ Å 10 9 8 7 6 5 4 3 2 1 100% of Time 50% of Time ¨ = Our service Å = Dealer A's D = Dealer B's department service service department department Having a report card on you and your competitors is important because it gives you information needed to decide how to allocate resources for service quality deployment, and to prioritize those requirements so that you can begin by working on those that are important to customers, done well by the competition, and done poorly by your organization. Gathering objective information on how you fare compared to the competition is difficult, however. The auto industry uses data gathered by J.D. Power, a market research firm that evaluates all auto companies on the same dimensions. Most industries do not have access to such comprehensive data, however. Upon completion of this third phase, you should possess data on how you and your competitors do on meeting key customer requirements. Phase IV: assess feasibility, benefits, and costs -- The purpose of this phase is to begin pulling together your service strategy by identifying which customer requirements you can realistically satisfy, given constraints on time, cost, and feasibility. The best way of doing this assessment is to form a team of six to nine individuals who represent the various functions in the organization. The first step is to lead the team members in eliminating customer requirements from the list that are totally out of the question because they would drive up the cost of the service too much, they are technically impossible, or simply impractical. First cut: eliminating the impossible to do For example, airline passengers might state that one of their requirements is that airplane seats be much larger, more comfortable, and have more leg room than they currently do. Some of the smaller airlines such as Midway and America West have responded to this by buying planes that do have more comfortable seats with more leg room. Other larger airlines like United and American have too big an investment in their current planes to replace all the old seats, so this requirement might be impractical for them to satisfy. The key is to make sure that committee members don't automatically discard a customer requirement because it appears too costly or too impractical. Explore alternatives before crossing the item off your list. A competitor may find a way of meeting this requirement and take away some of your market share. Second cut: three dimensional evaluation Once you've narrowed down the list somewhat, the next step is to evaluate each requirement on three dimensions, using a ten- point scale for each dimension: feasibility, benefits and cost. Feasibility -- The first dimension to evaluate is the feasibility of the customer requirement. Some of the questions you should ask are: Given existing technology, is it possible to meet this requirement? Does the organization have the resources to meet this requirement? People Skills Time Facilities Have we ever met this requirement in the past? Have the members of the team discussed and reached consensus on a feasibility rating for the first customer requirement. Third cut: measuring benefit The next dimension to evaluate is the potential benefits that might be realized if you were able to consistently meet or exceed this customer requirement. Again, lead the group in discussing possible benefits and get them to reach consensus on a rating of one to ten. A rating of ten might be given if meeting this requirement would give your organization a significant edge over the competition. A rating of one might indicate that there is no real benefit to meeting this customer requirement, other than satisfying a small minority of customers. Fourth cut: measuring costs The third dimension of each customer requirement to evaluate is costs. To evaluate costs you should ask the following questions: Costs -- What will be the initial costs required to meet this requirement? What will be the ongoing costs necessary to continue meeting this requirement? What new facilities, equipment, or tools will we need to purchase to meet this requirement? Will we have to hire additional people to meet this requirement? Will we have to raise the price we charge for the service to meet this requirement? Again, a 10-point scale should be used, with a 10 indicating that the cost will be nothing, or extremely small, and a 1 indicating that the costs will be extremely high, both initially, and on an ongoing basis. Final cut: establishing overall ratings for each requirement Once you have finished evaluating the three dimensions for the first customer requirement, total the three scores. Take this figure and multiply it by the one, two, or three importance rating given to the requirement by the customers. Proceed in the same manner evaluating each of the remaining customer requirements. When you are finished, you will have an evaluation of customer requirements chart that looks like that on the next page. The customer requirements that have the highest overall scores are the ones you should begin work on first. Those are the requirements that are the most important to customers, will cost you the least, provide you with the biggest benefits, and can be easily accomplished. Phase V: identify impacts on each customer requirement -- At the conclusion of Phase IV, you will have a list of customer requirements which you have identified as being important, practical and cost effective. The purpose of this phase is to examine each customer requirement and identify which functions in your organization should be involved in meeting that requirement. This process can be done in the same meeting where the customer requirements are evaluated. The facilitator should prepare a flip chart that looks like the organizational impact chart above, listing the functions in the organization along the top of the chart, and the customer requirements along the left side of the chart. Impact analysis Begin with the first customer requirement and ask what degree of impact the first function will have on meeting it. As you can see in this figure , some of the functions or departments in an organization will have no impact or involvement in meeting customer requirements. Others will have a high degree of impact in meeting the requirements. Again, the reason for the impact analysis is to define accountabilities and to identify areas of the organization in which changes must occur to consistently meet the customer requirements. Planning for success and customer satisfaction Once you have thoroughly defined customers' requirements for the services our organization provides, the next step is to build a plan for consistently meeting those requirements, and for measuring how you do in meeting the requirements. This is where the impact matrix you created in Phase IV becomes very useful. A cross-functional plan needs to be created that specifies the actions and responsibilities for meeting each individual customer requirement. Is all this work necessary? If it sounds like a lot of work, it is. Improving service quality requires a great deal of time and hard work. Further, it is a never-ending process. You don't do this for a year or two and sit back and relax. Customer requirements are constantly changing. Consequently, you need to be gathering data on what customers expect and want from organizations like yours continuously. A competitor offering a new service or enhancing an existing service often creates new customer requirements. Innovation and customer requirements -- Think back to the days before we had overnight delivery companies like Federal Express. It is hard to remember how we in the business world did without this service in the past. With the advent of facsimile machines (the ever present fax) our requirements again have changed. No longer do we expect transmission of information from one place to another in 24 hours, we want it done in a few minutes. The fax machine allows us to do just that, which has changed our expectations for service. What we will pay for the transmission of information changed as well. Paying Federal Express $10 to $14 to deliver a few pages overnight seemed reasonable until we compared it with the cost of transmitting the same information by fax , and only spending a dollar or less in phone line charges. Service innovation and improved technology has given us a way of receiving a much better service for much less cost. Questioning your traditional service answers -- This article has presented a systematic process for defining customer requirements, evaluating those requirements, and developing a strategy for meeting those requirements. This is only the front end of the service quality improvement process, however. Much more needs to be done to make exemplary service a reality in an organization. This front end portion is the part that many service organizations do poorly, however. Many assume that they know what their customers want and expect, and end up committing valuable resources and getting employees to perform tasks that don't matter to customers. A supermarket chain in Detroit, for example, installed an incentive system to get checkout clerks to tell customers to "have a nice day," before finding out that the majority of customers either didn't notice whether or not the clerk said the phrase, or hated hearing "have a nice day." An organization cannot just assume that it knows what customers want and expect. Doing a good job on the wrong details can not only waste valuable resources, it can actually drive customers away.¨ This article first appeared in a special Satisfying Customers reprint issue of the Journal for Quality and Participation (Jan. 1994): AQP 801-B W. 8th. St., Ste. 501, Cincinnati, Ohio 45203, Tel. 513-381-1959, Fax 513-381-0070. Call Sara Olberding at AQP Information Center for this reprint issue ($30 list price; $15 AQP members) and more articles and conference presentations on satisfying customers and other topics. Nominal fee for reprints.