Regis McKenna R&D/J.D. POWER

BenchMarketing Japan

Realtime Strategies for Customer Satisfaction

This month's column stresses the importance of understanding the whole customer chain when evaluating customer satisfaction, with particular focus on the role played by service providers.

For the past 28 years, JD Power & Associates has been helping companies understand what makes and keeps customers satisfied. A key finding across all industries during that time has been the importance of paying attention to the whole customer chain. If a manufacturer's dealers are not satisfied or properly trained, there is a very strong likelihood that the end customers will be dissatisfied or ill-informed. The recent JD Power/Regis McKenna PC-Network Users Satisfaction Survey highlighted this point among PC network users in Japan.

The customer chain is a simple concept that identifies the individual steps and players involved in delivering a product or service to the end user. The figure shows a simple customer chain with only a few links, but in practice the complexity can be much greater, starting with internal customers (such as manufacturing and engineering) and including several layers of end user customers. In order to succeed, a company must focus on the next level of the chain as well as on the final end user. This poses some interesting challenges for companies involved in the PC network business.

As noted last month, the variety of customers forces a company to reevaluate the actual business it is providing. A company must ask itself, "Are we selling hardware (or software), or are we providing solutions to customer problems?" Our survey results suggest that it is not the product but rather the service that the customers evaluate.

We looked first at overall satisfaction by server manufacturer if only hardware and software factors are considered. When the industry average was set at 100, Compaq came out marginally on top with a score of 102, while the bottom score was 98. This very narrow range suggests that there is little differentiation in the minds of customers in terms of hardware.

When the service provided by systems integrators (SIs) is factored in, however, the satisfaction scores begin to differentiate, ranging from 105 to 97. (The SI role includes providing information, building or developing systems, and handling problems.) This wider spread in scores indicates that the inclusion of SI services creates a differentiation.

Our previous experience has shown that the type of dealer can dramatically impact a manufacturer's overall Customer Satisfaction Index score. We therefore decided to look at overall satisfaction with the manufacturer as well as the types of retailer outlets to determine the overall correlation among PC network users. The chart shows overall satisfaction with their PC networks among those who used an NEC server. Even though the hardware was the same, the chart shows that the type of dealer has a dramatic impact on overall satisfaction.

Customer satisfaction when NEC sells the server directly to the customer is high, but when the sale is made by a general office automation dealer, the score drops dramatically. Where and why does this difference arise? Is NEC universally better able to provide service and support to the customer? To find such answers, it is necessary to look closely at performance of the players within the customer chain.

Our survey found that, when NEC sells directly to a customer, that customer is very satisfied with the problem-solving capabilities and information provided, but less satisfied with the ease of system design and management. In contrast, when NEC servers are sold through a software house, the customers are satisfied with the ease of system design and management, but less happy about the information that is available to them.

While independent dealers rank very high in their ability to develop the whole system, in this case customer satisfaction with hardware capabilities plunges. Not coincidentally, satisfaction with independent dealers' abilities to solve problems is also very low. A dealer's inability to address problems will be expressed directly in dissatisfaction with the equipment, because the equipment cannot be used properly until the problems are resolved.

Similar patterns can be seen for other server manufacturers, depending on the particular strengths of the manufacturer and the support they provide to their direct and independent dealers. The difficulty for a manufacturer is understanding who is selling its equipment, how the equipment is being used, and what the perceived weaknesses in the customer chain are. A common response from manufacturers is, "We cannot control what our dealers do. Sometimes, we don't even know who is selling our machines, because there are so many
sub-dealers in Japan. So why should we worry about something we can't control?"

The simple answer is, "Because the customer seldom draws a line between the manufacturer and the dealer." In most customers' minds, the dealer has explicit authority from the manufacturer to represent its products, and the manufacturer bears the ultimate responsibility. Failure anywhere in the support chain will make customers likely to use another systems integrator, and another manufacturer's server system, when the time comes to upgrade. What can manufacturers do to address this situation? The most important first step is gathering accurate information. Product manufacturers need to understand:

* How their products are perceived in the marketplace;

* How they are being used;

* Who is using them;

* Who installs them;

* Who the dealers are; and

* What the competition is doing.

The answers to these can provide a starting point from which a manufacturer can identify its strengths and weaknesses. If a manufacturer finds, for example, that it has no control over the information (or lack thereof) provided by its dealers, it may need to set up a special hot line with product and support information. Or, if problem-solving is identified as a weak point, a free-dial troubleshooting support line may be needed, or the owners manuals may need to be reevaluated. And if a manufacturer does have a good understanding of its dealers, but they are performing poorly, perhaps special dealer and salesman training workshops are the answer.

As the market becomes more competitive, and the number of dealers carrying multiple brands increases, it is imperative that manufacturers maintain strong dealer mind share. Knowing where to start is the first step to gaining this mind share, and taking control of the perception that customers develop and retain.

In the coming months, we will continue to explore the dynamics and key trends surfacing in the fast-changing PC network market. Questions and comments can be addressed to:

Brian K. Heywood
(R&D/JD Power)

e-mail: rjpjapan@aol.com
phone: +81-3-5695-0121
fax: +81-3-5695-0126

Hiroshi Menjo
(Regis McKenna)

e-mail: hiroshi_menjo@regis.com
phone: +1-415-493-2030
fax: +1-415-494-8660