Building Customer Satisfaction

Customer Focus In The Public Sector/05

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Chapter Overview

CUSTOMER FOCUS IN

THE PUBLIC SECTOR

CUSTOMER FOCUS IN THE PUBLIC SECTOR

5.0 Identifying Customers

5.1 Identifying Customer’s Need / Requirements in the Public Sector

5.2 Building Customer Satisfaction Vs. Strategizing Customer Loyalty

5.3 Characteristics of a Customer Focused Public Organization

Introduction to Public Sector Quality Management :: PAD 252

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5.0 IDENTIFYING CUSTOMERS

Customers are one of the crucial components that exist in any organization, including

public organizations. Even though public organizations do have loyal customers

(since some of the government services are not available anywhere else), it is really

important to recognize their presence and provide them with a quality service. Giorgio

Merli (1990) in his book, Total Manufacturing Management (quoted by Goetsch and

Davis, 2010), has defined a customer as below :

• The customer must be the organization’s top priority, where survival of the

organization depends on the customer.

• Reliable customers are the most important because they will buy repeatedly

from the organization and feel the satisfaction via their purchases.

• Customer’s satisfaction is ensured by producing high-quality products. It is

done through renewal on every new purchase made. Customer’s satisfaction

and loyalty implies continual improvement.

LEARNING OBJECTIVES:

After studying this chapter, you should be able to:

1) Identify and explain types of customers.

2) Restate the needs of customers in the public sector.

3) Explain the importance of building customers’ satisfaction and

loyalty.

4) Describe the characteristics of a customer-focused public

organisation


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Customers can be defined as people who interact with the organization after the

processes have produced the product. They are considered as people who used an

organization’s products (Goestch and Davis, 2010). In order to understand the

concept of customers in a total quality setting, it is important to look into customers-

suppliers relationship. It is because suppliers are those who provide the materials

needed to produce the products (or even to finish a task given).

The interaction between customers and suppliers happen inside and outside of an

organization. A civil servant is a supplier and customer at the same time. For example

Ahmad is an immigration officer in Immigration Department. He provides information

to his subordinates on the operation needed to be conducted. The operation is an

order from his superior. He is a supplier to his subordinates and a customer to his

superior. The nature of the relationship can be viewed as the following:

The Customer-Supplier Relation shows that Civil Servants are Suppliers

and Customers to Each Other.

Source: Goestch and Davis (2010)

SUPPLIER SUPPLIER

CUSTOMER

Customer & Supplier

Customer & Supplier

Customer & Supplier

Customer & Supplier

Customer & Supplier

Customer & Supplier

SUPPLIER

CUSTOMER CUSTOMER


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5.0.1 Types of Customer

Generally, there are two main types of customer, which are internal customer

and external customer.

a) Internal customers - refers to those at the process level, departments

and key cross-functional processes within an organization. They are the

main contributors to the organization’s vision and mission. They depend on

the department’s / function’s / products / services to ultimately serve the

consumers (i.e. those who receive the final products / services). For

example, nursing unit in a public hospital is a customer to the laundry unit

in the same hospital or HEP is a customer to HEPA.

b) External customers - refers to those who receive / pay for the products

and/or services. In this case, they are considered as the ‘outsiders’ of an

organization, since they are not involved directly with the processes within

the organization. For example, the students are external customers to

UiTM and other higher learning institutions, of which they only receive the

services provided i.e. education services and they are not involved in

preparing the means for education.

Now, what about consumers? Who are they? Consumer refer to the end users

of an output (good or service). Consumer can also be defined as “a person who

consumes goods, services and gifts of nature for his/her satisfaction and

general well being” (Bishan, S., 1992). Another definition provided by Webster’s

New World Dictionary (quoted by Mohd Hamdan, 2000), consumer refers to “a

person or thing that consumes; specifically a person who buys goods or

services for his own needs and not for resale or to use in the production of other

goods for resale”. It means that consumer is a person who uses the goods

and/or services available within his/her surroundings, including the gifts of

nature such as clean air, water and other natural resources. He/she may not be

the purchaser, but only use the goods and/or services. Every person is a

consumer, in his/her own way.


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5.1 IDENTIFYING CUSTOMER’S NEEDS IN THE PUBLIC SECTOR In identifying customers’ needs in the public sector, it is important to look at the needs

in two different angles, internal customers and external customers. As both customers

possess different characteristics, it is possible that their needs are also dissimilar.

However, both must be treated equally important, as what Merli (1991) mentioned ;

customers are the people who determine the organisation’s survival.

5.1.1 Internal Customer’s Needs

Internal customers are also known as internal service providers, which can be

any civil servant within an organization. Here, internal customers can possibly

be the colleagues, other departments or even the informers (who provide

them with necessary information to execute their task), that consecutively are

manipulated to create a good output for the internal and external customers.

(Earl, 2004). In understanding the internal customers’ needs, several

fundamental questions must be understood by the civil servants who are also

the providers to the internal customers. The questions employees should ask

are:

• Who are our internal customers?

• What are other civil servants’ who are our internal customers’,

requirements? (Performance level and Personal level)

• What is the best approach to deal with other civil servants who are our

internal customers?

• How do we meet other civil servants who are our internal customers’

requirements?

In order to meet the requirements of external customers, the civil servants as

providers also have to be able to answer several fundamental questions :

• What are the services produced by the organization?

• Who uses these services?

• Who do employees call, write to or answer questions for?

• Who supplies the inputs to the process?


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These questions need to be addressed and clarified by public organisations.

At the performance level, the civil servants (input providers) receive inputs/

processes from other civil servants (other input providers) and produce some

outputs for other civil servants who are their internal customers.

At the personal level, the civil servants (input providers)try to meet their

internal customers’ personal requirements such as acting gently and

professionally, practicing good public relations skills, being helpful being

cooperative etc. These requirements are important in order to establish happy-

working environment and esprit de corp among the public servants especially

in handling services to the public.

How do civil servants know their internal customers’ need at both,

performance and personal levels? In order to understand these requirements,

formal and informal communication are important. Communication must be

encouraged and facilitated by the top management. Improvement in

communication can be assisted via several quality management efforts such

as cross-departmental teams, quality circle, organisation steering committee,

family day etc.

5.1.2 External Customers’ Needs

In identifying external customer’s needs, it is important to understand who they

are. External customers are those who are not working with an organisation,

but need some products and services from the organisation. Scholtes, Striebel

and Joiner (2003) (quoted by Goestch and Davis, 2010) have suggested the

six-step strategy in discovering the external customer’s needs which is also

applicable in the public sector.


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Six-Step Strategy for Identifying External Customers’ Needs

Source: Goestch and Davis (2010

STEP INVOLVED EXPLANATION

Step 1 – Speculate

about the results

It is conducted BEFORE gathering information about

the customers. The management needs to guess what

their needs are. It is useful since the management can

compare their expectation with the real needs. This will

ensure that the organisation is parallel with their

customers’ needs.

Speculate About the Results

Plan How to Gather the Information

Gather the Information

Analyse the Results

Check the Validity of Conclusions

Take Action as Indicated


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Step 2 – Plan how

to gather the

information

Collection of information need to be done systematically

and well-organised. Therefore, developing a plan is

necessary to determine what type of information

needed and who will provide those information. Try to

consider face-to-face interview when developing the

plan, or any other alternative such as phone interview.

Step 3 – Gather

the information

It is advisable to conduct a pilot survey beforehand,

involving a few numbers of customers. This is to ensure

that any error on the methodology used can be

detected earlier. After correcting the error, the real

survey can be conducted in larger scale, according to

the time frame outlined in the plan.

Step 4 – Analyse

the results

After collecting the information needed, it is then

analyse thoroughly and objectively. The information

gained will be compared with the speculation made

earlier (in the first step) i.e. identifying the similarities,

problems, comments and any suggestions that can

improve the product/service provided.

Step 5 – Check the

Validity of

Conclusions

Conclusions are derived from the analysis made in Step

5. The conclusions need to be validated by the

customers themselves. Share with them and other

people within the organisation whether the conclusions

made are correct and get their feedback. After that,

adjust them appropriately according to the feedback

gained.


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Step 6 – Take

action as indicated

The valid conclusions provide room for changes

needed. Plan properly the changes involved. Immediate

action is needed for the short-term basis. Let the

customers know what the organisation are going to do,

and as far as possible, make the changes in

accordance to their priority of needs.

Explanation on the Six-Step Strategy for Identifying External Customers’ Needs

Source: Goestch and Davis (2010)

These steps will help the public organisations, to understand the needs of the

external customers i.e. the public. Hopefully, using these steps as a guideline,

the performance of the public sector can be enhanced and its productivity will

be improved.

5.1.3 Customers’ Feedback Mechanisms It is very important for a public organization to gain customers’ feedback, as

this feedback can be used to improve the services provided by the

organization. It also reflects their requirement expressed to the organization,

which it is also known as “voice of the customer” (Evans and Lindsay, 2005).

There are several mechanisms or approaches that can be used by the

organization to gain information from its customers (Evans and Lindsay,

2005), as the following:

a) Comment cards and formal surveys

They are the easiest way to gather customers’ information. These

mechanisms focus on assessing customers’ satisfaction and usually

pinpointing at customers’ perception on the services provided. Scientific


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approach is used in formal surveys, whereby a sample of respondents is

randomly selected. Therefore, the formal surveys need to be carefully

designed to ensure the information gained is appropriate with what the

organization is looking for.

b) Focus group

It is a selected group consists of people (current or potential customers)

who respond to questions about the organization’s services. The

members of this group are carefully selected and will be asked questions

about several crucial issues, such as:

• Are your expectations aligned with the experience encountered?

• Is there any problem encountered during the “moment of truth”?

• Are you satisfied with service by the officer-in-charge?

• Are the promises made in the Client Charter fulfilled?

Focus group allows the organization to gain direct response from the

people, as face-to-face interview is used in this approach. However, it

will cause an extra cost to the organization to conduct a focus group.

c) Direct customer contact

In order to give more attention toward customers, personnel of the

organization can directly contact the customers in order to get their

response(s) and solving any issues arised. The information gained can

be viewed as an eye-opening experience, where the organization will

learn more about its customers.

d) Field intelligence

This mechanism is used when the personnel in an organization engage

in a conversation with the customers and listen to their problems.

However, it depends on the organizational culture i.e. whether the

organization encourages open communication with the customers or not.

Sometimes, the organization uses observation to monitor their

customers’ behavior.


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e) Study complaints

Sometimes, customers make complaints through websites, letters,

newspapers, phone calls etc…. The complaints contain necessary

information for organization to discover their weaknesses and problems,

especially the gaps between expectations and actual services gained.

The complaints are made for the organization to improve its services

according to the customers’ preferences.

f) Monitor the Internet

Nowadays, Internet forums have been widely used by the customers to

share their experiences about services as well as to seek advices on the

similar matters. By monitoring these forums, the organization may know

their strengths and weaknesses in providing their services. This urges

the organization to develop a website so that the customers can give

feedback either complaints or even expressing their gratitude for a great

moment experienced. This mechanism is low at cost as compared to

others. However, the accuracy of information gained is less since it is

informal and less focus on the critical matters.

POINTS TO PONDER!

• Is internet is a good way to collect the data?

• Who are the focus group and what do they do?

• You may state your opinion about it. There is no wrong or right answer ☺


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5.2 BUILDING CUSTOMER SATISFACTION VS. STRATEGISING CUSTOMER LOYALTY

It is important for any public organization to recognize the public’s satisfaction, as

satisfaction is the basis of building or establishing a customer-focused public

organization. In addition, satisfaction will lead to the public’s loyalty in consuming the

services provided. Some may ask;

“Why public’s loyalty towards public services is important, since they will definitely use the services?”

Well, it is necessary because the legitimacy possessed by the government comes from the public support. Since the public organizations are managed by the

government elected by the people, public’s satisfaction and loyalty are extremely

important, to ensure continuous support from the public for the next election.

5.2.1 The Importance of Customer Satisfaction and Loyalty

Public sector and some private sector organizations deliver services to the

public. Patrick Mehne, the chief quality officer at Ritz-Carlton Hotel Company

(quoted by Evans and Lindsay, 2005), stated “satisfaction is an attitude, loyalty is a behaviour”. It gives two different pictures in this quotation. First,

‘satisfaction is an attitude’ means satisfaction that relates to people’s

feeling, either it is a positive response (feeling satisfied) or negative response

(dissatisfied). Attitude will reflect behaviour. ‘Loyalty is a behaviour’ means

reaction towards one’s feeling. In other words, once people feel satisfied, they

tend to be loyal to the organization. The customers don’t only buy or use but

will keep on buying or using the services. An organization cannot create a

loyal customer without creating a satisfied customer in the first place.

Quality improvement will ensure that the customers feel happy and hopefully,

create a ‘loyal-based’ relationship with the organization. One of the ways to

improve the quality of the services is understanding the customers’ needs and

wants (refer to GAPS analysis in chapter 4). Creating customers’ satisfaction

and loyalty will provide a solid competitive advantage to the organization. It

helps in reducing the cost of operation, but at the same time, providing the


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same level of services or may exceed from the expectation. This will ensure

the survival of the organization.

Loyal customers are also willing to spend more on the services offered by the

organization; regardless of price and time. They will then refer new clients to

the organization and it is less costly to do a business with loyal customers as

compared to new customers. For instance, Company X gets a contract from a

government agency. The agency feels satisfied with the services provided by

Company X and retain company X for the next few years. In addition, the

agency may refer Company X to the other agencies which need the same

services. It costs five times more to find a new customer than to keep an

existing one happy. (Norman, 1998; quoted by Evans and Lindsay, 2005).

5.2.2 Creating Satisfied Customer

Many organizations, especially public organizations, are still focusing on the

processes and services from an internal view rather than understanding these

concepts according to the external customers. It is important to pay greater

attention to overall customers’ experience that affects their perception through

several ways such as unambiguous advertisement, clear instructions, etc. The

truth is that, an organization should create customers’ satisfaction by looking

from their eyes i.e. what makes them satisfied or unhappy.

In understanding what the customers really want, there are three main aspects

that must be considered i.e. three aspects of customer-driven quality. They

are:

• Expected quality

Here, an organisation needs to identify their roles as the producer of

outputs and try to make assumption about customers’ needs. The

assumption made is hopefully representing the true customers’ needs and

expectations.


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• Actual quality

It refers to the outcome of the processes and how the outputs are

delivered. An organization should prepare itself with whatever

consequences that will be faced after the delivery of goods or services. In

other words, the organization must expect the outcome from any

transaction that they have made with its customers. However, in some

ways, actual quality and expected quality may be different due to

misinterpretation or lost of information gained from the customers. This

situation will cause the services delivered not according to specification.

• Perceived quality

After the services have been delivered, the customers will assess the

quality and develop their perception on the delivery made. They will

compare their expectation (expected quality) with what they have received

(actual quality). If expected quality is higher than actual quality, the

customers probably may feel dissatisfied. On the other hand, if actual

quality is greater than expected quality, they may feel delightful and

definitely satisfied. Therefore, the organization must ensure that whatever

delivered to the customers (actual quality) needs to conform to the

expected quality. However, the organization must keep in mind that the

customers’ perception is not always accurate!

These aspects are important in ensuring costumers’ satisfaction by

identifying their needs and wants. Some mechanisms can be used to

measure their level of satisfaction and the feedback gained can be used

to improve the products / services delivered, such as customers’ feedback

form and surveys. These aspects suggest that the organization must put

greater effort to ensure that customers’ needs are being fulfilled. The

effort then must be based on the perspective of the customers, not the

organization.


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5.2.3 Strategising Loyal Customer

Previously, it has been said that it is important to ensure the customers are

satisfied and be loyal at the same time. This concept is also applied in the

public sector, as the customers’ loyalty represents the customers’ support to

the current government. Public organizations need to work hard in retaining

their customers, as the theory said “a customer forever”. This theory tells what

drives the desire of an organization to create customers’ loyalty.

Karl Albreacht (1998; quoted by Goetsch and Davis, 2010), however, opposed

this idea of ‘customer forever’ that just meet the customers’ expectations. He

said it is more than just meeting the customers’ expectation, but creating

values is more important. He argued that the retention of customers with an

organization is because they prefer to do the business with the organization.

This is what he called as “customer preference”. To support this idea, he

proposed the basic Theory of Service Relativity formula, which is as the

following:

V = R – E; where

V = Value

R = Results

E = Expectations

In this formula, V (value) as perceived by the customers is equal to actual

results (R) minus expectations (E). When R is equal to E, V will be zero. It

means that if there is no value created by an organization, it is merely meeting

the customers’ expectation, where there is no guarantee that the customers

will deal again the organization.

Albrecht’s emphasis on customer preference, is actually similar to the concept

of loyalty. When the customers prefer to deal an organization, it means they

are loyal to the organization.


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In strategising customer loyalty, there is a model introduced by Steve

Hoisington and Earl Nauman (2003; quoted by Goestch and Davis, 2010).

This model is known as Customer Loyalty Model, which consists of four main

components. The components are:

1) Business performance

For this component, the customers will evaluate the transaction made with

the organization via considering several factors that may fall onto one of

these categories:

• Product quality (e.g. attributes, features, reliability, compatibility,

usability).

• Service quality (e.g. delivery of service).

• Relationship quality (e.g. communication, empathy, responsiveness).

• Image strength (when other performance indicators are equal, image

will play an important role to distinguish one organization to the

other).

2) Global perceptions

This component refers to the perceptions made by the customers. Once

they have evaluated an organization, they will create a whole-some (or

global) perceptions on the organization. Perceptions are different between

one and another. Some may see the organization as good, some may not.

However, if the assessment made is positive at all key areas, loyalty

behaviour can be formed among the customers.

3) Loyalty Behaviours

Loyalty is a behavioural concept, and it is possible to measure it. There

are two ways to measure loyalty behaviour, which are:

a) By defection rate Regular customers can easily detect if there is unusual circumstances

happens, especially in delivering a service. For instance, those who


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always travel abroad are regularly made a passport or getting a visa

from an Immigration Department. Usually, process of the passport

and visa will take 45 minutes to one hour. If they get their passport

and visa in three hours more than what they have experienced,

definitely they will feel something wrong with the services provided. It

means, the services provided have a defect in terms of processing

time of the passport and visa.

b) By business-volume-by-customer rate

Here, loyalty behaviour is measured based on the rate of using the

services (or in other words, by business volume per customer).

Customers possibly use a service over and over again. The

difference is that, the rate of usage is getting less, time after time. The

consumption of the service is getting lesser and lesser from the

previous time. They may be seen as loyal, but not from the

perspective of their consumption. For example, customer X is a

government officer. He always goes to a general hospital for medical

examination. He always has to wait for a long time before he can see

a doctor. From going there once a month, he only goes to the general

hospital when he has less money to pay for the medical bill in a

private clinic. Thus, his consumption on the services provided by the

general hospital is getting lesser and lesser, as he prefer to go to a

private clinic for faster services.

4) Financial outcomes

There are several key factors that may effect on financial outcomes, which

includes:

a) Reduced costs – Loyal customers cost less than finding a new

customer, in which will decrease the organisation’s cost of operation.

b) Employee attitudes – Good customer-relation derives from good

employees.

c) Shareholder value – The shareholders’ value will increase when the

cost of operation is decreased.


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These components allow the organization to build or maintain its

relationship with the customers. The components are used to measure

the effectiveness of the organization in fulfilling the needs of customers.

5.3 CHARACTERISTICS OF A CUSTOMER FOCUSED PUBLIC ORGANISATION Richard C. Whitely (1991; quoted by Goestch and Davis, 2010) has outlined several

characteristics shared by various successful organizations in the market and

applicable in th e public sector. There are seven (7) characteristics:

a) Vision, commitment and climate

When an organization possesses these criteria, it shows that the organization is

serious and committed to fulfil the customers’ expectations. The commitment of

the top management is shown through their focus towards customers by

establishing a vision that focuses on customers, and commit to it and creating a

good climate to enhance customers’ satisfaction.

POINTS TO PONDER! Satisfaction and loyalty are two main criteria in retaining the customers. What

if the public organizations ignore the importance of these criteria? Think

about real scenario that happens when these criteria are ignored.


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b) Alignment with customers

A customer-focused organization will always work hand-in-hand with its

customers. It can be illustrated in many ways, such as not over-promising, ask

for feedbacks, refer the customers of any new services introduced, incorporate

input from the customers with the improvement made, and understanding the

attributes of services the customers prefer to.

c) Willingness to find and eliminate customers’ problem This characteristic manifests the effort of an organization to focus on its

customers. It continually tries to identify and solve any unhappy incident that

may happen during the process or delivery of service. The responsiveness of

the organization demonstrates in many forms; monitoring customers’ complaint,

identify and thoroughly analyse their problems, and eliminate the failure that

cause defects.

d) Use of customer information

A customer-focused organization is not only seeking for feedback, but it will use

the information gained to improve its services. The information will be

communicated to those who involved in the process level, so that they will have

the real view of who their customers are and their real needs and expectations.

e) Reaching out to customers

This characteristic illustrates the assertiveness of an organization in

understanding its customers’ needs. The organization does not wait for the

feedback from its customers (refer details to chapter 5). They try to find how to

improve their services in several ways; simplify the process for customers,

encouraging its employees to go beyond their normal call of duty to entertain its

customers, actively solving the customers’ complaint and seeking for

feedbacks, and making the complaints made be known to the top management.


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f) Competence, capability and empowerment of people

An organization treats its employees as professional; people who possess the

ability to reach to the next level. They are empowered to use their own ideas

and opinions in conducting their roles to please the customers. It means that

they are well-versed and knowledgeable about the products / services to fulfil

customers’ needs and expectations. The organization also provides necessary

resources and support for its employees in doing their job to satisfy the

customers.

g) Continual improvement of products and processes

It is necessary for an organization to continually improve their products /

services, as well the processes involved in producing them. The improvement

made can be viewed in many ways, such as studying and finding the best

practices to do their job, cooperation and teamwork, and research and

development to enhance the productivity and performance through innovations

and inventions.

These characteristics illustrate what are needed by an organization to be

successful in the future. Some may say that public organizations do not need these

formulae, since they are able stand on their own. In reality, these characteristics will

be a useful in order to maintain the public’s support and unnecessary reformation

can be avoided (due to changing of government).


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At this point you should be able to:

Identify and explain types of customers. Restate the needs of customers in the public sector. Explain the importance of building customer’s satisfaction and loyalty. Describe the characteristics of a customer-focused public organization.

PART A: DEFINITION Please explain briefly the following terms:

1) Internal customers.

2) External customers.

3) Loyalty behaviour.

4) Perceived quality.

5) Vision, commitment and climate

PART B: ESSAY QUESTIONS Answer the following questions:

1) Explain with example, the differences between internal customer and external

customer.

2) Identify SIX (6) ways to understand the needs of external customers.


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REFERENCES

1) Evans, J. R. & Lindsay, W. M. (2005). The Management and Control of Quality – 6th Edition. Thompson-South-Western: USA.

2) Goetsch, D. L. & Davis, S. L. (2010), Quality Management for Organizational Excellence:

Introduction to Total Quality – 6th Edition. Prentice Hall: USA.

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Building Customer Satisfaction

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