Turning CFOs into Quality Champions

Article

Goodman, John; O'Brien, Pat; Segal, Eden   (2000, ASQ)   TARP, Arlington, VA

Quality Progress    Vol. 33    No. 3
QICID: 13838    March 2000    pp. 47-55
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Article Abstract

For chief financial officers (CFOs) to support quality efforts, they must see that quality improvements have an impact on problems, complaint behavior, or customer satisfaction. Before studying the effect of enhanced quality on profits, the CFO should learn about customer behavior. Research on customer behavior by TARP (formerly Technical Assistance Research Programs) indicates: problems in most industries lower customer loyalty by about 15% to 30%; most business customers and about half of individual customers do not complain to the company when they have problems; if a call center can transform a dissatisfied customer into a satisfied one, loyalty increases by 50%; inadequate problem solving by the company decreases loyalty by about 25%; dissatisfied customers share their stories with twice as many people as do satisfied customers. To transform these findings into a quantification of quality improvement payoffs, the following data are required: customer profit value; number and percent of customers who complain; and the impact of problems and of service on customer loyalty. When put into a TARP model, these data generate an expected return on investment for improvements in quality, service, and satisfaction. This article provides a detailed example of model calculations. It also suggests responses to typical CFO objections to the model.

Keywords

Financial industry,Customer complaints,Customer loyalty,Problem solving,Customer service,Customer satisfaction (CS),Return on Investment (ROI)


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