Zero defections quality comes to services harvard business review pdf

Earl Sasser ,. Quantity price applied. Add Copyright Permission. Copyright Permission Qty:. Current Stock:. Buying for your team? See quantity pricing. This is a copyrighted PDF. Add copies before sharing with your team. Although the magnitude of the change varies by company and industry, the pattern holds: profits rise sharply.

But defection rates are not just a measure of service quality; they are also a guide for achieving it. Below are the available bulk discount rates for each individual item when you purchase a certain amount. Publication Date: October 01, HBR OnPoint articles save you time by enhancing an original Harvard Business Review article with an overview that draws out the main points and an annotated bibliography that points you to related resources.

This enables you to scan, absorb, and share the management insights with others. Companies that aim for "zero defections" keeping every customer they can profitably serve can make profits rise. Defection rates are both a measure of service quality and a guide for achieving it. By listening to the reasons why customers defect, managers know exactly where the company is falling short and where to direct their resources.

If you'd like to share this PDF, you can purchase copyright permissions by increasing the quantity. Earl Sasser ,. Even restaurants can collect data. A crab house in Maryland, for instance, started entering into its PC information from the reservation list. Managers can now find out how often particular customers return and can contact those who seem to be losing interest in the restaurant.

What are defectors telling you? One reason to find customers who are leaving is to try to win them back. When customers cancel their credit cards, the swat team tries to convince them to stay. It is successful half of the time. But the more important motive for finding defectors is for the insight they provide. Customers who leave can provide a view of the business that is unavailable to those on the inside.

And whatever caused one individual to defect may cause many others to follow. The idea is to use defections as an early warning signal—to learn from defectors why they left the company and to use that information to improve the business.

Unlike conventional market research, feedback from defecting customers tends to be concrete and specific. Defections analysis involves specific, relevant questions about why a customer has defected. Customers are usually able to articulate their reasons, and some skillful probing can get at the root cause. This information is useful in a variety of ways, as the Staples example shows.

It may be a clue that the competition is underpricing Staples on certain goods—a competitive factor management can explore further. If it finds sufficient evidence, Staples may cut prices on those items. This information is highly valued because it pinpoints the uncompetitive products and saves the chain from launching expensive broad-brush promotions pitching everything to everybody. The company uses that information to change its buying stock and to target its catalogs and coupons more precisely.

Instead of running coupons in the newspaper, for instance, it can insert them in the catalogs it sends to particular customers or industries that have proved responsive to coupons. Defections analysis can also help companies decide which service-quality investments will be profitable. Should you invest in computerized cash registers or a new phone system?

Which of the two will address the most frequent causes of defection? One bank made a large investment to improve the accuracy of monthly account statements. A company that is losing customers because of long lines can estimate what percentage of defectors it would save by buying new cash registers, and it can use its defection curve to find the dollar value of saving them. Then, using standard investment-analysis techniques, it can compare the cost of the new equipment with the benefit of keeping customers.

There are some customers the company should not try to serve. When a health insurance company realized that certain companies purchase only on the basis of price and switch health insurers every year, for example, it decided not to waste its efforts seeking their business.

It told its brokers not to write policies for companies that have switched carriers more than twice in the past five years. Conversely, much of the information used to find defectors can point to common traits among customers who stay longer. The company can use defection rates to clarify the characteristics of the market it wants to pursue and target its advertising and promotions accordingly.

Many business leaders have been frustrated by their inability to follow through on their public commitment to service quality. Since defection rates are measurable, they are manageable. Managers can establish meaningful targets and monitor progress. But like any important change, managing for zero defections must have supporters at all organizational levels. Management must develop that support by training the work force and using defections as a primary performance measure.

Everyone in the organization must understand that zero defections is the goal. It is important to make all employees understand the lifetime value of a customer. He made sure that every order taker, delivery person, and store manager knew that number. Mastercare has redesigned its employee training to emphasize the importance of keeping customers. Videos and role-playing dramatize these different definitions of good service.

And it builds credibility among employees by sharing its strategic goals and customer outreach plans. In the two target markets where this approach has been used, results are good.