Using the KANO-model as an approach to evaluate customer satisfaction

Table of Contents

List of Figures

List of Tables

List of Appendices

1. Introduction

2 Theory
2.1 Customer satisfaction
2.2 Product quality

3 The Kano model
3.1 Basics of the model
3.2 Identifying and classifying the customers' needs
3.3 Evaluation of the Kano model

4 Conclusion

Appendix

Bibliography

List of Figures

Figure 1 - Connection between customer's expectation and his satisfaction

Figure 2 - Product qualities according to the Kano-Model

Figure 3 - The process of evaluating customers' needs using the Kano model

List of Tables

Table 1 - Approaches to Quality

Table 2 - Example for a Kano question pair

Table 3 - Kano quality classification scheme

Table 4 - Evaluation example

Table 5 - Advantages and Disadvantages of the Kano model

List of Appendices

Appendix A - Distribution Methods for Kano questionnaires

1. Introduction

The goal of every profit-oriented company is to maximize its profits. One vital step in achieving this goal is to maximize the company's income by selling more products to the customers. In the past this was often achieved by spending a lot of money on advertisement or similar marketing-methods. While those methods are still important today, there is a lot of evidence which suggests that raising the customers' loyalty is an even more effective method of raising a company's income. Customer loyalty can be created by raising their satisfaction with a company and its products. How effective a high customer satisfaction can be was shown by an analysis committed by Growth Strategies International. Their conclusion of the analysis was that a totally satisfied customer will generate 17 times more revenue than a somewhat dissatisfied customer (see Singh, 2006, p. 2). While the exact number is only an average and might deviate in other branches of trade, the benefit of satisfied customers should overall be very high. The main reason for this relies in the fact that dissatisfied customers are more likely to pass on their experiences than satisfied customers. Furthermore, a satisfied customer is more likely to buy another product from the company.

While the importance of a high customer satisfaction is well known to the companies, a lot of them still fail to reach it. The reason for this resides in the fact that the customers' needs are very hard to determine. Companies are very often not objective enough or lack the required information, which is why simply putting a lot of work in customer-care might not suffice in order to achieve the maximum results (see Hill, Brierley, & MacDougall, 2003, pp. 1-2). In order to determine the customers' needs exhaustively, a more structured approach is required. Because of this, a lot of different models have emerged, that are meant to determine the customers' needs. One of those models is the Kano-Model, which is broadly accepted in practice.

As the improvement of customer satisfaction is a very actual, important and complex topic for most companies, the goal of this assignment is to analyze how the Kano-Model can be used to determine the customers' satisfaction and their needs in a structured approach. In order to achieve this goal, the theory behind the main terms will be explained in chapter 2. Chapter 2.1 will feature a discussion of the term "customer satisfaction" in order to give a better understanding of how customers react to the companies' products. This is followed by an explanation of the term product quality in chapter 2.2, in order to give a short overview of factors that might influence the customers' satisfaction. In chapter 3 the Kano- Model will be discussed in-depth. Chapter 3.1 will give a general overview of what the Kano-Model is and what different quality-categories exist within it. Afterwards the process of analyzing customer preferences will be shown in chapter 3.2. Lastly, chapter 3.3 will evaluate the usefulness of the model in the given context. Chapter 4 will conclude this work by presenting the essential findings and reflecting the used approach.

2 Theory

2.1 Customer satisfaction

The term customer satisfaction is used frequently in companies. There is, however, no generally accepted definition for it. Hill describes it as simply being "... a convenient phrase to describe the attitudes and feelings that customers hold about an organization" (2007, p. 15). Customer satisfaction is, as Hill indicates, very subjective as the customers' feelings are the very basis for the development of their satisfaction. This is in agreement with the author's experience and a very important factor to be considered when trying to increase the customers' satisfaction. Furthermore it should be clarified, that customer satisfaction does not only relate to a whole organization, but can also relate to single products^[1]. Furthermore, it is very important to understand how customer satisfaction develops. A generally accepted opinion is that satisfaction (or dissatisfaction) is the difference between a customer's expectation and his perception of the actual product's performance (see Hoffman & Bateson, 2010, p. 289). This connection is illustrated in Figure 1.

As the figure shows, there are three possible cases. The most desirable one is a totally delighted customer, which can only be achieved if his perception of the delivered performance exceeds his expectation. This clearly implicates that it is not a very good approach to raise the customers' expectations to a level that cannot realistically be satisfied by the product. If the expectation is too high, the customer will very likely be dissatisfied. A very low expectation, on the other hand, will obviously result in a very high satisfaction. This is also not very desirable as the customers are probably less likely to buy the product in the first place.

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Figure 1 - Connection between customer's expectation and his satisfaction

(based on Hoffman & Bateson, 2010, p. 289)

Another problem that results from this definition relies in the perception of the customers. While one customer might perceive the product as being perfect, another one might not like it. This further confirms the subjective aspect of customer satisfaction, because the expectations as well as the perception of the delivered performance rely heavily on the customer's experiences, knowledge, etc. These experiences can also be related to a dissatisfaction the customer had with other products of the company, which shows that there are interdependencies between the satisfaction with the products and the company as a whole. These influence the expectations and the perceived performance.

2.2 Product quality

Defining product quality is not an easy task, as there are multiple views of what quality is. David Garvin grouped these views into five principal approaches which are illustrated in Table 1.

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Table 1 - Approaches to Quality

(based on Bagad, 2008, pp. 2-4)

While none of the shown approaches is per se incorrect, they are very different in nature and thus are not all suitable as basis for increasing the customer satisfaction. Simply reducing quality to "conformance to requirements" (that were defined by the company) as in the manufacturing based approach might lead to unsatisfied customers as the specified requirements might deviate from the customers' actuals needs, which were already described as being subjective. This makes the user based approach the best choice as basis for this assignment. Another advantage of this approach is that it can also implicate the desirability of conformance to the specified requirements, as this might also be what the customer wants. Furthermore, this approach is also preferred by Bergman & Klefsjo who discussed various definitions for the term quality. They define the quality of a product as "... its ability to satisfy, or preferably exceed, the needs and expectations of the customers" (Bergman & Klefsjo, 2010, p. 23). This also fits very well to the presented definition of customer satisfaction but implicates that some aspects of the product quality can't be measured easily. It is still very important to keep the problem of the user based approach in mind, as the actual needs can vary from customer to customer. This makes it often impossible to find a solution that is satisfying every customer's needs. The only solution for this problem is to create a product that satisfies the majority of the customers, as Bagad suggests (see 2008, p. 4).

Another important aspect to be considered is the fact that the quality is by a large part influenced by, but not limited to a product's primary functionality. If the product fulfills its purpose very well but the surrounding service is not good (customer service at a telephone-company, for example), the satisfaction can also be lowered. This further complicates finding all relevant customer-needs.

3 The Kano model

3.1 Basics of the model

The Kano model was developed by Noriaki Kano in 1978 in order to better identify and operationalize customer needs. He discovered that there are five basic categories of customer needs, which influence the customer satisfaction differently. These are illustrated in Figure 2 and described in the following.

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^[1] The term 'product' is used synonymously with the term 'services' within this assignment, as everything mentioned here applies to both types.