Anantha Kollengode has written a typically interesting column regarding healthcare – this time focusing on the Voice of the Customer (Patient) and how it relates to the Six Sigma process in healthcare. While I agree with the overall point of the column, the need for using the VOC, I have a couple of bones to pick with Mr. Kollengode.
First, let me point out an area of agreement. He states:
However, unlike other service industries (think Hospitality industry), the healthcare professionals will tell you what they think their customers want and need, but will often fail to directly ask you what their patients actually want by determining the Voice of the Customer.
I think this is a pathology that pervades much of American business (I can’t comment on international business). Companies give lip service to the VOC instead of actually collecting it. As a consultant to many companies I constantly hear that management already knows what the customer wants and needs and there is no need to collect the information. When confronted by information that does not agree with their beliefs I hear, “The customers don’t know what they are talking about!” I can’t think of anytime when they have been correct. This arrogance has a severe depressing impact on the success of projects and initiatives.
Now for the first bone. Mr. Kollengode talks about the impact of customer satisfaction on profitability. I would really like to see the research on which this point is based. The “contented customer theory of profitability” has been widely and strongly discredited. I refer readers to the work of Gale, Reichheld and Reidenbach and Goeke. Recent empirical studies such as that conducted by Soderlund and Vilgon (1999) provide a strong punctuation to this point. The authors used a lagged model (using three years of observations) looking at the impacts of satisfaction on such outcomes as number of orders, purchase volume, purchase amount, and customer profitability. Here are the correlations:
Number of orders -.07
Purchase volume .04
Purchase amount .02
Customer profitability -.05
This is particularly stunning. Satisfaction plays a negligible role in increasing the number of orders from your customers, increasing customer purchase volume, amount or profitability. I have discussed the insufficiency of using satisfaction as a strategic metric to drive outcomes such as those listed above in several blogs and refer interested readers to Six Sigma Marketing: From Cutting Costs to Growing Market Share for a more comprehensive discussion. Instead, companies would be better served by measuring and monitoring customer value. Value is the relationship between the quality of a company’s product service offering and the price that the customer has to pay for that quality. Gale’s work, using the PIMS data (Profit Impact of Marketing Strategy) concluded:
Superior customer value is the best leading indicator of market share and competitiveness. And market share and competitiveness in turn drive the achievement of long-term financial goals such as profitability, growth, and shareholder value (p.26 Managing Customer Value, 1994).
Reflecting the schizophrenic view of value and satisfaction that exists in Six Sigma, Kollengode uses the two terms interchangeably. They are not synonymous. Satisfaction is an emotional response to a buying event while value is a cognitive (thinking) measure that weighs the quality benefits against the cost (price). I have found that satisfaction is a good transaction measure (report card on performance) while value is a very powerful strategic measure that drives market share and top line revenues.
Finally, I do agree with Mr. Kollengode regarding the need to capture the VOC early on in the DMAIC process. In fact, Six Sigma Marketing makes it an initial priority on which everything else is based. It drives the Six Sigma Marketing process.
Companies and organizations seeking to improve their market share and profitability are not getting good value from their use of satisfaction. Healthcare organizations rely heavily on satisfaction based on the premise that a satisfied patient is a profitable patient. This is too simplistic and they would be well-advised to look into customer value as a strategic metric. A customer who receives superior value is a customer who is loyal and profitable.