Customer Satisfaction - Case of Wal-Mart - Research Paper Example

Contents Introduction 2 A short definition, background and history 3 Background and history of the company 3 Current issues 3 Current thinking, models and trends on the subject area 7 recommendationS for an organization 10 Change of Focus from Lowest possible price to Customer Satisfaction 10 Offer Incentives To The Employees 10 Offer Training To The Employees 11 Improve The Consumer Experience 11 Offer Better Salary And Remuneration Packages To Employees 12 Formulate A Proper Plan Of What Needs To Be Achieved 12 Applicability in the work environment 12 A 12 month implementation plan 13 Conclusion 15 References 16 Introduction Customer satisfaction has become a decisive aspect in the success of any business. It is critical for the management of any business to consider the satisfaction level of the customers and then take necessary steps to enhance the customer satisfaction level. Customer satisfaction can be defined as the extent to which products and services offered by the company are able to meet the expectations of the customers. This term is used extremely regularly in marketing and business aspects. Kardes, Cline, and Cronley, (2011) has also defined customer satisfaction as the ratio of a number of customers that have reported higher satisfaction than expectations after using the products and services of the company to the number of total customers served by the company. According to Farris, Bendle, Pfeifer, and Reibstein, (2010), customer satisfaction level is an important aspect in analyzing how the company is performing. The research revealed that 71% of the respondents said that customer satisfaction is critical in managing the business and in monitoring it (Farris et al., 2010). Gitman and McDaniel (2005) stated that customer satisfaction level is considered as a significant and a differentiator factor in this competitive market. In the competitive market, customer satisfaction level is decisive for success. This report analyzes the situation of one of the largest retailers of the world, Wal-Mart. The report analyzes how the retailer is managing and satisfying the customers. The report first gives an overview of the company and issues related to customer satisfaction level at the company are discussed.. Different theories, models and trends on the subject have also been presented in this report. The report also recommends different strategies that Wal-Mart can adapt in order to improve the customer satisfaction level and a plan has been formulated on how to go about these recommendations. A short definition, background and history Background and history of the company Wal-Mart is the leading retailer in United States. Wal-Mart has been operating successfully since 1960s. The company has a presence in 27 countries along with an e-commerce website that allows consumers to purchase and order products that would be delivered at the doorstep of the customers. The company has reported sales of $466 billion in 2013 (Wal-Mart, 2014a). More than 2.2 million employees work for Wal-Mart in different parts of the world. In United States alone, the company has employed approximately 1.3 million employees (Wal-Mart, 2014b). According to Fortune Global 500 list, the company is the largest employer in the world (CNN Money, 2012). Wal-Mart is the leading player in the retail industry and it focuses on offering the products at the lowest prices to consumers. The management believes in the idea that in the retail industry consumers are highly price sensitive and the price is the most influential factor that influences their decision making to select any retailer. Therefore, the management focuses on reducing costs and this reduction in cost is then passed on to the customers by lowering the prices. Although, the company is the leader in the market, but the sales of the company are declining and customers are not satisfied when they shop from Wal-Mart. Current issues Wal-Mart is the leading retailer in the United States market. The company has been the market leader in the retail industry. The major reason for being the market leader is that the company focuses on offering products at the lowest possible prices for consumers. The management of Wal-Mart believes that offering the products at the lowest possible price is critical in the success of a retailer. However, in the last few years the sales of the company has been declining. The major reason identified for the decline in the sales of the company is because of the poor customer services. It has been found that the company does not care whether customers are satisfied or not and whether customers are given proper customer services. Gogoi (2007) conducted a survey and identified that the employees at the Wal-Mart retail store do not care about greeting the customers of the company at the retail store. A cashier was interviewed, and he revealed that when the top management of Wal-Mart does not care about customer satisfaction, then why he would be so concerned regarding serving the customer in the best possible manner (Consumer Affairs, 2014). There are many stories of poor customer services at Wal-Mart. According to the research conducted by Consumer Affairs related to Wal-Mart, it was revealed that only 2% of customers rated the services of Wal-Mart as 5 Star. 1% of the consumers rated the satisfaction level of shopping at Wal-Mart as 4 Star and 2% customers rated their experience as 3 Star. 21% of the consumers rated the satisfaction level of Wal-Mart as 2 Star. 74% of the consumers rated their satisfaction level as 1 Star at Wal-Mart. Thus, this highlights how dissatisfied the customers are when they go to Wal-Mart. (Consumer Affairs, 2014) Gogoi (2007) revealed that Wal-Mart focuses on offering the lowest possible prices. In order to offer the lowest prices to the consumers, it is vital that the company manages its expenses. In managing its expenses, the company pays its employees exceptionally low salary and benefits. This results in low morale and low motivation of the employees, and therefore they have no incentives to greet the customers and offer them quality services. As the company believes that it can be successful by competing with other retailers on the basis of price, therefore it is critical to offer low price. Moreover, the slogan of Wal-Mart is ‘Always low price, Always’ and ‘Save Money, Live Better’. So this also highlights that the company is trying to attract the customers on the basis of price. The problem is not with the price, but the problem is that in order to retain the position of market leader in the retail industry the company has to offer a lot more than offering low price to the consumer. If the customers are getting slightly low price but exceedingly poor customer services, then not a lot of customers would come again. Moreover, it has been found that the retail stores of Wal-Mart have some horrible smells and the retail store team take almost no actions to fix such issues (Gogoi, 2007). Offering low wages and salaries to the employees have also hurt the brand image of the retailer. Therefore, this image has also discouraged customers to come again and again to the retail store. In addition to this, it has been found that the retailer is not able to keep its shelves stocked, and this is another factor that dissatisfies the customers (Jones, 2013). Moreover, at times customers have complained that the shelves are disorganized and this situation is getting worse and resulting in dissatisfaction (Dudley, 2013). There has been an increase in the sales of one of the competitors of Wal-Mart, Whole Foods. On the other hand, there has been a decline in the sales of Wal-Mart. The main reason for this increase and decline in the sales of these companies is how they are serving and satisfying the customers. Whole Foods is able to offer high quality services in comparison to Wal-Mart that does not care about their customers. As there has been improvement in the economic condition of United States, therefore consumers today are not solely making their purchasing decision on prices (Linn, 2013). Denning (2012) identified that the Wal-Mart has been focusing on low price. However even after reducing costs and paying lower wages to the employees, the company is not able to offer the lowest prices to customers. According to Denning (2012), Amazon offers products to consumers at around 19% cheap rates than Wal-Mart. Thus, today Wal-Mart is found in the middle of the road (Denning, 2012). The company is neither able to offer the cheapest prices to the consumers, nor it is able to offer quality customer services so that they are satisfied and retained. Wal-Mart is not the market leader in terms of customer satisfaction level in the retail industry as this position is held by Amazon (Clark Howard, 2008). Among other important retail stores where customers are pleased after shopping are Costco, Publix, and Nordstrom (Tuttle, 2012). According to Tuttle (2012), the customer satisfaction level is only 4% which is extremely low. Today, in order to be successful in business, one not only needs to offer the lower price or comparable prices to consumers but other crucial aspects play a critical part. These aspects include brand image, how much the company pays to its employees, how much the company is paying back to the community, the quality of services, customer experience while shopping at the store and several other factors (Shaw, and Ivens, 2002). Therefore, Wal-Mart is suffering from the number of issues, and the company needs to focus on offering high quality experience and services to make sure that customers are not only satisfied, but they are delighted when they shop at Wal-Mart. Current thinking, models and trends on the subject area Customers are the most influential stakeholders that every organization needs to satisfy. An organization that does not satisfy its customers would not succeed. Today, managing the business is not as easy as it was before. Satisfying the customers is critical in improving the retention of the company. There is a relationship with the satisfaction level and retention of customers. Moreover, there is also a direct relationship with the retention ratio and the profitability of the company. It has been revealed by Feinberg, and Kadam (2002) in their research that if retention ratio of the customers increases by 5% then it results in increasing the profitability of the company by 25 to 80%. Lewis (1993) stated that service quality is critical in satisfying customers. Moreover, he added that in the competitive market, offering quality service to the customers can result in improving overall organizational performance. Payne, A., and Holt (1999) stated that today businesses need to focus on relationship marketing and build relationships with customers in order to be successful in the competitive environment. Anderson, Fornell, and Lehmann (1994) stated that the satisfaction level of customers is highly dependent on the value or price. Therefore if an organization has more satisfied customers, then they would be willing to pay a higher price to buy the particular product. Garvin (1988) stated that higher customer satisfaction level of customers helps the organization in improving profitability. It is crucial for organizations to work on the improvement of customer satisfaction in order to enhance the overall performance and profits. It is necessary to acknowledge here that the customer satisfaction is the key for the organizational growth and profit. Organizations have been looking for different methods and strategies for improving the customer satisfaction as this will result in increasing the customer retention and hence will increase sales and profits of the organizations (Kurtz, and Boone, 2010). There are different factors which influence the customer satisfaction like the location of the organization, the pricing, product, services, procedures, and other related processes. Organizations are realizing the importance of all these factors and thus, they are coming up with effective and efficient strategies according to the needs and demands of the customers. The customer satisfaction results in increasing the customer loyalty and thus increases the overall customer lifetime value and customer based brand equity of any particular organization or brand (Shaw, and Ivens, 2002). However, one salient aspect to be considered here is regarding the measurement of customer satisfaction. In order to come up with strategies which directly influence the level of customer satisfaction, it is essential to first measure the customer satisfaction (Shaw, and Ivens, 2002). Many organizations in today’s competitive world are not able to measure the level of customer satisfaction and thus are not able to come up with appropriate strategies and insights. Hence, in order to manage the customer satisfaction and increasing the customer retention, organizations should carefully measure the customer satisfaction. The customer satisfaction can be measured through different tools and methods. Every organization should select the tools and methods according to their requirements and situation (Kurtz, and Boone, 2010). Another critical aspect that can improve the overall customer satisfaction is the maintenance of good and effective customer relationship management. Well developed and planned customer relationship management strategies and methods can help the organization in building a strong relationship with customers and thus improving the customer satisfaction which in turn will increase the overall profits and growth of the organization (Boone, and Kurtz, 2013). Hence, it is vital for organizations to listen to the customers and formulate all strategies keeping in mind the demands and needs of the customers. Today’s marketplace has totally changed, and customers have become more demanding. This has increased the power of customers and thus has forced organizations to focus on customer loyalty, customer retention, and customer satisfaction. recommendationS for an organization It is decisive for Wal-Mart to offer high quality services to consumers. Making the customer experience delightful is significant in retaining the customers. The sales of the company are declining, and if the company does not focus on satisfying the customers then it would be difficult for the company to keep its market leader position. To improve the customer services, the following recommendations have been presented that Wal-Mart needs to consider in order to remain as the market leader in the retail industry of US. Change of Focus from Lowest possible price to Customer Satisfaction One of the greatest strategic changes that the management of Wal-Mart needs to take is to change their strategy from being the lowest price retailer. The company has been focusing on offering the lowest possible price to the consumers. This strategy has resulted in not making or investing in the retail stores, and the environment of the retail stores has been badly affected. It is critical for the management to change their focus to satisfying customers instead of cost reduction. The strategy needs to be changed immediately as the company is not able to offer the lowest possible prices. Currently, Amazon offers goods at even a lower price than Wal-Mart. On the other hand, the company is not able to offer satisfy its customers. Therefore, it is critical for the company to start focusing on satisfying the customers instead of focusing on the lowest price as the current strategy is resulting in decline in sales. Offer Incentives To The Employees In the retail industry, employees are the ones that greet the customers and their behavior is critical for satisfying the customers. It has been found that employees are not willing to satisfy and greet the customers in a positive and satisfactory manner. Behavior of employees is terrible and awful which is resulting in dissatisfaction of customers. The management of Wal-Mart needs to change their focus and offer different types of incentives including monetary as well as non-monetary incentives to reward employees that take a further step in satisfying the customers and greet the customers well. Offer Training To The Employees The mindset of the employees needs to be changed. Moreover, their behavior and how they greet and work at the retail store also need to be changed. In order to successfully make these changes with the objective of achieving higher customer satisfaction level, the management needs to train its employees. The management needs to offer on-job training, classroom sessions, stimulation training and other training methods in which the focus would be on satisfying the customers. This would allow management to make sure that the mindset and attitude of the employees change and employees greet its customers well so that it can help in improving their satisfaction level. Improve The Consumer Experience Consumer experience is another critical aspect in the success of the organization. Therefore, the management should also focus on improving the overall work environment. For this, the management needs to take care that the retail stores are clean and have a good smell. It is found that some retail stores are not clean, so the management needs to punish the whole team working at the store if they do not check whether the store is clean or not. Therefore, such working environment would help in improving the consumer experience that would result in improving the satisfaction level of the customers. Offer Better Salary And Remuneration Packages To Employees Currently, Wal-Mart is highly criticized for paying low compensation and salaries to its employees. This has also influenced the brand image of the company and thus, has discouraged customers as they do not want to purchase from retailers that do not value its human resource. Formulate A Proper Plan Of What Needs To Be Achieved The external market has changed with the passage of time. During the recessionary periods, the economic conditions were poor. The consumers were looking to minimize their expenses, and this helped Wal-Mart to continue its growth and sales. Moreover, in those days customers were not that much choosy and selective and they were making their decisions on the basis of price. However, the buying power of the consumers has increased and therefore they are ready to pay a higher price for a better quality. Therefore, it is critical for the management of Wal-Mart to understand these changes and formulate strategies accordingly so that it is able to retain its position of the market leader. Applicability in the work environment The above recommendations need to be adapted by the management of Wal-Mart in order to retain its position as the market leader. The company needs to make sure that these recommendations are in accordance with the organizational culture so that the employees and the management of the company are able to adjust accordingly. In order to properly apply these recommendations, the top management of the Wal-Mart needs to communicate the reason for this strategic change of shifting the focus from low cost to the satisfaction of customers. Having meetings with the team managers of different regions could help the management in appropriately making these changes. Currently, the company has emphasized on cost reduction. However, this change in approach needs to be communicated along with the reason for making these changes. If these changes are not properly communicated, then these changes would not be beneficial for the organization. Customers today not only want the lowest prices for the goods, but they consider a number of other factors in selecting the retail store. A 12 month implementation plan It is critical for Wal-Mart to prepare a proper plan in order to make sure that the changes are successful. The company needs to formulate strategies to make sure that the change is successful, and these changes are able to improve the customer satisfaction level. The following plan needs to be implemented in order to make sure that the changes are successfully implemented at Wal-Mart, and its objectives are achieved. A project plan has been formulated in order to present how the management should go about making these changes. Task Duration Starting Date Ending Date Predecessor Identifying the objectives to be achieved from these strategic changes 10 days 4/1/2014 4/14/2014 Formulating strategies to achieve these objectives 15 days 4/15/2014 5/5/2014 1 Preparing a plan of how to go about the change 10 days 5/6/2014 5/19/2014 2 Involving HR Department in making changes 5 days 5/20/2014 5/26/2014 2,3 Communicating the changes required via email and online meetings to all the employees 30 days 5/27/2014 7/7/2014 3,4 Formulating strategies to motivate the employees such as higher pay, benefits and rewards for offering quality service and others 15 days 5/27/2014 6/16/2014 4 Inviting different team members from different regions where Wal-Mart is operating at the head office to have detailed and face to face meetings 30 days 7/8/2014 8/18/2014 5,6 Taking feedback from these team members to further improve the customer satisfaction level 15 days 8/19/2014 9/8/2014 7 Conducting Training Sessions 60 days 9/9/2014 12/1/2014 8 Implementing the changes at the workplace 3 days 12/2/2014 12/4/2014 9 Branding about this important change at Wal-Mart 30 days 12/5/2014 1/15/2015 10 Marketing and attracting more clients and giving the lost customers incentives to come back 15 days 12/5/2014 12/25/2014 10 Monitoring the performance of different retail stores 30 days 12/5/2014 1/15/2015 10 Taking actions to further improve the changes 15 days 1/16/2015 2/5/2015 10,11,12,13 Taking feedback from the customers regarding this strategic change 15 days 1/16/2015 2/5/2015 12,13 Incorporating the feedback from the customers 10 days 2/6/2015 2/19/2015 15 Evaluating the performance of the employees 15 days 1/16/2015 2/5/2015 13 Rewarding employees that perform better and go out of the way to satisfy the customers 18 days 2/6/2015 3/3/2015 17 Marketing about this particular employees not only within the organization but outside the organization as well to communicate customers 20 days 3/4/2015 3/31/2015 18 Conclusion Wal-Mart is the largest retailer of United States. The company has been successfully operating for a number of years. However, in the last few years the company has reported a decline in sales. One of the major reasons identified is the lack of focus on satisfying the customers. The research has revealed that the company has not emphasized on satisfying the customers and offering high quality customer experience. Satisfying the customers is critical in the long run success of the organization. There are a number of benefits of satisfying the customers such as retaining customers and retaining customers help in improving the profitability of the company. Wal-Mart has been focusing on reducing the prices in order to improve the profitability and attract customers. The company has always focused on lowering its cost and offer products and services to consumers at the lowest price. However, this reduction in price has resulted in poor service to consumers and poor environment that results in poor customer experience. In offering the lowest price, the company has been found wanting as it is no more the cheapest retailer in the country. The company is neither able to satisfy and retain its customers, nor it is able to offer the lowest price to the consumer. Therefore, it is decisive time for the management of Wal-Mart to make some strategic changes. The change proposed is to change the focus from giving the lowest price to higher customer satisfaction. Therefore, Wal-Mart needs to make sure that the overall experience of the consumer is exceptional so that they are satisfied. If the company does not change their focus from lower price to higher customer satisfaction, then the company may give away its position as the market leader in the retail industry. References Anderson, E. W., Fornell, C., and Lehmann, D. R. (1994). Customer satisfaction, market share, and profitability: findings from Sweden. The Journal of Marketing, 53-66. Boone, L., and Kurtz, D. (2013). Contemporary marketing. 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