The Fundamental Principles of Customer Accommodation - Literature review Example

The success or failures of any company ultimately is determined by how much volume of business it receives from the s. The s are the most important stakeholders in the business world. It is very important to find ways to satisfy the needs of the customers. The business area of study that concentrates in attending the needs of the customer is called customer accommodation. Customer accommodation occurs within the supply chain of enterprises. The purpose of this paper is to describe and analyze customer accommodation in the business world. The customers are the reasons businesses exist so companies have to align their business strategies based on their needs and desires. The marketing department used to be the only ones that attempted to satisfy the needs of customers by creating new products and marketing campaigns that were appealing to them. Businesses realized that the entire company had to help out and create business processes in all facets of the business in which customer focus was the main strategy of the business. Supply chain management changed due to this new way of thinking and began to implement new policies based on customer accommodation. A lot of early customer accommodation initiatives were based on theories based on consumer focused marketing. Consumer focused marketing is a business philosophy that suggest that focal business point of a business strategy must be the customer it intends to serve (Bowersox & Closs & Cooper, year). In order for this concept to work companies had to follow certain guidelines to ensure the customer was the top priority. Four fundamental ideas based on placing the customers as the critical element of an operation are: Customer needs and requirements are more basic than products and services Availability of products is very important There is no single market for a product or service Volume is secondary to profit (Bowersox, et. al. year). Out of the four concepts mentioned above one which illustrates the importance and positive effects of serving the needs of customers is volume is secondary to profit. Building close relationships in which the focus of the company is obtaining the maximum profitability from a contract is a better strategy than looking to sales high volumes to particulars. A high volume buyer at times drains overall profit margins of companies in these types of transactions and these types of customers are extremely price conscious and will leave you immediately if the competition offers any type of additional discount to them. On the other hand are customers which a company acquires by building close and trusting relationship. These clients receive special treatment from the company they are purchasing from. By customizing the levels of service companies can charge a premium which clients are willing to pay for special services which increase overall profitability. These clients are the type of customers that can be retained by firms and they represent a steady flow of income for companies. An example of a business relationship in which profitability is more important than volume is NLC America. The company is dedicated to providing leisure cruises to tourist. Their operation in Hawaii utilizes three ships that are constantly traveling the island. The company has one staff member in the cruise per every two passengers. This is a very high level of service since the industry standard is a ratio of one employee per every seven passengers. The company is able to charge a small premium to the customers for the awesome service they provide and the client is very satisfied by the experience which gives the company a better opportunity to retain the client and serve his entertainment needs in the future. A lot of companies have switched from consumer focused marketing to relationship marketing. Relationship marketing refers to companies that focus on building long term relations with key supply chain participants such as customers, intermediary customers and suppliers to develop and retain long term preference and loyalty (Bowersox, et. al year). The strategy NLC of America is utilizing is a relationship marketing strategy. The supply chain service outputs of companies have different constraints which companies must overcome to be able to successful meet the needs of its customer base. The three discrepancies companies must overcome are space, time and quantity & assortment for which companies can apply solutions to these dilemmas such as spatial convenience, lot size, waiting and delivery time, and product variety & assortment (Bowersox, et. al year). Spatial convenience involves locations in which the company’s product will be available. A company that distributes its product through a large multinational retail chain such as Walmart provides the opportunity for many potential customer prospects to acquire the product. Companies can also gain good exposure of its product by having multiple stores carry its products. The contrary to such a strategy would be products which are sold at only one small stores or which are sold at exclusive shops. The only logical reason other than a lack of necessity to expand a product beyond the local market due to a small supply of the good is branding strategies. Gatsby sells its branded products thought its own retail chain to make sure the prices of its branded quality expensive products is maintained at the desired level. Typically the customer that wants exclusive branded products is willing to travel to whatever location to acquire that type of merchandise. Lot size is the amount of units suppliers require its customers to buy in order to acquire the merchandise. The best business strategy is to have flexible alternatives for the customer as far as the required purchase volumes. Over the last decades companies have been switching to inventory systems based on just-in-time (JIT). JIT is a philosophy of continuous improvement in which non value added activities are identified and removed for the purpose of reducing cost and improving performance (Inventorysolutions, 2005). Companies nowadays simple do not want to buy in large bulks since excess inventory freezes economic resources and takes up valuable space. Waiting time refers to how long it takes a customer to acquire a desired good or service. For example a person that wants to buy an iPod can go to shopping mall pick up the item and immediately pay for the item. The entire process once the person is at the store should take between 20-40 minutes to complete. Another person looking for an iPod could purchase the item at Ebay. The person would have to place a bid and wait for the auction to end. If the person wins the action he would proceed to send payment to the seller. The seller then sends the package and in a day or two ships the item is in the mail. Then the transport company delivers the item to the customer. The entire process could take between one or two weeks to complete. This Ebay buyer is willing to have a long waiting time in exchange for savings in the purchase of the iPod. The general rule is that customers want to receive their goods or services as fast as possible. The job of supply chain managers is to minimize waiting time. The supply chain meets the goals of its customer through customer service. Customer service identifies and prioritizes all activities to accommodate customers logistical requirements (Bowersox, et. al year). The United States Army purchases supplies from thousands of different vendors. The army classifies the different items they purchase in different codes to facilitate the logistics involved in dealing with the different companies they realize business with (Rand). The importance of setting up good logistics and providing great customer service in the process lies in being able to provide customer with the goods they need at the precise time to ensure the customers does not run out of goods. When a company runs out of particular good the situation is referred to as a stockout. The general consumer response to a stockout is very negative (Fitzsimmons, 2000). If a company selling to a customer caused the customer to incur in a stockout of merchandise that customer will be extremely dissatisfied and it is very possible that the company will lose the account. An important element of customer accommodation is to meet the expectations of the customers. Customers have different types of expectations such as reliability, responsiveness, access, communication, security, tangibles, courtesy and competency (Bowersox, et. al year). If a company can meet the expectations of the customers the customer retention rate will be high. Customer service is one of keys to provide the things customers expect out of a business relationship. There are different gaps within business- client relationships which customer service must fill. These gaps are standards, performance, communication, perception, satisfaction, quality (Bowersox, et. al year). Communication is extremely important in all business matters. Communication should be provided in various forms to ensure clients receive the message. For example a company that has to deliver an important message to a client should sent a letter, an email, a fax and make a call to communicate the message to some employee of the client. The ultimate goal of any customer service department is to achieve consumer satisfaction. Companies performing business in today’s fast moving environment need to find as many sources of income as possible. Customer service can become an income generating activity. Lots of clients required specialized services within the supply chain management which are considered value added services. These value added services may involve customized or tailored logistics ((Bowersox, et. al year). Companies willing to provide these types of value added services and acquired businesses contracts other companies can not. Values added services are in high demand due to the complexities globalization brought to the business world. Customer accommodation is a critical part of the supply chain cycle of all successful enterprises. It provides companies with the practices they need to implement to keep its customers satisfied. Customer service is the best way to provide customers with the levels of service they desire and it also provides companies with tools that are required to meet the expectations of the clients. Globalization changed the business world and open up new opportunities for everyone. It also made the business environment more competitive and in order for companies to stay ahead of the competition it is imperative to focus on the needs of the customers. References Bowersox, Closs, Cooper (year). Supply Chain Logistics Management (2nd ed.) Fitzsimons, G. (2000) Consumer Response to Stockouts. Journal of Consumer Research, 27. Retrieved August 21, 2007 from http://faculty.fuqua.duke.edu/~gavan/GJF_articles/stockouts_jcr_00.pdf Inventorysolutions.org (2005). What is JIT? Retrieved August 22, 2007 from http://www.inventorysolutions.org/def_jit.htm Rand.org. Logistics. Retrieved August 21, 2007 from http://www.rand.org/pubs/monograph_reports/MR1309/MR1309.ch5.pdf Read More