Management Strategy - Research Paper Example

Running Head: MANAGEMENT STRATEGY Management Strategy of the of the Management Strategy Introduction The purpose ofthis study is to analyse the system in organization that has started its ISO 9000:2000 certification process. This process requires not only the implementation of quality processes, but measurement of their efficacy as well. In this paper there is a proposal for conducting the customer satisfaction survey in order to analyse the customer satisfaction with the provided service from the organisation. This study will help in investigating the theoretical structure of service quality, the impacts of service quality on an organization, and the consequence of favourable and adverse customer intentions on apparent quality by using survey research. It is required for the success of an organisation to satisfy its customer and fulfil the customer needs. This research study will review the association among customer satisfaction with service and customer retention in an organisation. In this paper there is an empirical study focus on the association among perceived service quality and customer intentions that will give the support to the findings. It is necessary to spend more than 75% of marketing budget of any organisation on retaining their customers by adopting those strategies than strengthen the association between an organisation and customer (Zeithaml et al., 2006). Once customers commit to a product platform, and the longer they use and deploy that platform, the more profit an organisation can realize. Longstanding, satisfied customers will generally continue, or often increase, purchasing, require less operational and customer service support, and be more willing to pay price premiums to remain with the company--all without incurring new customer acquisition costs (Pine, Peppers, and Rogers, 2005). This research study will analyze how organisation’s service association with its customers produces customer behaviours indicating whether or not a customer will remain an organisation’s customer. The methodology used will follow Zeithaml, Berry and Parasuramans study on this topic (2006). While reinstate lost customers requires new customer acquisition costs, customer retention should be an essential performance measure for an organisations executive staff and a main component of the companys incentive programs (Zeithaml et al., 2006). Acquiring a new customer can require five times the investment needed to keep an existing customer (Weinstein et al., 1999). Literature Review Customer service, not surprisingly, has been researched extensively: from the conceptual framework of service quality, to the positive and negative impacts of service quality, to the effect of favourable and unfavourable customer intentions on perceived quality (Zeithaml et al., 2006). Zeithaml, Berry and Parasuraman (2006) offer an intangible model of quality of service. The researchers postulate that the quality of customer service will determine whether a company retains its customers or loses them to defection. Zeithaml, Berry and Parasuraman (2006) highlight seven key points: 1. Customer defection has a negative relationship with an organizations profitability. 2. Retaining current customers costs less than acquiring new ones. 3. Customer retention should be a primary part of incentive programs. 4. Companies must advertise not only to attract new customers, but to replace lost customers. 5. Advertising, promotion, and sales costs are requisite expenses when drawing new customers. 6. In general, at the beginning of a customer/vendor relationship, the customers do not generate a profit for the company. Zeithaml, Berry and Parasuraman estimate that acquisition cost recovery can take as long as four years. 7. Positive customer assessments of service quality lead to positive behavioural intentions, strengthening the relationship between the customer and the company. Negative assessments, on the other hand, create unfavourable customer behavioural intentions. The unfavourable conditions weaken the customer/vendor relationship. Based on their research and observations, Zeithaml, Berry and Parasuraman (2006) believe that expressed or observed behavioural intentions can indicate whether or not customers will remain with an organization. Reinartz and Kumar (2000) challenge Zeithaml, Berry and Parasuramans assertions that customer retention always leads well-managed companies to profitability. Reinartz and Kumar (2000) disagree that long-term customers are not for all time the most cost-effective customers, and dismiss research assuming that loyalty equates with profitability as a gross oversimplification. Reinartz and Kumar (2000) contend that managers should not automatically assume increased lifetime spending, decreased costs of service, and decreased price sensitivity for long-term retained customers. Reinartz and Kumar (2000) go further in also disputing the idea that long-term retained customers require lesser marketing investment by companies. Their research concluded that long-term customers often have inactive purchasing periods unrelated to their retention by an organization (Reinartz and Kumar, 2000). During these dormant periods, these customers are at best a break-even proposition for organizations, and often consume marketing and service resources resulting in net losses during periods of inactivity. Reinartz and Kumar (2000) found that short-term customers may be as significant to customers as long-time clients. Other research indicates that organizations struggling with a single approach to gratify all customers can finish up with incompetent and unsuitable levels of service (Cohen, Cull, Lee and Willen, 2000). Cohen, Cull, Lee and Willen (2000) conclude that organizations must modify their service to convene each customers entity needs. Superior service generates favourable behavioural intentions in customers, including increased future spending, acceptance of price premiums, "word of mouth" referrals, and, ultimately, customer retention (Zeithaml et al., 1996). Since quality customer service can generate positive behavioural intentions, quality service strategies are effectively profit strategies for organizations. Research illustrates this link between service and profitability, as Keaveney (2005) found that customer defections can cost an organization future revenue stream. As customers intentions toward a company improve, the results include new customers, increased business with existing customers, fewer lost customers, and added pricing power (Berry et al., 2004). Berry and Parasuraman (2007) stress the creation of customer feedback channels as a component of quality service. Listening and responding to the customers needs in a quality way has a "direct effect on the quality of service provided" (Berry and Parasuraman, 2007). This focus on customer feedback drove the purpose of this series of papers. Evidence, such as Keaveneys study, highlighting the role customer loyalty plays in making an organization more profitable makes it imperative that companies quickly and proactively address concerns, complaints and other unfavourable behavioural intentions among their customers (Tax, Brown and Chandrashekar, 1998). Tax, Brown and Chandrashekars point also applies in a comparative sense as well. Organizations can potentially provide satisfactory service that nonetheless lags other competitors service offerings. In these cases, customers may defect because of the attraction of comparatively superior service offerings from a competitor. Managers of service departments and service companies must recognize this comparative measure, and realize that some customers will defect even when they are satisfied with a former provider (Keaveney, 2005). Customers exhibit positive intentions such as approving the company, expressing an inclination for the company to the company or to other consumers, continuing and/or increasing purchasing volumes, paying price premiums, and making recommendations to others based on their satisfaction with the company (Zeithaml et al., 1996). Satisfied customers stay loyal to an organization longer, pay less attention to competitive products, exhibit less price sensitivity, offer service improvement or expansion ideas to the organization and cost less to service over time than new customers (Weinstein et al., 1999). When dissatisfied, customers show unfavourable intents such as expressing an eagerness to leave the organization, decreasing purchase patterns, voicing complaints to the vendor, complaining to others, or taking legal action against the organization (Zeithaml et al., 1996). When consumers execute to leave an organization, many choose to do so quietly with the intention of getting even by making negative comments to others about the organization (Tax and Brown, 1998). Since defecting customers can impact current and future revenue streams, properly identifying dissatisfied customers and understanding why customers defect can be valuable tools in improving customer retention management programs. Companies must implement strategies to overcome potential customer defections. Retention efforts should begin as soon as organizations acquire new customers. The organization should proactively attempt to learn and address customer needs and resolve any complaints or concerns quickly (Weinstein et al., 1999). Weinstein et al. (1999) suggest several ways to build loyalty and increase favourable behavioural intentions in customers. They suggest that organizations could embed sales staff at the offices of their best customers, participate in their customers events or promotional efforts, interview their customers customers, conduct retreats with major customers to share best practices and to train customers on company products and services, expand a desired customer pricing strategy, recompense customers for referring new business, solicit feedback on product development roadmaps, and even cohort with vital accounts on business research projects (Weinstein et al., 1999). SERVQUAL The instrument will be used in this study is SERVQUAL designed by Berry, Parasuraman, and Zeithaml in 2004. It is an assessment tool for analysing the quality of services. They developed a set of 5 dimensions ranked constantly by customers as fundamental to service quality, apart from the service industry. These five dimensions are: Tangibles, Reliability, Responsiveness, Assurance and Empathy. The SERVQUAL instrument facilitates service providers recognize both customer expectations and acuities of particular services, as well as quality developments over time (Berry, Parasuraman, and Zeithaml, 2008). Analysis of customer responses to a SERVQUAL questionnaire presents numerous potential practical implications for companies and their customer service teams. Scope We will conduct a study of all customers of selected organisation (the "population") by e-mailing or mailing a questionnaire to companies listed in organisations internal records. The study will take less than one month to complete. We will contact all customers and direct them to the on-line survey, and follow up with customers who have not responded after two weeks. We will end the study after four weeks, and expect 25%-30% participation. We base this estimate on the response rate of similar studies mentioned above. A response rate of at least 10% will yield a significant sample, enabling us to make conclusive findings and recommendations. Methodology We identify three determinants of customer satisfaction with organisation: service quality, solution quality, and price (through a measure of perceived value). By using the survey questionnaire the data on customer satisfaction, quality of services, solution quality and price will be composed. The questionnaire adapts the SERVQUAL instrument developed by Berry, Parasuraman and Zeithaml (2008) and uses a combination of Likert-scaled, dichotomous and unstructured questions. Likert/dichotomous and unstructured questions will help in research study to get benefit from the potency of both quantitative and qualitative research. The use of quantitative questions allows us to obtain a high degree of reliability and validity using the scientific method, and enables others to more easily repeat or replicate our study. The qualitative questions provide background for customer responses. Triangulation, in this case the combination of qualitative and quantitative methods, allows us to overcome the weakness of using only one research technique. We do not assume that there is only one reality and believe that different research methods will reveal different perspectives. Using quantitative and qualitative triangulation allows us to use diverse sets of data, different kind of analyses, different researchers, and/or different theoretical perspectives to study customer service. The quantitative question results will provide data that we can subject to complex statistical analyses. We will combine the quantitative question responses to determine central tendencies and dispersion of the data, including measures of mean, standard error, median, mode, standard deviation, variance, kurtosis, skewness, and range. We will analyze the results of each question and of the study as a whole. Based on the results of the analysis above, we will develop regressions to identify potential relationships between past service experiences, perceived quality, future purchasing behaviour, and loyalty. A possible research design for the regression analysis follows. H1: There is a positive correlation between the level of superior customer service and positive future customer behaviour. H2: There is a negative or no correlation between the level of superior customer service and positive future customer behaviour. H3: There is a positive correlation between the level of inferior customer service and negative future customer behaviour. H4: There is a negative or no correlation between the level of inferior customer service and negative future customer behaviour. Using these results, we can make conclusions about the management problem defined above. Development of these findings will include the use of anecdotal evidence from the qualitative questions in the survey. We will use the responses to the qualitative questions to support the quantitative findings, and to highlight key issues not covered by the quantitative portions of the survey. Possible Findings Following Zeithaml, Berry and Parasuraman (2006), we believe that a positive relationship exists between quality service and positive customer behaviour as defined above. Additionally, we believe that our research will show that favourable customer behavioural intentions will be higher among customers experiencing no service problems. Customers who have experience problems, but received service to resolve them will show the next highest level. Customers with unresolved service problems will show the least favourable behavioural intentions. Discussion Customer service and its effect on customer retention in an organization is a growing area of research, and one that is vital to maintaining quality at an organisation. This research study will assist in probing customer retention and defection from an organization in the situation of customer service quality, investigating four areas: 1. A theoretical framework of how service quality influences particular customer behaviours and the cost for an organisation, creating the purpose for this study, 2. Practical studies that focused on the association among service quality and customer behavioural intentions, 3. A triangulated quantitative and qualitative survey to study perceived service levels among organisation customers, 4. Follow-on research based on the survey results and statistical analysis, including a summary of expected findings Customer retention depending on many other important areas like; value-added services, supply chain relations, utilization of information systems to service customers’ enhanced and vitally superficial performance. The successful organisations learn from their customers, by the customer feedback it becomes easier for the organisation to provide exactly what the customer wants. Organizations have a chance to learn from their customers (Pine II et al., 2005). It is actually the customer who told the organisation what to do exactly in order to retain their customer and it is important to listen and respond the customer. References Berry, L., Parasuraman, A. and Zeithaml, V. (2008). A Conceptual Model of Service Quality and its Implications for Future Research. The Academy of Management Executive, 8, 32-52. Berry, L. and Parasuraman, A. (2007). Listening to the Customer: The Concept of a Service-Quality Information System. Sloan Management Review, 38, 65-76. Berry, L., Parasuraman, A. and Zeithaml, V. (2004). Improving Service Quality in America: Lessons Learned. The Academy of Management Executive, 8, 32-52. Keaveney, S. (2005). Customer Switching Behaviour in Service Industries: An Exploratory Study. Journal of Marketing, 59, 71-82. Pine II, J., Peppers, D. and Rogers, M. (2005). Do You Want to Keep Your Customers Forever? Harvard Business Review, 73, 103-114. Reinartz, Werner J. and Kumar, V. (2000). On the Profitability of Long-Life Customers in a Noncontractual Setting: An Empirical Investigation and Implications for Marketing. Journal of Marketing, 64, 17. Tax, S. and Brown, S. (1998). Recovering and learning from service failures. Sloan Management Review, 40, 75-88. Tax, S., Brown, S.and Chandrashekar, M. (1998). Customer evaluations of service complaint experiences: implications for relationship marketing. Journal of Marketing, 62, 60-76. Weinstein, Art and Johnson, W. (1999). Designing and Delivering Superior Customer Value: Concepts, Cases, and Applications. Boca Raton: CRC Press. Zeithaml, V., Berry, L. and Parasuraman, A. (2006). The Behavioural Consequences of Service Quality. Journal of Marketing, 60, 31-46. Read More