Managing Customer Relationships at Circular Book Solutions - Coursework Example

Managing Customer Relationships Introduction Circular Book Solutions is a medium level company in provision of warehousing facilities to small publishers of books. After the books are printed and bound at a printing facility, they are shipped to Circular for handling. Books are received initially by handlers who unload the books off trucks, place them on pallets, and move them via forklifts and conveyors to their assigned storage space in the warehouse. The handlers also retrieve books and bring them to the shipping area when orders are received (from bookstores, newsagents and other retailers around the country). The books are then packaged, placed in cartons, and loaded on delivery trucks (to take to air or ground transportation providers) by shippers. Book orders are taken by customer service representatives via written, phone, email or faxed order forms. New accounts are generated by marketing representatives who cold call on retailers offering their services as a boutique book supplier. The marketing representatives also service existing account holders. Order clerks handle all the internal paperwork. All of these employees report to either the supervisor – operations, or supervisor – customer service who in turn reports to the general manager. An administrative assistant also reports to the general manager. The business is still growing and changing rapidly as new avenues are being created because of increasing size. Clients are calling for faster order fulfillment with a weekly turn around. For the case of Circular Book Solutions, Mary Wensley is the General Manager and responsible for the workforce, she needs to averse herself with human resources practices that are able to address the workforce capacity and plan for its operations. The modern approach of managing customer relationships revolves around the fact that “successful organizations are becoming more adaptable, resilient, quick to change direction and customer-centered”. The changes within Circular Book Solutions are believed to go hand in hand with the changing role of customer relationships which has been viewed as the success factor of the firm. Overview of managing customer relationships Managing Customer Relationship (MCR) is a strategic move toward the creation of an improved shareholder value throughout the development of suitable relationships with key customers and customer segments. MCR tends to join the potential long-standing relationships with customers and other key stakeholders of the company. It creates enhanced opportunities of using data and information in understanding customers and c-creation of customer value with them, because of a cross-functional integration of processes, people, operations and marketing abilities which are enable by information, technology and application (Winer, 2001). Firms are increasingly aiming on managing customer relationships, their asset and equity. It recognizes the long-run value of potential and current customers in a given firm as it seek to raise revenues, profits and shareholders returns. It’s believed that managing customer relationships concerns the long-run value of potential and current customers. The key cornerstone of developing, maintaining and enhancing customer relationships are marketing activities as they tend to increase the firm’s revenues and shareholders return. These marketing activities call for an exhaustively understanding of the fundamental sources of value that the company equally draws from consumers and delivers to consumer. Managing customer relationships is an essential part of a company’s strategy whose input is devotedly measured in decisions concerning the development of organizational abilities, managing value creation and resource allocation. It provides a strategic and tactical outlook for recognizing the sources of value to both the consumers and the company. Studies have focused on numerous MCR issues based on whether they put into consideration a business-to-business or business-to-consumer framework. Customer Management Effort Bowman and Narayandas (2004) examined how increasing product quality and the effort dedi­cated to customer management influence customer satisfaction and profits. They find that customer delight “pays off,” but there are diminishing returns on customer management efforts. Furthermore, the presence of a viable competitor provides a benchmark for comparison, as well as resulting in lower margins and lower share of wallet. A competitor’s customer management effort negatively influences customer perceptions of employee performance and responsiveness. However, the focal firm’s customer management effort is twice as important (in terms of the magnitude of the effect) as competitors’ actions. The size of the customer matters in three ways: margins increase with customer size (nonlinear relationship with decreasing returns); the responsiveness of share of wallet variables to satisfaction decreases with customer size; and larger customers are more demanding, and thus have a lower baseline for both satisfaction and performance assessment. Customer Satisfaction Much of the research on customer satisfaction has assumed that the state of satisfaction results from the disconfirmation process. This states that satisfaction is a customer's reaction to a post-use experience with a product service or retailer. The disconfirmation process involves comparisons between some established standards of performance and perceptions of performance. The disconfirmation of expectations paradigm states that consumers possess preconceived expectations regarding performance standards of attributes within a transaction (Oliver, 1980). These attributes may be strictly product-related, such as price, size, or design, or they could be service-related, such as availability and helpfulness of staff. In many cases, customers have both product-related and service-related expectations regarding a consumption experience. Customers then enter into the transaction and are exposed to these attributes. Finally, customers engage in a post purchase evaluation of the experience. During the evaluation they compare what actually occurred with what they expected to occur. If the experience does not live up to expectations, expectations are negatively disconfirmed and customers experience dissatisfaction. If the experience exceeds expectations, positive disconfirmation occurs and customers are satisfied. If the experience merely meets expectations, consumers are not dissatisfied. Disconfirmation then, is the cognitive comparison between what the consumer expects and what is received. Expectations Expectations are commonly defined as pretrial beliefs or predictions about a specific product or service. Oliver (1980) claims that the type of expectations a consumer possesses toward a product is based on the product itself. The context of the purchase and individual characteristics of products aid in forming expectations. Consumers’ prior expectations are established through both internal and external sources. Internal sources are based primarily on past experiences, while external sources would include advertisements or information from friends. These expectations provide a frame of reference or a standard for consumers to evaluate the actual experience. Expectations therefore, may have an indirect effect on satisfaction, filtered through the disconfirmation of expected performance compared to actual performance. Expectations have also been shown to have a direct affect on performance and satisfaction. Satisfaction While expectations are considered pre-existing and cognitive in nature, satisfaction is more treuisaction specific and may contain both cognitive and affective components. Satisfaction has been defined as "the level of affect (positive to negative) that the consumer experiences in response to a specific consumption experience" (Swan 8 Oliver, 1989, p. 519). More positive affect represents increasing levels of satisfaction, while more negative affect represents increasing levels of dissatisfaction (Westbrook, 1987). Another definition maintains that satisfaction is a "post choice evaluation judgment concerning a specific purchase selection" (Westbrook 8 Oliver, 1991, p. 84). The more favorable the cognitive appraisal, the greater the level of satisfaction. Three facets of involvement that have the potential for influencing customer satisfaction are (a) perceived product importance, (b) symbolic value of the product, and (c) the hedonic value of the product. Perceived product importance includes any personal meaning the consumer may attach to the item. The symbolic value of the product is more ego-involved due to its ability to express one's values of personality. Finally, the hedonic value of an item is its ability to provide pleasure. The more involved a customer is, the greater the amount of satisfaction associated with a positive consumption experience. Siehl et al. (1992) suggested that the degree of psychological involvement of the consumer will vary. Three primary criteria may influence involvement: (a) a product that directly involves the consumer's person, (b) products that require a lengthy contact with the seller, and (c) products that are less tangible. Shaffer and Sherrill (1997), in a study of health-care service satisfaction, investigated the impact of involvement on satisfaction formation in a study that included both ambiguous and non-ambiguous attributes. Results indicated that there was an interaction between ambiguity of attribute and amount of consumer involvement. For ambiguous aspects of health care, highly involved consumers experienced greater expectations, greater perceived performance and higher levels of satisfaction. Involvement had no impact on ratings for unambiguous attributes. Perceived performance was found to be the most influential predictor for participants with low levels of involvement. A firm may also gain competitive advantage via customer satisfaction; this will raise itself high above others in the same industry in matters to do with environmental issues. The firm will portray itself as being more responsible than the rivals and by so doing it is able to win the hearts of many people who it deals with for example by designing products in such a way that they are user friendly and focused Customer loyalty There is immense evidence that customer loyalty can stimulate purchase behavior. According to Hill and Alexander (2006), most organizations lose at least 10% of their customer base per year. The lose has been associated with lack of loyalty by customers toward the goods or services of the company. For the case of Circular Books Solutions, the management has introduced a customer loyalty program about a decade ago, which has helped the firm to focus on the most profitable group of customers and minimize the burden of brand positioning-changing the nature of stiff competition in the warehousing and storage industry. Bolton et al (2000) noticed that loyalty programs stimulate the purchasing behavior of customers through a virtuous cycle; more experience with the product motivates more usage, leading to more experience. Business experts have proved that loyalty programs had complex effects on customer behavior. At Circular Books Solutions, customers within the loyalty programs tend to have more forgiving in regard to billing errors and exhibit a more stable behavior over time for the reason that they are less affected by perceived losses or gins from previous transactions. They concluded that customer loyalty have the potential to operate as a form of mass customization that strengthens customers perception of the company’s value proposition. In situation where consumers believe to have an effort advantage over others, higher loyalty program needs enlarge this discernment as well as raise the general perceived value of the program. The ‘‘dark side’’ of customer loyalty program is that sometimes they my fail to contribute to the creation of customer assets or build brand loyalty. They mostly discount prices, thus eroding future profits (Shugan, 2003). Moreover, customers who happen to respond principally to value propositions, even though satisfied, may actually provide little value for the company (Gummersson, 2002). According to Verhoef (2003), the relationship regarding to marketing efforts such as direct mailing and customer loyalty programs tend to increase retention and share of wallet when they influence customers affective commitment compared to their calculative commitment, that lean toward an economic basis. Service quality Quality of service is the ability to provide diverse priority to diverse users or customers of company goods or services. Changing climate in business world, social stratification and political arenas in society are already initiating sea of changes in the quality of service companies offers to their customers. Such changes are mostly relevant to the service sector, as individuals demand for high values of services being offered unto them and firms compete for the market share or public sincerity for their goods or services (Peppers & Rogers, 2005). Majority of big multinational corporations have hinted that introduction of overall quality initiatives has improved their morale, increased their productivity and boosted their entire business strategy. Companies face an exceptional challenge of meeting customer needs while remaining economically competitive. Although the automation of services and processes can make an impact, but services are still labor-intensive. Researchers believe that there can be no alternate for high-quality company relationships between service employees and customers. For majority of firms, quality practices have been adopted to help them; recognize and develop operational processes or practices, recognize problems promptly and methodically work on solutions, ascertain legitimate and unswerving service performance procedures and measure customer satisfaction as well as other performance outcomes. Specifications, alongside the strategic quality measures, are helpful to describe what quality is. Commonly, firms do not seize any kind of formal specifications, which results in goaded service unpredictability in addition to lower quality. Specifications are called upon to direct the managers in their respective roles within the firm. Specifications are also required as a means of comparisons for effective quality evaluation of the goods or services. Setting ample specifications does not mean total homogeny, but requires an analysis and design of the total service, like of every moment of service satisfaction. Key account management This is the management of the customer relationships that are very essential to an organization. In a company set up, key accounts are those held by customers who creates more profit for that particular company or have the potential of doing so or customers of strategic significance to the operation of the firm (Winer, 2001). Development of such customer relationships and their retention is vital to business success. Particular weight is vested on evaluating which accounts are most important to a firm at any given time, shaping the needs of particular clients, and accomplishing certain procedures in making sure that they receive premium customer service and to increase customer satisfaction. Key Account Management (KAM) programs have been created to achieve mutual gains, although under customers’ and suppliers’ point of view, such view of value is insufficient to put into consideration such mutual perspectives. Suppliers increasingly pay attention to the maintenance and enhancement of specific relations with chosen group of customers, which is exhibited in the formation of Key Account Programs. The origin of KAM is traced from the suppliers’ realization that not all customers are equal with some typically representing extremely high levels of sales and profits (Hakansson & Snehota, 1995). As a natural consequence, suppliers will tend to dedicate most of their resources to that core portfolio of clients representing the highest stakes; their accounts. It is however important to note that it is not just revenue or profitability that is used to spot such customers, but variables as different as company image, geographic proximity, technology competencies, and organizational complexity may totally affect the decision. Value as the basis for the exchange process between customer and suppliers underlies most marketing thinking. Value is mostly viewed in the marketing literature from the supplier point of view creating value and customer benefiting from it. However, while they may be created by supplier, what counts as a benefit is defined through the customer’s perceptions, like connecting offering features to the satisfaction of underlying needs and wants, which tend to be embedded in expectations. KAM is perceived primarily as an activity aimed at internal efficiency and effectiveness of the supplier. The emphasis is on efficient processes that provide certain interaction results at reduced costs, like improved sales productivity. Examples are the emphasis on elements of concentrating sales teams, improving account team communication, improving dissemination of key customer information, focusing selling resources and processes; inventory utilization improvements. Conclusion Based on the discussion on managing customer relationships, it can be argued that MCR is an integral part of a firm’s strategy. A firm’s decision concerning the development of organizational capacities, managing of value creation and the allocation of resources across investment opportunities which are fundamental aspects in the range of strategic choices of the firm (Anderson et al, 2004). The elements revolving around customer relationship management creates a strategic and tactical focus for identifying and realizing the sources of value for both the customer and the firm. These objectives of managing customer relationships are congruent since relations represent market-based assets that a firm continuously invests in, in order to be viable in the marketplace. Strong relationships are associated with customer loyalty and/or switching costs, which create barriers to competition. Thus relationships provide a differential advantage by making resources directed to customers more efficient. For example, loyal customers are more responsive to marketing actions and cross-selling (Verhoef, 2003). References Anderson, E.W., Fornell, C. & Mazvancheryl, S. K., (2004). Customer Satisfaction and Share Holder Value. Journal of Marketing, 68 (3), 172–185. Anderson, P. F., (1982). Marketing, Strategic Planning and the Theory of the Firm. Journal of Market­ing, 46 (2), 15-26. 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