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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background
Organisations, both private and public, in today’s dynamic marketplace and market space are increasingly leaving antiquated marketing philosophies and strategies to the adoption of more customer-driven initiatives that seek to understand, attract, retain and build intimate long term relationship with profitable customers (Kotler, 2006; Gronroos, C 1994; Paradise-Tornow, 1991; Narver and Slater, 1990). This paradigm shift has undoubtedly led to the growing interest in customer relations, management initiatives that aim at ensuring customer identification and interactions, customisation and personalisation that unreservedly lead to customer satisfaction, retention and profitability, among other things (Thompson, 2004; Gronroos et al., 1996; Xu et al, 2002; Dyche, 2001; Ryals & Knox, 2001; Stone, 2000). Organisations are therefore increasingly being more customer-centric and are much interested not just in acquiring new customers, but more importantly, retaining existing customers. This is perhaps because it costs more to attract new customers than to retain existing ones. It is believed that the average business spends six (6) times more to attract new customers than to retain old customers. Again it is more profitable retaining an old customer who is more likely to re-purchase or re-use a company’s products/services and recommend them to others. Customer retention is, therefore, basically a product of customer loyalty and value which in turn is a function of the level of customer satisfaction or dissatisfaction (Reichheld, 1996). Customer satisfaction is central to the customer-centric paradigm shift, and has gained much attention from scholars and practitioners as it has become one of the cardinal means for achieving quality improvement programmes, and one of the crucial foci of strategic marketing management in business organisations that have long-term perspective for growth. This is because of the intriguing findings, that satisfied customers are more likely to remain loyal and committed to an organisation which eventually leads to profits as opined by the popular service-profit-chain proponents (Heskett et al., 1994; Heskett et al., 1997; Reichheld and Sasser, 1990). In this regard, it is a fact that a very satisfied customer is nearly six times more likely to be loyal and to re-purchase and/or recommend a product than a customer who is just satisfied. It is again believed that satisfied customers tell five other people about their good treatment, and that five-percent increase in loyalty can increase profits by 25% - 85%. Conversely, the average customer with a problem eventually tells eight (8) to ten (10) other people (SPSS White paper 1996; Limayem M., 2007). Consequently, organizationsattempt to adoptmeasures to ascertain customer satisfaction/dissatisfaction. Some organisations traditionally rely on customer complains to ascertain customer satisfaction. Unfortunately the average business firm never hears from 96% of their unhappy customers and 91% will never come back; they get back; only 4% of dissatisfied customers will complain (SPSS White paper 1996). Consequently, the shift toward the recognition of effective customer satisfaction and its measurement has led companies to change their paradigms about satisfying customers. Many organisations no longer use only customer complains; rather they adopt rigorous qualitative and quantitative mechanisms to measure customer satisfaction. In this regard, measuring customer satisfaction provides the feedback of how successful an organization is at providing products and/or services to the satisfaction of customers at the marketplace and market space. This makes it imperative for organisations to take pragmatic and reliable steps towards improving the quality of service delivery, managing customer value and satisfaction more effectively. The shift to devoting considerable attention and resources to customer...
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