IMPACT OF PERCEIVED QUALITY ON PROFITABILITY

Topics: Quality management, Quality of service, Quality control Pages: 7 (2606 words) Published: September 29, 2013
ABSTRACT
The introduction of free trade policy and globalisation has forced businesses to review their strategies and focus on achieving customer satisfaction through quality services and products. Recognizing that fulfilling customers need fulfils the organizations needs as well, focussing on customer satisfaction by attracting, retaining and enhancing customer relationships has become a goal for every organization. This essay will examine how customer’s perceived quality can have a bearing on the profitability of a company. The essay concludes that providing quality services and products enhances customer satisfaction and perceived quality, which leads to customer loyalty and retention ultimately leading to success. INTRODUCTION

Businesses are embracing marketing concepts and strategies with the objective of fulfilling their needs of increasing revenue, and reducing cost as a percentage of sales at the same time build business to gain a competitive edge (Fanning ,2013; Andronikidis, Georgiou, Gotzamani, & Kamvysi, 2009).Through the study of marketing one is able to understand and analyse the market (Fanning,2013), and adopt strategies to gain competitive edge by understanding the concepts and philosophies of marketing. Kotler (1988) defined marketing as an activity geared towards satisfying human needs and wants by entering an exchange process. Fanning (2013), supports the same that the exchange process involves both the parties (customers and organizations) to mutually benefit by fulfilling each other’s needs. The strategies for achieving this are to attract new customers, retain existing customers and enhance value of relationships (Fanning, 2013). It has been found that due to rising competition in the global environment, businesses are focussing on delivering quality service to achieve market leadership (Dagger & Sweeney, 2000; Parasuraman, Zeithaml & Berry,1985). While every organization aims to deliver 100 % customer satisfaction because it influences the buyers decision to return (Fanning, 2013), it is the customers who judge the quality and value of the products and services to decide the level of satisfaction achieved. The marketing concept of mutual satisfaction emphasises the need for fulfilling customer satisfaction for organizational success (Smith, cited in Fanning, 2013).The steps for achieving this has been outlined by fanning as the circle of satisfaction. Customer satisfaction has gained so much attention and importance because of its ability to influence the behavioural intention, customer retention and profitability of the company (Singh, 2006; Cronin. Jr., Brady & Halt, 2000), but it’s the quality that acts as a bridge between the customers and producers of goods and services (Johnson & Weinstein, 2004).Thus the importance of quality cannot be emphasised further.

The essay achieved its objective by referring through a number of existing literatures on quality management, customer satisfaction, customer and loyalty etc aided by lecture notes, e texts, magazines and browsing through the internet. The main objective of this essay is to establish that perceived quality positively impacts the profitability and performance of organisations by: -Demonstrating that quality improvement leads to lower cost and better performance, -Establishing the link that customer satisfaction leads to customer retention and loyalty, where as customer dissatisfaction can lead to loss of business through negative publicity.

DOES QUALITY COST?
Cho & Pucik, 2005 claim that quality is the universally accepted dynamic threshold that must be met by every organisation to satisfy customers. The concept of quality dates back to the 13th century but it was only in the early 20th century that the emphasis on the quality of goods and services delivered became important (Sisek, Knego & Kolakovic, 2009). This has led to the sprouting of many quality management philosophies like the total quality management by...


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