Chapter 1
PROBLEM AND ITS BACKGROUND
Introduction
One of the largest service organizations known in the world today are those airline, aviation and airport industries. These industries all over the world are now living in an interesting era. More and more people have been using these industries for every services and purpose they want and for their travel satisfaction. The process of change as of the old economy to the new global economy has brought tremendous changes and development to the services being offered. Part of the changes brought by the competition of these industries globally is the new economics, new market structure, new marketing strategy as well as the new technological structures of each and every industry within the marketing service field.
However, because of the competitive market environment, service industries are now having a hard time to make their business portfolio different from their competitors. It has been noted that the technology that is accessible to every industries has made it simpler to copy each other’s business offerings. Because of this, airport industries and other service industries are having difficulties in differentiating the industry from their competition. In addition, they are also having a hard time to achieve competitive advantage. It is said that one way to achieve this is by providing excellent customer service.
In marketing, the significance of satisfaction has been given consideration. Hence, many marketing strategies and practices are being implemented in order to satisfy the needs of their customers. Principally, the main goal of this proposed study is to conduct an investigation to determine the relationship between marketing practice and customer satisfaction of one of the most identified business venture in airport, i.e. the Duty Free Shop in Bahrain.
The main objective of this research is to determine the relationship of marketing practices of Duty Free Shop in Bahrain and customer satisfaction. The study shall be divided into five chapters in order to provide clarity and coherence on the discussion of the topic. The first part of the study will be discussing the problem uncovered by the researcher and provide ample background on the topic. The chapter shall constitute an introduction to the whole study, the hypothesis, and the statement of the problem in order to present the basis of the study. Moreover, the chapter shall also have a discussion on the scope of its study as well as the significance of the study to society in general and specific effects on individuals.
The second chapter shall be discussing the relevance of the study in the existing literature. It shall provide studies on marketing strategies or practices and customer satisfaction and others. After the presentation of the existing related literature, the researcher shall provide a synthesis of the whole chapter in relation to the study.
The third part of the study shall be discussing the methods and procedures used in the study. The chapter shall comprise of the presentation of the utilized techniques for data collection and research methodology. Similarly, it shall also contain a discussion on the used techniques in data analysis as well as the tools used to acquire the said data.
The fourth chapter shall be an analysis on the tabulated data. After the said tabulation, the data are statistically treated in order to uncover the relationship of the variable involved in the study. With the said data, the chapter seeks to address the statement of the problem noted in the first chapter.
The last chapter shall comprise of three sections, the summary of the findings, the conclusions of the study, and the recommendations. With the three portions, the chapter shall be able to address the verification of the hypothesis stated in the initial chapters of the study.
Background of the Study
Each industry is subject to marketing elements which influences the company’s function and performance as a whole. Accordingly, such elements are the one’s attributed in determining whether the company has met their organisation objective and if they are able to satisfy their clients (, 1997). In this regard, there are several approaches which can be considered so as to sustain competitive advantage within the marketing environment. As noted, the context of marketing has been referred to as the vital strategy to achieve the goal of meeting the needs of the customers and satisfies them. In an industry like Duty Free, the company noticeably has to attempt and attained this level of customer satisfying as one approach of staying ahead of the competitive environment and generating revenues (, 1994).
Some marketing strategies give emphasis in the long-term retention and satisfaction of the customers through the provision of products or services that directly suit their needs. While these marketing strategies have been used for various purposes within the customer life cycle, obtaining and maintaining customers remain its prime objectives. Currently, the use of such strategies had increased as businesses give more priority to their markets. In addition, changes in the consumer trends had caused the increased interest of businesses for the marketing strategy.
Specifically, customers nowadays prefer their vendors or distributors to act as product consultants – one who would provide assistance while choosing a product in order for them to purchase the one that will give them the most advantage. Customer assistance can also be provided by instructing consumers how a certain product is used or explaining the purpose of the item. Providing this assistance will in turn result to customer satisfaction and loyalty ( 1998). The use of this strategy benefits both the company and the customers – the company obtains greater profit and market growth while the customers are able to acquire the products that fit their standards. In other words, this strategy works well as it promotes a two-way benefit effect.
Accordingly, the ability of the company to meet the needs of the customers is an important aspect of marketing function. The means or alternatives that Kubota will apply should then focus on this. Obtaining customer satisfaction encourages clients to patronize the products produced by the company and even recommend them to others. While this is essential, the alternatives for Kubota should also be implemented to maintain this satisfaction level. This is based on the main principle of efficient marketing function, where customers are not only obtained but maintained as well (, & , 1998).
There are several ways on how organizations can ensure quality operations and increased levels of customer satisfaction. One of which is by means of addressing all customer concerns and taking them seriously. The employees on the other hand, should be empowered to make efficient decisions that will augment customer satisfaction. One way of achieving this is by creating a self-initiative work environment rather than one that is constricted to rules and company policies. Procedures that will ensure quality control should also be enforced during business operations. Wal-Mart is a good example for this aspect; its “Satisfaction Guaranteed” policy helps in ensuring that employees deliver the best services for its customers (, 2000).
Although there are numerous studies that provide information regarding marketing strategy and customer satisfaction, there are still limited resources of this analysis in airport industry. Hence, the need to investigate the issue of the relationship of marketing practice with customer satisfaction will be highlighted in this study.
Rationale of the Study
Customer satisfaction is among the top priorities of current businesses and organizations. Within the marketing, organizations must consider how individual customer needs can be provided so as to provide high levels of customer satisfaction. Furthermore, organizations must be able to identify their specific customer groups clearly (, & , 1994). This will help them analyze and provide general and more specific needs of each customer segment. In providing customer satisfaction, the quality of the products and services of businesses must be measured and continually monitored.
It was noted that there are a number of literatures that discussed how customer satisfaction can be achieved. However, there had been limited resources focusing on the relationship of these marketing strategies in achieving customer satisfaction. Considering the existence of many service industries, in the world and Bahrain in particular, it is important that several studies stress this context of assessing the relationship of these contexts
By and large, the purpose of this research study is to identify the relationship between the marketing strategy and customer satisfaction in Duty Free shop in Bahrain. The research will specifically identify how the marketing strategy implemented by Duty Free enables them to attain customer satisfaction. In addition, this proposes study will also include the discussion of relevant literature. The outcome of this study will be helpful for different organisation.
Furthermore, the purpose of the research is to help management students, marketing managers, and the company to the importance of having an effective marketing strategy. The findings of the study will be able to benefit different organisations in Bahrain. This means that the results of the study will be beneficial to the business scheme since the research will be able to support previous claims that marketing strategies can help improved the performance of an organisation and achieved customer satisfaction. This also suggests that the findings of the research will allow leaders and organization to integrate marketing strategies in handling customers.
Research Aims and Objectives
The research study will try to achieve the following aims and objectives.
Ø To identify the fundamental context of marketing strategies and customer satisfaction.
Ø To know which types of marketing strategies do Duty Free Shop use and determine if this is positively significant with customer satisfaction.
Ø To recommend a sound conclusion which supports the outcome of the analysis and literature review gathered.
Research Questions
The primary aim of this study is to determine the relationship of the marketing strategy imposed in Duty and satisfaction of their customers. Specifically, the paper tends to respond to the following queries:
Ø Is marketing strategy of Duty Free Shop positively significant with customer satisfaction?
Ø How do customers view the marketing strategy of Duty Free?
Ø In the customers own views, do the marketing strategies used by Duty Free enables them to be satisfied?
Scope and Limitations
The study intends to investigate the relationship of marketing strategies and customer satisfaction in Duty Free Shop in Bahrain. For this study, primary research and secondary research will be used. Primary research will be conducted using survey-questionnaires that will be sent to clients and customers of Duty Free Shop in Bahrain. The questionnaires will be used to collect quantitative data and the interviews will be used to provide qualitative insights into the data collected.
The data will be analysed and compiled for the correlation of the hypothesis. The data will then be presented by means of graphical representations and illustration and the difference would be highlighted. A negative correlation between the variables would suggest that the hypothesis is null, that is, the level of effectiveness of training programs significantly affects the general efficiency of the organisation.
Further, this dissertation will be quantitative and qualitative in nature. The model of this dissertation will be based on the Input-Process-Output Model; a process is viewed as a series of boxes which are known as processing elements and connected by inputs and outputs. Data or information flows through a series of tasks or activities based on a set of rules or decision points. In IPO model, flow Charts and process diagrams are often used to present such the process. Basically, what goes in is the input or those data that have an impact in the process and the output (the result). See Figure 1.1 (Basic IPO Model).
Figure 1.1
Input – Process – Output Model
The IPO model will show the general structure and guide for the path of the dissertation. Substituting the variables of this research study on the IPO model, the researcher came up with the following:
Figure 1.2
Conceptual Framework
INPUT PROCESS OUTPUT
For this research, the study will focus on assessing relationship of marketing strategy and customer satisfaction. The study will give emphasis on identifying whether the duty free shop’s marketing strategies leads having satisfied customers. For this study, the research will only have respondents from customers of duty free shop in Bahrain to make sure that pertinent data will be gathered.
Marketing strategy and satisfying the target market has been considered as one of the most important factors to be considered by an industry. Hence, this study will be conducted to determine if these two contexts have a relationship in Duty Free shop in Bahrain. The result of this study will only be confined to the information gathered and collated from the selected respondents based in Bahrain and the books, journals and internet resources. As this research is noted to be accomplished in a specified time limit, different factors and other variables may not be considered which may have a significant effect on the result.
Hypothesis
This study will work on the following hypotheses:
“Marketing Strategies used by Duty Free Shop in Bahrain has a significant relation in achieving customer satisfactions.”
Definition of Terms
The following are the definitions of some workable terms in the study:
MARKETING: Marketing is the procedure by which a company product or service are produced and is then priced, endorsed, and distributed among target market. In large companies the major marketing functions go before the manufacturing of a certain product. Herein, the companies involve marketing research and product development, product design, and product testing or evaluating. The marketing activities focused principally primarily on the customers or the target market (, 2000). As the company determined that needs and desires of the customers, the market leaders develop effective marketing strategies which are designed to educate customers regarding the most essential features of the product or services, encourage them to buy the product or avail the service, and then to improved customer satisfaction with the purchase.
CUSTOMERS: Consumers or customers could be considered as the fuel of any business venture. They are the ones who purchase the products and/or services of the company. Furthermore, consumers may choose particular products/brands not only because these products provide the functional or performance benefits expected, but also because products can be used to express consumers’ personality, social status or affiliation (symbolic purposes) or to fulfil their internal psychological needs, such as the need for change or newness (emotional purposes) (, , , and , 2002).
CUSTOMER SATISFACTION: Customer satisfaction is the difference between what the customer expects from a product or service and what the customer perceives he/she received. As a result, customer satisfaction is perceptual in nature. It is defined by how customers think and feel about your product or service. Objective issues of product performance are important as a basis for influencing customer perceptions about how a product actually performs ( & , 2001). Customer satisfaction is a very wide area of responsibility that most companies strive very hard to achieve. By being accepted by clients or customers, and availing of the services or products that are offered by the company, the provider gains profits and earns. Essentially, customers are the life blood of any business and their acceptance and satisfaction is what ensures that the business stays in operation and continues. Since customers are important to service providers and producers of products, a definition of what a customer must be defined in order to determine who important customers are to companies particularly those who provide services.
CUSTOMER LOYALTY: A loyal customer has a specific bias about what to buy and from whom. His/Her purchase is not a random event. In addition, loyalty connotes a condition of some duration and requires that the act of purchase occur no less than twice ( & 2002).
CUSTOMER RELATIONSHIP MARKETING: Customer Relationship Marketing is a practice that encompasses all marketing activities directed toward establishing, developing, and maintaining successful customer relationships. The focus of relationship marketing is on developing long-term relationships and improving corporate performance through customer loyalty and customer retention ( & , 1997).
CUSTOMER RELATIONSHIP MANAGEMENT: Customer relationship management is a business strategy that attempts to ensure every customer interaction that is appropriate and consistent regardless of the communication channel and that CRM is a core business strategy for managing and optimizing customer interactions across the public or private’s institutions’ traditional and electronic interfaces. CRM can be used to gain clearer insight and more intimate understanding of customers’ behaviors and in helping to build an effective competitive advantage and its relationship to the e-business process ( 2000) and that committed customers can be viewed as company assets who are likely to be a source of favourable referrals and are more resistant to competitors’ offers ( 2000).
Chapter 2
REVIEW OF RELATED LITERATURE
Most business always value this quote: “Keep the customer satisfied”. Basically, every organization agrees that satisfaction of customers is important. But what exactly is “customer satisfaction?” Actually, customer satisfaction is the difference between what the customer expects from a product or service and what the customer perceives he/she received. As a result, customer satisfaction is perceptual in nature. It is defined by how customers think and feel about your product or service. Objective issues of product performance are important as a basis for influencing customer perceptions about how a product actually performs.
In a profit making business the firm obviously has to try and achieve this level of customer satisfaction as a way of staying ahead of the competition and making a profit. Traditionally, marketing strategy has been utilized by the private sector in decisively increasing the capabilities of an organization. Marketing can be considered as one of the most important elements underpinning successful business creation (, 1994). Perhaps because of its complex applications, marketing have been defined in a variety of ways, based on their purpose, their goals, and others (, & , 1988). The marketing strategy concept was first promulgated in the late 1950’s (, 1990). The importance of marketing strategy incorporates repeated elements such as: customer orientation; integrated marketing strategic efforts; and resultant profitability (, 1990).
All corporations have different strategies in which they allow their organization to operate, which all depend on the different factors that the leaders believe affect their operations, ranging from the environment that their employers are in, the products or services that they are releasing and the dates in which they will be released, and also concerning their human resources that involve the employment, especially regarding their actions that affect the decisions within the departments of the company. With all these factors, it is easier to understand and visualize that indeed in running a company, there are different features that affect the outcome of the company as well as the way in which the operations within it are being followed. However, emphasis must also be given on the clients of whom the companies are serving, of whom many businesses regard as the source of their operations.
Value of Customer Satisfaction
The companies’ customers are then considered among the most important ingredients that determine the success or failure of a company or any other business that operates. Customer satisfaction is a very wide area of responsibility that most companies strive very hard to achieve. By being accepted by clients or customers, and availing of the services or products that are offered by the company, the provider gains profits and earns. Essentially, customers are the life blood of any business and their acceptance and satisfaction is what ensures that the business stays in operation and continues. Since customers are important to service providers and producers of products, a definition of what a customer must be defined in order to determine who important customers are to companies particularly those who provide services.
Customers can carry a lot of potential for the service providers aside from the money that they generate for the business since customers contribute to the growth and development of the institution through the lessons that the company learns from them. This in turn translates to processes, initiatives and directions that the company considers when they plan for future operations. The wealth of information that is derived from the feedbacks generated from the clients serve as something that help with the improvement of the company especially on the products that they will generate and the services that they may be able to offer to their clients. By knowing what their customers need and desire, then the company will also be able to help them in finding out their weaknesses and be able to work on those in order to help with their improvement.
Accordingly, customers are those who purchase or rent from a company or organization. According to the same website, there are two types of customers, the external, and the internal customers. The internal customers are those that people who are working in the same department or branch. The external customers on the other hand, are those who individual customers, customers of different cultures and countries, business groups and organizations. The difference between the external and the internal customers is that the internal customers are employed by the company and belong to the same department or organization that produces the product or service or to other organization of the same company. The external customers on the other hand, are those who avail of the product or service that is produced by the company but do not belong to the company or service sector that provides these.
, , (2001) maintained that customers are productive resource and helps in the overall operation of the institution. In high-contact systems clients can affect the time of demand, the exact nature of the service, and the quality of service provided by any company. If customers somehow become better consumers, that is, more participative, knowledgeable, or even productive, service quality experience will likely be improved for the customer and the company as well (, & , 1990). Companies or firms which capitalise on the active participation of customers in organisational processes can achieve competitive advantage through greater profits, enhanced operating effectiveness, positive word-of-mouth publicity or promotion, decrease marketing expenses, and enhanced consumer loyalty ( & , 1990; , 1992). Clients who actively participate in company and firm activities can directly enhance their personal satisfaction and perceptions towards the quality of the products or services being offered by the company (, & , 1990). Customer participation has made organizations to broaden up their views on productive resources to the point where customers are not only seen as participants and not merely as recipients of services. (, 1997)
Among the things that companies, service providers, and producers of product must be able to identify are the needs of their customers, the identification of the needs and requirements of the customers and clients of those who provide or would provide this needs are essential for the understanding of the behavior of the customers. Also in the identification of the needs of the customers, those who provide these are equipped with the necessary knowledge and skills that are essential for the service that would be provided. An understanding of the necessary business tools ensures that the company has a focus and is ready to deal with the needs of its clients. Making the customers the center and the focus of any business undertaking reaps rewards for the company and understating that customers are the most important ingredient for the success of the operations is something that most companies are doing right now.
According to (1996), there is a shift from the old to the new value chain option of service providers. The new value chain operates on the premise that there is a customer orientation. A customer cluster model that is a part of the “new chain model” is a customer driven organization that has directed its resources towards customer needs. In this model, the relationship managers are the ones who own the relationship for customer clusters that are defined by a combination of attributes like demographic and psychographic attributes that are applicable to product and service needs. This type of chain is responsive to the changing behavioral patterns and preferences of customers and the relationship managers can respond to the changing needs of the clients. The relationship managers are the face of the institutions and what they reflect are the drive of the institution to be customer centered. Institutions understand that without the customers and clients, the businesses will not prosper and they will be left behind in this very competitive market that is prevalent today. Having core business priorities that are centered on the very valuable aspect of customer service is a big plus to most service oriented organizations and ensures that in the coming years, there is something that people would recall when the mention of that company or institution comes into mind.
As customer driven institutions, it is very important to determine the competitive advantage of the company. This allows the company to have an edge over their competitor and not to be left behind in today’s very competitive nature of business. Having a very effective customer service system entices customers to do their purchases from the stores that offer more value for their money. As such the need for an effective customer service is a must for an institution that caters for diversified needs and requirements of their clientele.
Customer Service
Customer service system is important to all businesses. Furthermore, 53% of the consumers prefer to do their purchases in retail stores rather than doing it online. This reflects the powerful potential of a very solid customer service system. , founder of High Yield Marketing, a customer relationship-management consulting firm adds that “Customers categorically reject companies when they can’t get in touch with a live person,” this underscores the fact that not even the most powerful software can match the service representatives whose approach to dealing with customers are interpersonal.
Customer satisfaction is directly tied to the aspect of quality that a product or service has. Quality as a measurement for customer satisfaction traces its roots to and and others. This was later continued with the development of key programs that are directly tied to the fulfilment of customer satisfaction. Programs are concepts and programs that involve Total Quality, Continuous Quality, and Total Quality Management (TQM). In TQM quality is “the meeting or the exceeding of customer expectations”.
There have been many views that are concerned with quality. According to it is a conformance of a requirement. For twenty four it is the fitness for use. Twenty eight argues that it is an innate excellence in a product. (1987) summarized all of this and put quality as something that is not a single recognizable characteristic but a variety of attributes that appear in many forms. Simply put, it is in the eye of the beholder where quality is determined.
Basically, different businesses operate because of profits. This motivation of businesses is the reason why they seek to constantly innovate and improve their services and operations is to continue to earn profits. Most businesses strive very hard to continually satisfy their customers and clients. Customer satisfaction is one of the aspects that private and public sector strive hard for. The importance of satisfying the needs of the customers result in the acceptance of the product or service that is offered by the business and assures that the client returns to avail of the product or service that is provided by the company
According to (2000) satisfaction is something that all people value. It can be a job well done, a fulfilment of a wish, or a positive outcome that is a result of something that was done. According to (1993), satisfaction happens when the fulfilment of expectations and when these expectations are exceeded. However, due to the high levels of individual satisfaction among clients, an expectation of a client may be different from the other client thus, there is need to further improve so as to satisfy the varied needs of those who are expecting something from the services of product that they have availed. (2000) adds that the expectation levels of clients change over time as one type of service may not be acceptable to others. As such, in the field of service, there are two ways where those who provide service combat these obstacles to customer satisfaction. The first one is the improvement of services that is offered by those who provide services. The other way is to take an active part in the establishment of the expectation levels that are to be reached. Through the setting up of the expectations that service companies have, they have their own expectations to reach and thus have something to start on.
(1997) noted that the unexpected high levels of satisfaction that is produced in clients lead to pleasure and delight. This in turn leads to those clients availing of the same services or products that provide them with a certain level of satisfaction and provide them with their monies worth.
The result of exceeding client expectation results in an advantage that companies would have that is called “commitment ladder” ( & 1999). This is the result of the satisfaction of clients who used to be one time customers of a certain product or service and has evolved into regular patrons of a certain service. This advantage works in many ways for the provider due to the unlimited opportunities that is attached with the satisfaction of a certain client or customer. Among the advantages that are attached with these is the promotion that the service gets due to the word-of-mouth promotion that is gained by the provider through the satisfied customer. The satisfied client boosts the credibility and reputation of the service due to the satisfaction that was gained by the client from the service provider. Another benefit that is gained by the service provider over satisfied clients is the reduction of acquisitions cost needed to attract more new clients ( 1996).
and (2001) state that very few measure satisfactions properly. Given the situation that very few measure customers’ satisfaction properly, the above mentioned authors suggested four ways on how customer satisfaction can be measured. These steps are vital for the identification of weak points where service providers can improve. The customer satisfaction management is necessary for providers of services and products so that there could be service improvements.
These measures include looking through the eye of the customers. In this step, the service provider considers the tangible and quantitative factors that help shape the impression of a customer to a product. The next way is to develop a standard system of measurement. and (2001) noted that two marketers namely and are known for their strong customer guarantee where they replace goods which fall short of the customer satisfaction. In the case of , the employment of a “balanced scorecard” which is used to measure the company performance and reviews the factors that affect client/customer satisfaction. The “scorecard” keeps track of indicators of company performance. Using the “scorecard” allows those in the service sector to develop a method of finding out what are the factors that contribute to the dissatisfaction of customers and clients and be able to find ways on how this could be corrected. The third way of measuring customer satisfaction is the application of specific measurement standards where it is appropriate. The final way to evaluate customer satisfaction is to take action and evaluate results. By identifying aspects that lead to customer satisfaction and dissatisfaction, the service provider can now focus on improving the service and there is a service that leads to the dissatisfaction of a client, the company can now institute ways on how this can be changed in order to produce satisfaction for the clients. Through the results that were gathered by service provider with regards to the operations that they are doing. The company can easily make adjustments on how to make the service that proved to be more efficient and effective in order to maximize the potential of the company and at the same time generate more income for the service provider. Through this, the customers would remain loyal to the company and the company in return would be benefiting from the many advantages that are attached to having satisfied clients and customers.
Satisfaction among customers is something that most service providers would want to ultimately achieve. It is a process that does not happen overnight and is a result of several changes that are undertaken within the company. According to (2002) organizations need to suffice the needs of customers. Thus, the need to realign the organization must be based on the requirements of the customers. The introduction of the American Customer Satisfaction Index (ACSI) in America was designed to help agencies determine the drivers of customer satisfaction. Anne Kelly, the director of Federal Quality Group stresses that “organizational alignment is necessary for enterprises to produce excellent results”.
According to (2002) an effective and efficient customer satisfaction begins with the right frame of mind of those who are in the Human Resources (HR) department. Since it is the human resource who hires those who would man the front desk and perform other functions that directly deal with clients or customers. It is the responsibility of the HR to determine the kind of employees that will be hired by the company or institution. The HR is tasked with the training, and orientation of the employee. This approach would spell out that the success or failure of the service provider to attract clients is in the hands of those who are in the Human Resource department. The old notion that customer service is in the field of responsibility for sales managers and technical support staff is now passed. What HR departments are employing and focusing their efforts now is on the training for the improvement of the programs that are geared towards customers’ satisfaction. As such, the HR activities like hiring, coaching and evaluation of programs are now oriented towards the development and the nurturing of long lasting relationships with clients. The subtle changes that have taken effect in the aspect of training and hiring of employees have produced positive improvements in the company. Take the case of NCCI Holdings Inc., when the company realized that the clients needed help in the use of the insurance software that the company provides, the company underwent a training initiative that is aimed towards the development of technical expertise of the sale representatives. The effect of this training was that there was an increase in the customer satisfaction levels of the company.
While training increases the improvement of customer relationships and customer services, there are ways on how effective these changes that were introduced can be reflected by those who are in the institution. According to (2002) a customer satisfaction strategy must be connected to actions that get results in terms of products and or services for customers. As such, there must be performance measures that would provide feedback on the success of strategies by serving as a progress reporting system. Measurements in an organization need to be balanced between leading and lagging, as well as between hard and soft indicators. Measures need to represent a variety of areas such as finance, customer satisfaction, stakeholder, internal operations, and employee learning ( and , 1993).
It is not only the performance measure that must be viewed but also the financial aspect. There must be a financial measure that would address the return on investment, direct costs compared to indirect costs, and resource allocations. Many government organizations use an accounting system to look at cost by product. Others have incorporated activity based costing, earned value management, or economic value added activities into their methodology. For most government organizations, the primary financial measure is the effective execution of the budget (, 2002).
Another area for measures is customer satisfaction or value added. This measure answers the question: “How well is the organization listening and responding to the customers?” customer satisfaction measures take into account all product/service features and characteristics that contribute value to customers. The customer measurements should be identified by customer segment groups. Still another area for measures is internal operations. These are the measures for the key or strategic, business, and support processes. They look at how things are done. Operational measures include productivity measures such as cycle time, rework, and system variation.
Ensuring Customer Satisfaction
According to and (1995), customer satisfaction brings many benefits as satisfied customers are not very price sensitive, buy additional products, are less influenced by competitors and stay loyal longer. and (1995) stated that customer satisfaction has been deemed directly to affect customer retention and companies’ market share ( & , 1995). In banks, service quality, service features, and customer-complaint handling determine customer satisfaction ( & , 2004). Some factors that affect satisfaction are extended hours of operation and competitive interest rates as confirmed by the study of and (1996). In addition, there are researchers who discuss the links between satisfaction, loyalty, and profitability (, 1994). They are proponents of the theory called service management, which argues that “customer satisfaction is the result of a customer’s perception of the value received in a transaction or relationship relative to the value expected from transactions or relationships with competing vendors. Pertaining to this theory, and (2004) stated: “Loyalty behaviours, including relationship continuance, increased scale or scope of relationship, and recommendation (word of mouth advertising) result from customers’ beliefs that the quantity of value received from one supplier is greater than that available from other suppliers” (). They continued: “Loyalty, in one or more of the forms noted above, creates increased profit through enhanced revenues, reduced costs to acquire customers, lower customer-price sensitivity, and decreased costs to serve customers familiar with a firm’s service delivery system” ( & , 2004, ).
Providing excellent customer service is a crucial differentiator in an intrinsic competent market environment. Most industries which provide clients what they need and satisfied them helps the company to enhance its market share, definitely gain more profit and enjoy higher revenue ( & , 2003).
Accordingly, customer relationship marketing is a business approach which consists of the entire marketing procedures with a primary goal of formulating, improving, maintaining and sustaining effective customer relationships. Herein, relationship marketing gives emphasis on creating lasting relationships and enhancing industrial performance through the gained customer loyalty as well as customer retention ( & , 1997).
Because of the introduction of the new business paradigms that are connected with the internet, the standards of industries have been changed. Conventional business affects differentiators which consist of location; comfortable and exchanging cost which have been much less relevant. In this manner, global businesses and industries from financial sectors to manufacturers, educational systems and service organisation, the playing ground has been easily and drastically concentrated.
Herein, one of the most notable approaches that has been left to make an industry different from their competitor is through the quality of the services offered. Having been able to meet the needs of the customers, leads to providing superior customer service, that provides the target market real reasons for continuously transacting business with the industry. Hence, industry analyst agrees that efficient customer service is one of the biggest and most crucial opportunities available on the web today (, & , 2002)
According to and (2003), the context of relationship marketing means achieving competitive advantage, specifically through the acquirement of significant assets, such as knowledge, commitment and trust. Therefore, from a relationship marketing standpoint, particular importance is placed on achieving the goals of generating and increasing intangible resources ( & , 1991). Communications, transaction activities, information research are all parts of traditional marketing and through this marketers are able to improve or streamline these traditional marketing processes. If organisations look toward and use some of the information communications technology, such as e-mail, virtual teaming, and the Internet readily at hand, and investigate some of the more esoteric electronic marketing resources, these processes can be improved or streamlined ( & , 2002). With these tools you can better research your products or services industry, better research environmental trends, better target your markets, maintain better knowledge of and communications with your current and prospective customers , and receive almost instantaneous feedback on new products or services.
Customer Relationship Management
The notion of customer relationship management existed as an approach implemented for learning and knowing more about the client’s needs as well as behaviours. Such knowledge enables the company to establish stronger relationships with the target market. Customer relationship management is a management system which works on the basic principle that the customers are at the center of the success of any business. Generally, an industry must be able to give importance to their customers through the total worth of their relationship with the industry, the possible worth of such type of affiliation, the productivity of the relationship/connection, the insights that the customers can give the industry, as well as the impact that these customers yield over other customers. Because of these, the industry is able to implement a successful management of customer relationship without utilising any technological software and database ( 2000).
In brief, management of customer relationship is a management approach which tries to secure customer interaction which is suitable and consistent despite of the channels of communication and that this approach is a central business practice for facilitating, organizing and optimizing the interactions of the customers across various institutions’ conventional and electronic interfaces. This management approach can also be implemented to achieve clearer insight as well as more personal understanding of the behaviours of the customers and in assisting create a sustainable competitive advantage and with a strong relationship to the e-business process ( 2000) and that dedicated target market can be viewed as fundamental assets of an industry who are possibly be the best source of advantageous referrals which are extra resistant to rivals’ offers ( 2000).
According to and (2000), CRM is concentrated on the use of information technology so as to aid the organization to stay abreast of its customers’ needs and concerns. Customer Relationship Management also helps the organization to respond in time and appropriately to their customers’ concerns. Basically, CRM is integrated into a business’ operation by means of customized software or computer programs. Though several views have been used to define CRM, the rationale for its use remains the same, and that is the application of strategies to improve or enhance customer relations.
In spite of the many considerations that management has to make in order to effectively implement CRM into its operations, several businesses are trying to work on employing such strategy. This is due to the fact that intimate customer relationships provide the industry several advantages. One of which is the establishment of committed customers. Committed customers are more than simple repeat purchasers as they have an emotional connection to the seller ( and , 1994; , 1997). These emotions may come in the form of trust, liking and believing in the organization’s capability to respond instantly and effectively to a customer’s concern (, 1998). The company considers committed customers as its assets as they can possibly be a source of favourable word-of-mouth referrals. These customers are more resistant to competitors’ offers. Aside from this effect, CRM provide a point of leverage to realize economies of scope. Committed customers are often amenable to line extensions ( and , 1998). Leveraging the customer base can facilitate cross-selling complementary products as well as selling up to higher quality substitutes. The ability of CRM to reduce costs has been explored as well in the recent years. When CRM is applied along with other work processes, the strategy is capable of reducing churn or turnover in a company’s customer base. Thus, better customer management can lead to lower sales and service costs, higher buyer retention and lower customer replacement expenditures (, 1996).
Various companies have applied CRM into their operations. One of these companies is the Irish Life and Permanent, which offers a wide range of life assurance, investment products and pension for individuals and groups to over a million clients in Ireland (, 2004). So as to maximize revenues and enhance customer satisfaction, a software platform that would sustain seamless, quality sales and services through multiple lines of business, product lines and channels of communication. Through this integrated profile, each client’s policy data and history would make it less difficult for Irish and Permanent to determine prospects for a more advanced business growth. Overall, the CRM system applied by Irish Life and Permanent had enhanced customer satisfaction and helped the company to become Ireland’s best provider of personal financial services (, 2004).
FAW-Volkswagen was also among the many others who have been dependent on CRM strategies. The company decided to implement a CRM system due to major business challenges such as unresponsive customer service, slow reaction times, lack of real-time information deficient incorporation of data and processes and shortage of IT personnel (, 2001). Within six months, the company then decided to execute mySAP Customer Relationship Management (mySAP CRM) in order to improve its customer service and acquire more vital information about its client base. According to the company management, the CRM system had made real-time information on products, dealers and clients more accessible. As a result, the system had been a helpful tool in enabling customer service representatives to acquire the latest product information and attend to customer concerns anytime and anywhere.
The Interamerican Group, a leading Greek insurance company, is yet another organization who had implemented their own CRM system. The application of this CRM system in the company had enabled the company to attain their corporate objective based on revenue growth so as to augment market share without leaving profitability behind. The project had helped the company in identifying customer segments and related exceptions. Furthermore, the CRM application had helped the company established underwriting rules through improved comprehension of the pricing policy and its implications. According to the company management, the project has not only allowed them to respond better to the changing trends of their market, but perhaps the most important thing the project has taught them was how to understand and serve their various rate groups better insights (, 2002).
Bahrain Duty Free Shop
Exhibit 1
Bahrain Duty Free
Duty Free is one of the most recognised retail industry which operating in an airport. Duty Free Shops has been able to conquer airline and airport industry all over the world and one of these is in Bahrain. Duty Free show in Bahrain started on October 29, 1981 at the Bahrain International Airport. Being considered as a high spending area in the Middle East, Bahrain Duty is distinctive as it is privately owned and has been included on the Bahrain Stock Exchange. With this strategy, the industry has been consistently aware of their responsibilities to their shareholders and the demand in maximising effectiveness and productivity without compromising the client offer. The management of Bahrain has been able to merge its legacy with the utmost level of international retail standards to generate a distinctive “sense of place”. One of the marketing strategies imposed by the company is its simultaneous investments in terms of infrastructure and assuring quality services to their clients, by offering them a unique place that offers everything.
This mission and vision has put the company in the competitive position among its rival companies. Regardless of regional unrest and the issues of the currency, exceptional growth, improved penetration and record sales have been retained in the successful history behind this one of a kind retail environment. Through their strategy, the company has been able to provide the needs of their target market and overcome the challenges posed in the travel retail industries in Bahrain, such as the discounting approach regional downtown and the low taxation.
Part of the marketing strategy of the company is to consider innovation at all marketing aspects. This strategy has elevated Bahrain international Airport retail industries to contemporary competitive level. Through the marketing strategy of Bahrain Duty Free, the company has been able to set new standard for retailing in airport by establishing a distinctive and high level of entertaining shopping experience.
All this and more has been attained because of the originality and uniqueness of the Duty Free Bahrain designs that brings together different
brings creative features, such as the utilisation of specialized lighting and colour coded areas to help the clients in determining brand categories which include:
v Cardinal Red for the area of Confectionary, Tobacco & Liquor.
v Cornflower Yellow for Fashion boutiques, Jewelry Shops and , Fashion & Watches
v Azure Blue for Cosmetics, Skincare and Fragrances
v Vibrant prime colours for high Tech stainless Steel finish of the Communications, Electronics, and Music.
In addition, the shop also include a special and extremely acclaimed area which is the Authentic Bahrain Souq that composed of exciting local crafts, regular demonstrations as well as performances by conventional artist and craftsmen. Moreover, the company also provides extended services for their clients which include a 24-hour shopping experience for arrivals and departures, pre-ordering service through the internet, online raffles and draws, the creation of customer Loyalty Card, beauty advisors, gift wrapping and many others. In addition, the staff in Bahrain Duty Free is always attentive to customers providing them assistance and giving advice.
Total Quality Management
According to (1999), Total Quality Management is the incorporation of all the functions and processes of the organization () to be able to develop the quality of the services and or/products that they offer. With this, it can be stated that customer relationship management programs are included in total quality management. The need to develop an effective total quality management is important due to various reasons. However, these reasons are still geared towards providing customers with the great business experience with the company. It is also the case that total quality management views customer satisfaction in relation to customer retention and increase in the profits.
However, there are different takes on this topic. Some researchers believe that customer satisfaction creates to customers who will keep on doing business with the same company. This results from the customers’ experience when they were conducting business with that particular company. These researchers believe that the presence of customers who are willing to spend a little more just to be able to do business with their preferred company confirms that customer experience; in this case, customer satisfaction can help businesses in increasing their profit. In fact, a number of companies believe so much in the power of customer satisfaction together with other key factors like revenue and profit that they use it to measure their business’ over-all performance.
This take on customer satisfaction brings about the concept that business must include customer satisfaction programs in their budget allocation. One such example of this practice can be observed in Sears Roebuck & Co. Other retail stores even use customer satisfaction rating as a measure for employee compensation. Employees and executives are being rewarded based on the feedback that the store gets from its customers. Businesses do this in order to foster a culture of delivering top-quality customer service that will improve financial performance. This statement simply means that businesses believe that the more satisfied the customers are the more profitable the store will be. They give much importance to on the fact that it is costly to attract customers but even more expensive to lose them (, 2004).
According to and . (as cited in , 2005), the cost of gaining new customers is 6-7 times more expensive than retaining customer and a 5 percent increase in customer retention can also increase profit by 25-95 percent. But the on the average American companies lose 50 percent of their customers every 5 years. This, to a certain degree, proves that there is an indirect relation between customer satisfaction and increase in sales through increased customer retention.
On the other hand, there are those researchers who believe that customer satisfaction does not always translate to customer loyalty or retention. According to two researchers, and , customer satisfaction result in varying levels of loyalty which affects the customers’ disposition towards patronage. This means that customer satisfaction do not create loyal customers because even satisfied customers have the tendency to change stores. This change of store by the customers can be justified by the level of satisfaction that they will get from another store. Therefore, the focus of customer satisfaction must be aimed at proving the highest value bundle to the customers in order to ensure the highest level of customer satisfaction (as cited in , 2003, ).
Even though, the two examples provide different view regarding the relation of customer satisfaction and customer retention, it is evident that customer satisfaction affects customer retention. And customer retention results in increased profit since customer retention lessens the turnover rates ( and , ) (1990). The only difference that was actually posted by the two articles involves how customer satisfaction affects customer retention. The first example stated that customer satisfaction automatically results in customer retention while the second views that customer retention is dependent on the degree of satisfaction that the customers get.
Nevertheless, both articles showed that there is a correlation between customer satisfaction, customer retention and increase in profit. This being the case, it can be stipulated that if banking industries recognize the correlation between the three then they will be able to sustain their business and ensure that its future it secured. Moreover, implementing customer relationship management programs will allow an organization to identify the sets of customers that are more susceptible to outbound contact methods and those that would rather stay with inbound call methods. In doing so, they will also be able to lessen the stress of their agents by providing them with hot leads.
Since Total Quality Management is founded on the philosophy of perpetual improvement (, 2005), it means that businesses must always be on their feet to keep up with the demands of the market. Therefore, businesses must accept that change is an integral part of success. They must be willing to give up old inefficient business strategies and start formulating new ones.
In addition, (2005) stated that the key to improving the quality of products and services that a company offers is develop the processes of identification, production and support of the products and services. This means that everybody with the company must be work together in order to resolve the problematic processes. In the middle of this, managers must be able to act as leaders and provide trainings to their subordinates. The skills that employees acquire through training will be their tools in initiating change. Managers must also keep track of the developments within the company. This means that they must constantly review and measure the performance of the team. This way they will be able to gauge if the process being used is helping in achieving the preferred result of the company.
Reference
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