CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
It’s difficult to over-stress the importance of
customer satisfaction. Sustained profitability is only possible through
building customer value and satisfaction. Profit comes as a consequence of building
customer value.
As Henry Ford said:
“Business must be run at a profit… else
it will die. But when anyone tries to run a business solely for profit, then
also the business must die, for it no longer has a reason for existence.”
Value Defined
Something that satisfies a consumer’s need or
want has value in the eyes of the consumer. Whether or not a consumer
will buy a product offering depends on whether what it costs them is greater or
less than the product’s perceived value. Furthermore, when choosing between
similar offers, a consumer will choose the product that offers the biggest
difference between value and cost. Costs to the customer include not only
monetary costs, but everything associated to acquiring it, such as time and
hassle. For example, having to go and pick up concert tickets you’ve already
paid for online adds an additional cost. Therefore, even if your product is
more expensive, it will nevertheless be chosen if it carries more value in the
eyes of the customer.
The difference between what the consumer
perceives as the value of the product offering and its costs, are known by
marketers as the delivered value. The goal is to ensure that the
delivered value for your product is greater than the delivered value of the
customer’s alternatives.
Customer Satisfaction
Defined
Customer satisfaction is closely related to
customer expectations. Once acquiring a product, the customer will compare the
actual performance of the product with what was expected. The customer will
have feelings of pleasure if product performance meets expectations, and
feelings of disappointment if it doesn’t. If actual performance exceeds
expectations, the customer is highly satisfied or delighted.
Customers form their expectations from a variety
of sources such as friends, past experiences, competitors as well as the
marketer’s messages and promises. A balancing act must be made here. If you set
expectations too high with your messages, your customers are more likely to be
disappointed. If you set them too low, fewer will buy. The most successful
firms set expectations high and then are able to deliver performance to match –
at a profit.
Creating Customer Value
Given the importance of customer value, it’s
useful to use what Micheal Porter of Harvard calls the value chain as a
tool to find ways to create more customer value. The value chain consists of
company activities that create value and add costs in an organization. The
primary activities in the value chain are:
- Bringing
materials into the company (inbound logistics) - Converting
materials into finished products (operations) - Shipping
out finished products (outbound logistics) - Marketing
the products (sales and other marketing activities) - Servicing
the products (customer service)
Primary activities have secondary support activities which include
procurement (or purchasing), technology development, human resource management
and firm infrastructure. These support activities may be handled by specialized
departments or by multiple departments.
Your job as a marketer is to examine the costs
and performance of each value-creating activity, and find ways to improve in
each area. It’s helpful to compare competitors costs and performance in the
value chain as a benchmark. If you can outperform your competitors you can gain
a competitive advantage.
It’s important to note that internal departments
sometimes act in ways to maximize their interests rather than those of the
company or customers. For example, a credit department may take too long
ensuring the credit worthiness of a customer to avoid the possibility of a bad
debt. During this time, the customer is waits and waits, and the sales person
becomes frustrated.
The solution to this problem, is to ensure the
core business processes are managed smoothly, by using cross disciplinary teams
to manage core processes.
It’s important to look beyond your own
operations as well. Finding competitive advantages beyond your own operations
will increase your chances of success. For example, Walmart’s suppliers are
plugged directly into its inventory system so that they can track sales and
replenish items as needed. This reduces the chances of stock outages.
The importance of
customer retention
Often, organizations focus a lot or their
marketing efforts on attracting new customers and far less attention retaining
customers. Satisfied customers are loyal customers. Here are some interesting
statistics from the Harvard Business Review (The Loyalty Effect by Frederick F.
Reichheld and Thomas Teal):
- It
can cost 5 times more to get a new customer than to satisfy and retain a
current customer - In
a typical company, customers are defecting at the rate of 10-30% per year - The
profitability of a customer tends to increase the longer the customer is
retained
A 5% reduction in the customer defection rate
can increase profits by 25% – 80%, depending on the industry
The
consumer is faced with an infinite number of choices in his buying behavior. He
makes a decision on whether to spend his money or save it. If he chooses to
spend it, he has a wide range of product choices available to him. Even within
the relatively narrow field of paint industries the consumer has, from five to
ten different brands of paints from which to choose in the average paint shop
or depot, obviously, no one brand is going to be sold for long if it stops
giving the customer what he wants. Hence, it is a total error for a marketing
manager to believe that the consumer must buy his product.
The
consumer bestows his favor on those who give him what he wants in product,
price, promotion and convenience. The penalty for disobeying his mandate is
almost certain failure. There are numerous illustrations of firms that refused
to obey “Key consumer”, thereby incurring his wrath. At one time, the Waltham
Watch Company was held in high esteem by watch buyers decided that the wrist
watch was preferable to the pocket watch and subsequently, the consumers
changed their buying habit, Waltham was a stubborn until the consumer forced it
to do so by refusing to buy pocket watches. Meanwhile, key consumer decided that
he wishes his wrist watch to do more than ten times, he wanted a fashionably
styled time piece. The majority of firm in that country immediately entered a
competitive race on a fashion basis, but not Waltham. His refusal to produce a
properly style watch eventually caused its failure.
Obviously,
the consumer seldom directly commands a manufacturer.
1.2 STATEMENT OF THE PROBLEM
In
the cause of research, answer will be provided to the following research
question problems
1.
Of what
quality and quantity would they prefer to buy?
2.
Is the
price charged on the product not too high enough for them to bear?
3.
Is there
any welfare package available for the consumer at all?
4.
Are company
products readily available to any shortest possible notice from consumer?
5.
Are there
any positive responses from consumer as to the prospect of the business?
The
researcher must however bear in mind and proffer proficient solution and
answers to these numerous questions if he is to guarantee himself of success or
survival of the business entrusted to him.
1.3 AIMS AND OBJECTIVES OF
THE STUDY
i. To know whether the price charged on the Berger paint product
is too high and ambiguous or not.
ii. To know if Berger Paint product is readily available for the
consumers
iii. To ascertain if there is any package available for the
consumers/customers who are frequent users of the Berger paint product.
iv. To know the quantity and quality rate which the consumers want
to buy.
1.4 SIGNIFICANCE OF THE
STUDY
The
important of the study is that it broadens and widens the researcher’s
knowledge. The topic chosen has really increases or improves the standard of
living of the researcher. The study serves as an impetus to participate
actively without allaying fears or panic in the field of practice. The study being
“Consumer Satisfaction and Retention as a key to business survival” plays a
dominant role in any business ramification.
The
study of this research work is a pre-requisite in partial fulfillment of the
requirement for the award of Higher National Diploma in Marketing. The research
equally creates awareness to the society at large as regards what consumer
satisfaction is all about in running of the organization in the respect that it
helps in solving problems associated with the satisfaction of consumers how
consumer can be valued at a profit.
1.5 SCOPE OF THE STUDY
The scope
of this study is limited to paint industry. It is therefore imperative for the
researcher to carry out all necessary enquiries and activities within the
boundary specified in the study. The scope will also cover the conceptual
aspect in terms of user, colour, behavior, reaction and modes, friends and
relative.
The
market scope covers Ilorin Township to immediate consumer areas. The industrial
scope will cover all the manufacturers of paint product. But the case study of
this research will be BERGER PAINT NIGERIA LIMITED. The geographical aspect of
the scope is going cover Ilorin metropolis area directed to the consumer.
The
area of interest will be on the number of sales recorded in the five
consecutive years (2007 – 2012).
1.6 LIMITATION OF THE STUDY
This
is varieties of problems faced white carrying out this research work. One of
this is thane constraint. There is no adequate time or sufficient time for the
researcher to visit and consult all necessary sales depots, distributors, and
consumers of Berger paint Nigeria Limited, since they are not geographically
sited in one region. In view of the limited time available for the final
submission of this project work, the researcher has to limit the research
finding to Ilorin depot of the company since they offer likely services or
operations.
The
researcher is also faced with some administration problems from the staff of
Berger Paint Nigeria Limited. The staffs were always reluctant to grant
interview being carried out by the researcher. The solution to this is achieved
by re-orientate them and give a kind of incentives as motivation in order to
change their lackadaisical attitude towards the researcher and their customer
at large. Consumer satisfaction and retention. A key to business survival.
1.7 DEFINITION OF TERMS
(a) CONSUMERS: These are groups of individuals in an organization who
are buyers for consumption purpose. They are not buying to make profit, but to
satisfy basic or psychology needs or wants.
(b) TOTAL CONSUMER VALUE: This is the bundle of benefits consumer
expect to derive from a given product or service.
(c) TOTAL CONSUMER COST: This is the bundle of cost consumer expect
to incur in evaluating, obtained using, and disposing of the product or
services.
(d) MARKETING: Marketing is the total system of interrelating
business activities designed to play price, promote and distribute want,
satisfying goods and services to prospective customers. (would be customers).
(e) SATISFACTION: Is all about pleasing the consumer by making
available what they want, need at the right time, in the right place and with
the right price. To provide them with what they want, needed or asked for.
(f) RETENTION: All the activities involved in finding and retaining
consumers and growing the business.
(g) CONSUMER SATISFACTION: This is the way by which the consumer
pleased with the company aim and objective to make profit. It is the way by
which the company makes every effort to make goods and services available for
the consumer at the right time, in the right place and at the right prices.
(h) BUSINESS SURVIVAL: This is all about the improvement or growth of
the business. Meanwhile, the primary aim of any business is to minimize loss.