IMPACT OF TOTAL
QUALITY MANAGEMENT PRACTICES ON CUSTOMER RETENTION AND SATISFACTION
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
TO THE STUDY
Total
quality management practice is a firm-wide management philosophy of
continuously improving the quality of the products/services/processes by
focusing on the customers’ needs and expectations to enhance customer retention,
satisfaction and firm performance. There are mixed results about the
relationship between total quality management practices and customer retention,
satisfaction and performance. However, this study will examine the impact of
total quality management practices on customer retention and satisfaction.
A growing number of organizations use total
quality management as a strategic foundation for generating a competitive
advantage (Reed, Lemak, & Mero, 2000) and improving firm performance
(Hendricks & Singhal, 1997; Lemak & Reed, 1997) and customer retention and
satisfaction (Samson & Terziovski, 1999). Firms that have won quality
awards generally outperform other firms with respect to both income measures
(Hendricks & Singhal, 1997), customer loyalty and stock market value (Lemak
& Reed, 1997). It is no surprise that the links among market orientation,
total quality practices, and performance have attracted the attention of
marketing and operations management researchers’ alike (Ettlie & Johnson,
1994; Flynn, Schroeder, & Sakakibara, 1994; Kohli & Jaworski, 1990;
Narver & Slater, 1990; Samson & Terziovski, 1999).
Total quality management practices have
been shown to enhance organizational performance for both product and service
organizations (Powell, 1995). However, there is relatively little research on the
differences between product and service offered by companies with respect to
the impact of quality practices on customer retention and satisfaction. We know
little about how these two different types of organizations view what they do,
how well they do it, and its consequences.
The concept of total quality management
practice has been developed as a result of intense global competition. Organizations
with international trade and global competition have paid considerable
attention to philosophies of total quality management, procedures, tools and
techniques. According to Juran (2001), international competition requires
higher levels of quality achievement by organizations. Total quality management
is the popular area of research in management. Total Quality Management has
been practiced in diverse manufacturing industries and now there is a growing
interest in the service sector, even from non-profit organizations (Nwabueze,
1998). But the service industry differs from the manufacturing industry in a
number of ways, such as service intangibility, simultaneity of production,
delivery and consumption, perishability, variability of expectations of the
customers and the participatory role of customers in the service delivery but
the main aim by both sector is to achieve customer retention and satisfaction.
Several authors have proposed models of total quality management. However, most
of the models are based on theories and practices that are primarily derived
from the manufacturing industry where this has been effectively practices in
the recent decades.
Furthermore, total quality management
has become the buzz word in the management practice. It has been defined in
many different ways. The International Standard ISO 8402, Quality Management
and Quality Assurance-Terminology has defined total quality management as the ―management approach of an
organization, centered on quality, based on the participation of all its
members and aiming at long-term success through customer satisfaction, and
benefits to all members of the organization and to society (Ljungstrom &
Klefsjo, 2002). Temtime and Solomon (2002) said that total quality management
seeks continuous improvement in the quality of all processes, people, products,
and services of an organization. Total quality management is also a systematic
approach to management that aims to enhance value to customers by designing and
continually improving organizational processes and systems (Kartha, 2004). The
emphasis is on employee involvement and empowerment along with customers and
customer satisfaction as the focal point.
The tenets of total quality are
continuous improvement, top management leadership commitment to the goal of customer
satisfaction and retention, employee empowerment, and customer focus (Ugboro &
Obeng, 2000). Total quality management means that the organization‘s culture is
defined by and supports the constant attainment of customer retention and satisfaction
through an integrated system of tools, techniques and training (Sashkin &
Kiser, 1993).
1.2 STATEMENT
OF THE PROBLEM
Many researchers think that total
quality management is old news, many of the new continuous improvement
initiatives are based on total quality management philosophies. Total quality
management encompasses a number of different initiatives. Juran (2001) wrote
that the benefits and goals of total quality are lower costs, higher revenues,
delighted customers (as seen in customer retention and satisfaction), and
empowered employees. Costs can be lowered by reducing errors, reducing rework,
and reducing non-value added work. Higher quality can also equate to higher
revenues through satisfied customers, increased market share, improved customer
retention, more loyal customers, and premium prices. Customers continue to demand
higher quality goods and services. Delighted customers purchase over and over
again, advertise goods and services for the company, and check first when they
are going to buy anything else to see what is offered by the company they are
loyal to.
However, it is not easy for management
to implement total quality management, because it means a cultural overhaul
(Rao, Youssef, & Stratton, 2004). Deming (1981) also attested that the
benefits of better quality through improvement of the process are thus not just
better quality and the long-range improvement of market-position, but also greater
productivity and profit. Improvement of the process increases uniformity of
output of product, reduces mistakes, and reduces waste of manpower, machine-time,
and materials. Kaynak (2003) suggested that a positive relationship exists
between the extent to which companies implement total quality management and
performance as a result of satisfied customers.
1.3 OBJECTIVES OF THE STUDY
The
following are the objectives of this study:
1. To
examine the impact of total quality management practices on customer retention
and satisfaction.
2. To
examine the approaches to the philosophy of total quality management.
3. To
determine the factors affecting the practice of total quality management in
companies.
1.4 RESEARCH QUESTIONS
1. What
is the impact of total quality management practices on customer retention and
satisfaction?
2. What
are the approaches to the philosophy of total quality management?
3. What
are the factors affecting the practice of total quality management in
companies?
1.5 HYPOTHESIS
HO:
There is no significant relationship between total quality management practices
and customer retention and satisfaction.
HA:
There is significant relationship between total quality management practices
and customer retention and satisfaction.
1.6 SIGNIFICANCE OF THE STUDY
The
following are the significance of this study:
1. The
findings from this study will educate the managements of companies on the
approaches to the practice of total quality management and its subsequent
effect on customer retention and satisfaction.
2. This
research will be a contribution to the body of literature in the area of the
effect of personality trait on student’s academic performance, thereby
constituting the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This
study will be conducted on some selected companies in Edo State. This study
will also cover the method of total quality management practice adopted by the
selected company so as to ascertain its effect on customer retention and
satisfaction.
Financial constraint– Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
and interview).
Time constraint– The researcher will
simultaneously engage in this study with other academic work. This consequently
will cut down on the time devoted for the research work.
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