Effects of Customer Satisfaction on Productivity Study of Dick Smith

Question: Describe the Effects of Customer Satisfaction on Productivity for Study of Dick Smith. Answer: Introduction The focus of this literature review is Dick Smith, an online retailer of electronic goods. Dick Smith was founded in 1968 by Dick Smith in Sydney, Australia(Dicksmith.com, 2016). The initial focus of the store was installing and servicing car radios. As demand grew, the store moved to a bigger premise. With growing demand for electronic products, the store began wholesaling electronics through Dick Smith Wholesale, which ran alongside the car radio business. In 1980, Dick Smith sold 60% of the company to Woolworths, and two years later the remaining 40%. The total cost of the sale amounted to A$25 million. The store continued to expand its operations across Australia and New Zealand. In addition to the Dick Smith, stores were David Jones electronics, which were powered by Dick Smith stores, and Dick Smith Powerhouse super-stores. In May 2016, Dick Smith was acquired by Kogan.com. Today, the company operates wholly as an online retailer, with no physical stores. It deals with a variet y of electronic and technological products from major brands around the world. The focus of this research is on the effects of customer satisfaction on productivity and profitability at Dick Smith. Customer satisfaction is important for any business, since it influences customer retention, customer loyalty and return purchases. Moreover, since consumers often communicate amongst themselves, customer satisfaction also influences new customer perceptions. In this manner, customer satisfaction further affects the productivity of an enterprise. By improving customer satisfaction, enterprises can be able to improve productivity and profitability, hence the choice of this topic. Literature regarding customer satisfaction and its effects is reviewed, with a focus on factors that lead to customer satisfaction particularly in the retail industry. Moreover, since the organization chosen is an online retailer, the literature review will also investigate factors that influence customer satisfaction within an online retail environment. Finally, the literature review will al so focus on the effects of customer satisfaction, through an evaluation of the impacts of satisfaction on productivity and profitability. The review will not concern itself with employee satisfaction or online commerce in general. Literature review Customer satisfaction is an important topic in the literature on business and retail marketing. Armstrong et al., (2014) identify customer satisfaction as an essential component of the marketing concept. Among other things, it influences the future purchase behavior of consumers, profitability, and value for shareholders. Customer satisfaction is therefore in the best interest of all organizational stakeholders. Customer Satisfaction One of the most pervasive definitions of customer satisfaction arises from the expectation confirmation-disconfirmation model. This model holds that customer satisfaction is the outcome of expected product performance against actual product performance (Armstrong et al., 2014). Accordingly, customer satisfaction occurs when the actual performance of the product matches the performance expected by the customer. Siddiqi (2011) highlights disconfirmation as the aggregate of discrepancies between the expected performance and actual performance paradigms. Here, positive disconfirmation occurs when the products performance exceeds the customers expectations, while negative disconfirmation occurs when performance falls short of expectations. Where performance matches expectations, this is regarded as zero disconfirmation. Despite this framework, customer satisfaction is not evaluated uniformly amongst all customers. Different consumers consider different factors when evaluating customer satisfaction. Three factors affect customer satisfaction/dissatisfaction. The first is the quality of the product, the second the quality of service, and the last is price. This is corroborated by Pilar et al. (2010), who indicate that for some customers, their satisfaction will occur if the quality of the product/service is above par, while for others, satisfaction will be based on the price charged for the product or service. Price affects different customers in different ways. For some customers, they will be satisfied when the price is cheap and affordable while for others, the price should be in accordance to the quality provided. Evaluation of customer satisfaction is therefore, also influenced by the nature of the industry (product or service). Factors promoting customer satisfaction in the retail industry As noted, customer satisfaction is influenced by the nature of the industry. Studies into customer satisfaction have identified several factors as promoting and affecting customer satisfaction. According to Baker and Cameron (2015), waiting time is a critical factor. In this study, the authors focused on directing management to establish a service environment that reduces waiting time, hence improving service evaluation by consumers. Other factors such as unique product and service offerings, friendliness of the customer service personnel, hassle free parking space, value added services such as free delivery, and guidelines on product use also contribute to customer satisfaction. Customer Staisfaction in the online retail environment The above-mentioned factors are important in improving customer satisfaction for a retailer such as Dick Smith. Given its transition to an online platform, however, the customer satisfaction paradigm has also shifted. While some aspects of customer satisfaction within an online retail environment are consistent with traditional retail store satisfaction factors, Souitaris and Balabanis (2007), highlight research indicating antecedent models of satisafction and loyalty within an online environment. They highlight eight key online differentiation strategies that influence e-loyalty, which include choice, care, community, character and customization. Moreover, Kim, Kim, and Kandampully (2009) point out that within an e-retailing environment, the quality of e-service is a key factor. Their study investigates the relationship between the online buying environment characteristics and e-satisafction amongst consumers. They find that attributes of the buying environment such as convenience, web appearance and entertainment value directly affect e-satsiafction amongst consumers. In another study, Hung, Chen and Huang (2014) conducted a survey of four online retailers, to determine the factors that influence customer satisfaction. Their findings were that customer satisfaction is influenced by a combination of both marketing and technical factors. Some of the marketing factors included consumer attitudes towards online shopping, perceived risk and convenience, and electronic word-of-mouth marketing. The technical factors identified were such as the quality of the information system, with regard to such factors as ease of access and user-friendliness of the websites. The advent of e-retailing has radically altered the manner in which customers evaluate satisfaction. Impact of customer satisfaction Customer satisfaction is evidently a complex phenomenon, particularly in the current era of online retailing. Yet, customer satisfaction is an important factor, with various studies revealing that it significantly affects retailing. According to Armstrong et al. (2014), there is a positive correlation between customer satisfaction and customer loyalty. This in turn leads to the improved perfromance of the company. Kim, Kim, and Kandampully (2009) corroborate this finding for the online retail environment, indicating that increased e-satisfaction leads to improved e-loyalty. Customer satisfaction also leads to increased benefits such as reduced advertising costs, enhanced profitability and income (Armstrong, Adam, Denize, Kotler, 2014). Satisfied customers not only become repeat customers, they also become willing partners and customer evangelists, who share their positive experiences with others(Armstrong, Adam, Denize, Kotler, 2014). Thus, customer satisfaction can improve profita bility through a number of avenues, such as reduced advertising costs and increased sales. Customer satisfaction alone, however, is not sufficient to guarantee the success of a retail business in the long term. Consequently, there is a need for continual customer relationship management to improve the competitiveness of the enterprise. A less investigated relationship in the literature is that of the impact of customer satisfaction on productivity. Luo and Homburg (2007) investigate whether customer satisfaction has any impact of employee performance. Their results indicate that customer satisfaction is indeed positively related to human capital performance. Consequently, investing in improved customer satisfaction can lead to improved productivity and better performance by employees. This would be a significant factor, since employee satisfaction has been proven to contribute to customer satisfaction and customer loyalty. Customer satisfaction is important for any industry, particularly in todays competitive global business environment. Dick Smith operates in one of the most competitive business lines, the online retail business. The competitiveness of this industry is underscored by the fact that customers can easily switch between various retailers through a few simple clicks of the mouse(Souitaris Balabanis, 2007). Consequently, this makes it imperative that businesses are well equipped to attract and retain consumers. Customer satisfaction allows businesses such as Dick Smith to do so. Through customer satisfaction, Dick Smith can be able to retain existing customers and attract new ones through positive word of mouth. Customer satisfaction will be an important feature in enabling Dick Smith to navigate the online retail industry. Based on the above literature review, the following research questions are formulated: How can Dick Smith improve customer satisfaction within an electronic retailing platform? What benefits can Dick Smith hope to derive from improved customer satisfaction in an electronic retailing platform? Conclusion Dick Smith is an online retail store operating in New Zealand and Australia. It was founded in 1968 by Dick Smith as a car radio installation and servicing store. The enterprise later grew into the giant retailer that it is today. It was initially bought out by Woolworths, before its recent takeover by Kogan.com. Today, Dick Smith operates entirely as an online retailer. The online retail market is a highly competitive one, characterized by heavy competition due to low barriers to entry. Moreover, customers are easily able to evaluate alternatives through a few clicks of the mouse. Consequently, this makes customer satisfaction imperative, since such satisfaction also serves as a competitive advantage. The review of literature concerning customer satisfaction reveals that customer satisfaction is promoted by factors such as quality of product, quality of service and brand image. Moreover, customer satisfaction within an online retail environment is even more complex, and is affected by additional factors such as the online retail environment. This refers to the website on which a business transacts, and its features such as ease of access and customization. Investing in customer satisfaction derives a variety of benefits for retailers, such as customer loyalty and customer retention, as well as new customers through word-of-mouth promotions by satisfied consumers. This has the additional benefits of reduced advertising costs and improved productivity. Moreover, customer satisfaction also leads to improved productivity, further improving profitability. In order to harness these benefits, Dick Smith should invest in developing a dominant and formidable online presence. The strategy adopted should include developing a website that is customized to the tastes of electronic and technological shoppers and enthusiasts. Dick Smith should also focus on providing quality customer service. By improving customer satisfaction, Dick Smith can then anticipate increased visits and sales. However, since customer satisfaction alone does not guarantee competitiveness, Dick Smith should continuously engage in customer relationship management. References Armstrong, G., Adam, S., Denize, S., Kotler, P. (2014). Principles of Marketing. Sydney: Pearson Australia. Baker, J. Parasuraman, A. Grewal, D. Voss, G. (2002). The influence of multiple store environment cues on perceived merchandise value and patronage intentions. Journal of Marketing, 66 (2), 120141. Dicksmith.com. (2016). About Dick Smith. Retrieved from Dick Smith: https://www.dicksmith.co.nz/dn/about-us/ Hung, S., Chen, C., Huang, N. (2014). An integrative approach to understanding customer satisfaction with e-service of online stores. Journal of Electronic Commerce Research, 15(1), 40-57. Kim, J.-H., Kim, M., Kandampully, J. (2009). Buying environment characteristics in the context of e-service. European Journal of Marketing, 43(9), 1188-1204. Luo, X., Homburg, C. (2007). Neglected outcomes of customer satisfaction. Journal of Marketing, 71(2), 133-149. Pilar Martnez-Ruiz, M., Jimnez-Zarco, A. I., Cascio, R. (2011). Assessing the maximum level of customer satisfaction in grocery stores: a comparison between Spain and the USA. International Journal of Retail Distribution Management, 39(7), 504-521. Siddiqi, K. O. (2011). Interrelations between service quality attributes, customer satisfaction and customer loyalty in the retail banking sector in Bangladesh. International Journal of Business and Management , 6 (3), 12. Souitaris, V., Balabanis, G. (2007). Tailoring online retail strategies to increase customer satisfaction and loyalty. Long range planning, 40(2), 244-261.