Strategies for Customer Satisfaction and Loyalty

Abstract

This research aims at to provide the strategies which can be employed by company in order to establish customer satisfaction and customer loyalty by looking at the case of Thai square which is the famous Thai restaurant in London regarding to its reputation. Since customer relationship management is gaining more important to businesses. Many companies try to solve their problem by applying customer relationship management such as the motivation of staff , staff training , method of increasing customer satisfaction, how to gain customer loyalty. These factors can lead to building customer loyalty in the future.

In the part of literature review will emphasize on the basis theories which are relevant to the customer relationship management. This research contains the motivation theory , staff training , customer satisfaction and customer loyalty.

By achieving this research purpose , this research employs secondary and primary data. The primary data was acquired by a questionnaire survey which is the methodology of this research. Regarding to the questionnaire for staffs , there are 20 respondents who participated in this research as well as there are 100 respondents who walk into and eat at Thai square restaurant who responded to the questionnaire for customers. The sample size of this research is Thai square restaurant (Minories).

To conduct this research researcher used both primary and secondary data achieved by self – administered questionnaire. By analysing primary data from the questionnaire , the SPSS and Microsoft Office excel was used to achieve it. The statistical method was applied to analyse the result of this research. The results illustrate what factors could gain customer satisfaction , how successful the staff performance after being trained , how well staff can achieve companies’ objectives.

This research also provides recommendations for company and the further research so that company can improve the customer relationship management as well as can gain more customer loyalty in the future.

Chapter 1

Introduction

1.1 Overview

Nowadays, the consumer behaviour has been changed from the product centred stage to the customer cantered stage . Moreover, the customer’s behaviour has been changing. Mudie & Pirrie (2006 p.7 ). When they purchase product , they expect not only good product , quality and design but they also expect on service. Therefore, the service has been the significant reason in decision – making process.

Since many business have been trying to improve and develop their strategy in order to meet the customer’s need rather than the products. All organisation’s achievement has to give an important to the customers. Companies need to recognize all details of their customers such as the details about what customer need , who they are , what they buy, when and where they buy , how often and how much they spend. Moreover, companies have to evaluate approximately the customers’ behaviour in order to predict what customers will do in the future. In addition, companies should establish the database of their customer and profile so that they can keep contact and advertise new promotion. These has been the knowledge of company which have been assumed as the asset of company. The managing customer relationships strategies is the essential process.

By emphasizing on customer relationship management , companies may increase their abilities in knowing what customers need. Moreover, customer relationship management can help companies to target potential customers and to cut unnecessary cost and gain higher return on investment.

As the staff motivation and training is a part of the Human Resource Management. There is a connection between customer relationship management and Human Resource Management because customer relationship management relies on staff’s effectiveness and moral. Customer relationship management focuses on customers. To satisfy them , companies need to develop their staff’ effectiveness and moral using motivation and training method. By doing so , companies may gain customer satisfaction and customer loyalty which are companies’ objectives.

Customer relationships management strategy has generally been company’s strategy in managing customer relationship so that companies can retain their customers and increase customers’ satisfaction and loyalty (Blazey 2006 p.136)(Kumar 2006 p. 156-157)

Companies are focusing on customer retention , customer loyalty and customer satisfaction as a key management objectives. The one objective of customer relationship management is the advertising of customer loyalty .(Peppers & Rogers 2004 p.12). The greatest benefit of customer service is customer loyalty (Tschohl & Franzmeier 1996 p.20).Loyal customers are forcing organization changes.(Montano 2005 p.332)and can improve employee morale and productivity because customers respond positively to company. (Tschohl and Franzmeier 1996 p.20).

The motivation for loyal customer based on better products, better service and better market value.(Montano 2005 p.332) . The manager is more likely to achieve improved levels of motivation(Nieto 2006 p.108) Companies have to motivate staff to participate in training process for improving staff performance so that they can achieve customer relationships management strategy. Organization tend to concentrate on performance management and rewards to elicit employee cooperation ,supporting the value management and employee relations in workforce. (Nieto 2006 p.108)

1.2 Aims and Objectives

The objective of this research is to provide the strategies which can be employed by company in order to establish customer satisfaction and customer loyalty and to improve employee’s performance to achieve objective in the future.

The objectives are that :

1. To evaluate the customer satisfaction which may lead to customer loyalty

2. To explain the relationship between motivation of staff and staff training as well as their effectiveness to improve customer service in order to satisfy customer

3. To establish the appropriate strategies for restaurants in terms of customer relationship management.

4. To give an advice for restaurant , staffs on how to improve their potential in providing so as to satisfy customer.

1.3 Organization background

The Thai Square Restaurant Group was founded in 1996 when the first Thai Square opened in The Strand in central London. Thai square restaurant aims to maintain the leader status in the London market and sustainable growth of Thai restaurant market. The currently competition is intensive and the customer’s behaviour have been changing very rapidly. Many competitors can soon gain the competitive advantage and also gain more market share eventually. The company creates challenges with authentic Thai food, fresh ingredients , excellent service as well as restaurant’s design and decoration to be unique and different from the competitors. To address these challenges, the company need to provide a great service in order to gain customer satisfaction and loyalty. Thai square has planned to add value to the customers by capturing customer feedback received by telephone, e-mail, and establishing a knowledge base of problems and solutions. (Interview with restaurant manager of Thai square (Minories)

According to the restaurant review, the customers choose Thai square restaurant because its decoration , quality of food and service however the price of food and drink in Thai square restaurant when compare to the competitors is quite high especially today’s economics is critic and the customers’ behaviour have been changing. They may choose to spent on food and drink which is not too expensive and value for money. Therefore, they will choose somewhere else which is cheaper even if it is not good as Thai square. The increasing competitors and changing consumer behaviour are forcing company to apply the managing customer relationships strategies such as customer loyalty , customer loyalty and customer service so as to meet customers’ need. Thai square uses the concept of managing customer relationships strategies to be the optimal solution for this case. (Interview with manager of Thai square (Minories))

In the case of Thai square restaurant, the company grew at a lower rate than last year (2008). Net profit declined by 23% from last year due to economic crisis. In addition, it is affected from changing consumer behaviour.The company applied the idea of customer relationship strategies to meet the customer satisfaction and consequently increase customer loyalty.

1.4 Research Structure

The structure of research consists of 6 chapters is as follows;

Chapter 1: Introduction

This chapter contains aims and objectives of research , organization background which is a case study of this research as well as the structure of this research.

Chapter 2: Literature review

This chapter focus on all theory and strategies that relate to this research such as motivation theory , staff training , customer service , customer satisfaction and customer loyalty.

Chapter 3: Methodology

This chapter describe what methodology can be employed in research and what methodology which is applied by this research. This chapter also contains the objectives and goal of this research, research design , sampling method , data collection and data analysis technique as well as the validity of this research.

Chapter 4: Data analysis

This stage is using Microsoft office excel (Excel) and SPSS program to analyses questionnaire’s data. As well as this process will be evaluated data into percentage and mean score in order to show result by bar chart and pie chart in next step. Bar chart and pie chart will help to easily understand the research topic in each questionnaire

Chapter 5: Conclusion

This chapter provide the conclusion of the questionnaire result is provided to answer the research aims and objectives.

Chapter 6 : Recommendations

This chapter provide some recommendations for company and its employee as well as further research.

Chapter 2

Literature Review

As a result of competitive business situation , many businesses need to pay attention to the new method in retaining and creating new customers. Customer loyalty lead to profitability. Companies should develop positive relationship with customers by increasing customer satisfaction. Since customer satisfaction has been an important to establish long – term relationships which may result in customer loyalty and long – run businesses. It is widely known that the cost of retaining an existing customer is much cheaper than attaining a new customer.

In addition, increasing a customer loyalty may be achieved by the level of service which is delivered by company. Companies need to develop the quality of service by increasing responsiveness , fulfilling customer’s needs as well as providing consistent service. In many business industries, customer satisfaction has been used as the guiding principle for developing customer relationship management strategies as well as organizing business activities.

2.1 Theories of Motivation

2.1.1 Introduction

The motivation in work is “The processes by which people are enabled to and induced to choose to behave in particular ways (Stevens 2005 p.90). As a result, The motivation could be maintained and improved if it was related with a seek for the methods by the job performance and productivity of members

2.1.2 Need Based Theories

The previous idea of human motivation was based on the concept of self-satisfaction which human tries to meet with the happiness and relieve and tries to avoid sadness and distress. However ,this statement, whilst being apparently rational, cannot clarify many ways of human behavior. For example, why do the volunteer charity workers offer their time and attempt for nothing? Why do amateur athletes exert such high levels of effort, whereas a hedonist would prefer to relax? Researchers started to understand that human has other needs and desires which cannot be given an explanation under such a restricted observation of human behavior as hedonism. Therefore, there is the basic principle of needs theories which human motivation is resulted from the absence of an important needs.(Argenti 2002 p.89)

Figure 2.1: The Motivation Framework

Source: Griffin, R.W. (2003), Fundamentals of Management- Core Concepts and Applications (3rd edn), Houghton Mifflin Company, Boston

2.1.3 Maslow’s Hierarchy of Needs

Yeatts and Hyten (1998 p.62) regarded motivation as a continually changing desire to fulfill changing needs. Maslow supposed that human needs arose in a hierarchy of importance, that was called ‘prepotency’. Only the motivators will play a role on the next stage of needs in the hierarchy. Therefore, the act as motivators would be ended when the stage of needs has been fulfilled and the person will pay directly the attention to the next stage of needs in the hierarchy. Maslow’s hierarchy of needs

is shown in Figure

Physiological needs

(Food, water, shelter)

Safety needs

(security, protection)

Social needs

(sense of belonging, Love)

Esteem needs

(status, self-esteem)

Actualisation

Needs

(Self-development)

Self-

Figure 2.2: Maslow’s Hierarchy of Needs

2.1.4 Motivation-Hygiene Theory

The research observed the link between job satisfaction and productivity with 200 engineers and accountants. The research outcome was the motivation – hygiene theory of Herzberg, which proposes that certain factors (intrinsic factors)can result in job satisfaction, while others (hygiene factors) can prevent from dissatisfaction but cannot stimulate satisfaction. Herzberg at el (1959 p.102). Intrinsic factors are factors which are inherent to the job, for instance , the satisfaction of the job itself as well as the recognition and development for success , the availability of chances for the responsibility.

On the other hand , hygiene factors are relevant to the environment in which the job performance is achieved. The hygiene factors consist of working conditions , supervision and interpersonal relations , salary as well as the policy and administration of organization. Besides, the importance prerequisite factor , which is needed to influence human’s motivation, is regarded as the hygiene factors.

The motivation factor would be able to proceed on the staff and establish job satisfaction and productivity if there were ‘good’ hygiene factors which lead the staff to be in a form of ‘no dissatisfaction’. Consequently, to encourage staffs towards higher productivity, “while it is important to ensure that the hygiene factors are correct, the manager must manipulate the motivation by attending to job-content issues (e.g. job-enrichment)� (Carson at el 1997 p.136). Job- enrichment entails redesigning jobs to make them more interesting and challenging by allowing provisions to be made for increased responsibility, creativity and autonomy.

The Herzberg’ research has been criticized because of the research itself and the biased collection of sample (see Holloway 1991). Holloway (1991 p.1) stated that the clerical and production workers ‘did not produce the accounts he was seeking, he didn’t sample them’. Goldthorpe et al (1968 p.11) suggests that other types of employee (such as assembly-line workers) may indeed view work in the way expressed by scientific management and be primarily motivated by financial incentives. A case of workers being primarily motivated by what Herzberg regards as a hygiene factor. The important point to be made from the criticism of Herzberg and from the work of Goldthorpe et al. is that no one theory, be it human relations or scientific management, is likely to apply universally.

Different socio-economic groups appear to attach different meanings or have different orientations towards and work (Parker 1972 p.200). While different group s of people may have different attitudes towards work, they are also likely to react differently towards management policies. A model of worker motivation should therefore be able to differentiate between different types of worker and treat the wants, expectations and attitudes towards work as ‘culturally determined variables, not psychological constants’ (Goldthorpe 1968 p.178).

As a result of the differences of each staff , company should apply a motivation policy so as to encourage an individual behavior and characteristic of its staff. To motivate people with different need and different characteristics is difficult but it would be rewarding and challenging. It can be said that hope is the magic component of motivation.

The motivation factors help staffs to do a better job and to increase productivity(Steinberg 1976 p.123) ( Kamin 2002 p.87). The theorists propose that there are four strongest motivation factors which are the achievement : feeing personnel accomplishment for having done a job well , the recognition : being recognized for doing your job well ; for example , being complimented by your boss and receiving an award , the participation : being involved in your work ; having some responsibility for making decisions and the growth : having the opportunity for challenge in the job, such as the chance to learn skills and knowledge. (Kamin 2002 p.87). Manager not only should translate attitude and knowledge into action but also recognize that people have diverse motivations for asking to join a team (Nieto 2006 p.56).Therefore , manager should to be understand in how theories and models can be translated into useful practices (Currie and Procter 2003 p.14) in next step on training and practical skill

Motivation Factors

Achievement

The work itself

Recognition

Responsibility

Growth

Advancement

Satisfaction No Satisfaction

Hygiene Factors

Supervision

Company policy

Relationship with supervisor

Working conditions

Salary

Relationship with peers

Status

Security

Dissatisfaction No dissatisfaction

Figure 2.3: Motivation-Hygiene theory

2.2 Training

2.2.1 Definition of training

Training has been defined as the planned activities on the part of an organization to increase job knowledge ,skills or to modify the attitudes and social behavior of the members in ways consistent with the goals of the organization and the requirements of the job (Robin 2003 p.1219)(Anderson and Neil 2001 p.280)

Development has been defined as any attempt to improve managerial effectiveness through a planned and deliberate learning process .

Methods of training needs / analysis needs. (Wilson 2005 p.149)

Job analysis.

Job description.

Interview with the job holder.

Interview with the manager / supervisor.

Performance objective.

Analysis of competencies.

Reasons for training

Poor performance and /or productivity.

A change in working methods.

Introduction of a new technology or equipment requiring new /different skills.

Changed or new product range ,after sales etc;

Replacement of employees who have been promoted or transferred, and training the employees who are all promoted and replaced.

To improve workplace safety.(Ferris, et al 1995 p.154)

2.2.2 Training Methods

2.2.2.1 Attitude training

An attitude training is an individual’s characteristic way of doing or responding to a object or a situation. It is based on the experience and leads to certain behavior or the expression of certain opinions.

2.2.2.2 Methods of attitude training

On the job experience placing the trainee within a group whose attitudes are thought to be appropriate .This socialization process tends to produce the desired attitude in the trainee.

On the job training :This may involve “Shadowing� or being attached to a senior employee who has the desired attitudes and personal qualities to influence the employee .(Bohlander 2001 p.235)

On the job counseling ‘s senior member of the organization with the desired qualities and attitudes is appointed as the mentor to the employee.

Off the job training :A group of employees engage on case study activity intended to emphasize relevant and desirable attitudes.

Off the job exercises : Role-playing exercises.

2.3 Customer service

The small companies should emphasize on creating positive relationships with their customers. Customers with positive dealings with companies are likely to be loyal. There are three fundamental idea which lead to the focus on delivering an outstanding customer service. Firstly, the high level of customer service increases customer satisfaction. Secondly, customer satisfaction leads to customer loyalty. Thirdly, small companies have a possibility in delivering greater customer service than large companies. From those three fundamental idea , it can be concluded that by not concentrating on customer service may endanger the achievement of customer satisfaction and customer loyalty. (Longenecker 2005 p.289)

In general , good customer service is to meet customers’ expectations by giving the importance and value to them. Their experience in companies’ service will decide that not only they want to continue doing the business with companies but also what will they give a word of mouth about companies’ service. The good customer service is decided by customers who is given the service. As each customer has different needs and expectations. Therefore, companies need to designed service for individual customers.

2.3.1 Why customer service is important

There are a research shows that when employees have a poor view of customer service , this will result in high turnover in companies. Therefore, to increase the quality of service could lead to increase employee retention and customer loyalty.

Some people would like to do good work. They may lack skills and so they appear unmotivated, or they may be job-hopping because they have not found work environment that support their talents. By giving the support and training as well as service environment which focus on customer staffs could have tools they need to give customers what they want and deserve. (Kamin 2006 p.1)

In addition ,training is important part to improve quality. Good staffs understand that training is crucial for being successful on the job and for future career opportunity.

2.3.2. The value of good service

Service is important to customers as well as it is important for business development. The aim of companies by creating more value for customers is to retain customer to their companies. Everyone in companies should help to build value as well as their jobs aim at serving customers. When everyone understand their role in serving customers, there will be the results which are creating goodwill and increasing companies’ reputation , decreasing in the case of poor quality , improving the chances of cross –selling and up – selling , gaining in the number of customer retention , reducing employee turnover , making more profit , establishing the goal and performance measure , having competitive advantages and being differences from competitors.(Zemke and Wood 1999 p.12)

2.3.3 How to provide good customer service

Most customers have common expectations. They need companies to deliver an outstanding service , solve and realize their problems as well as make an apology if anything went wrong. To determine customer satisfaction companies need to meet their customer’s needs. Moreover, there are some methods which could help to build customer satisfaction. Firstly , companies should give the attention to customers all the time. Secondly, companies have to listen to customers in the way of understanding what they really need.( Aguilar and Stokes 1995 p.3-7)

2.4. Customer Loyalty

As the purpose of increasing profit by continually satisfying customer’s need becomes more prevalent, the significance of meeting customers’ satisfaction and increasing their loyalty becomes more important in the competitive business (Disney 1999 p.491). As a result, business owner who want to be successful in the long term should encourage customers’ visits and make more sales. Good business owner have known and understood this situation well and devoted much of their consideration to ongoing and increasing sales through a variety of marketing activities. Business owner of subtle products should do the same for supporting competitive advantages( Disney 1999 p.491)(Grönroos 1990 p.3).

Moreover , since the need of focusing marketing attempt on maintaining existing customers grow to be the principle of marketers (Grönroos 1990 p.3), the topic of customer loyalty, which aim to increase the regularity of a customer’s behavior and the possibility of cross-selling, has been received more consideration recently (Buttle and Burton 2002 p.217; Dick and Basu 1994 p.99). In this part, the customer loyalty, the different types of loyalty, characteristic of service and service loyalty and the benefits which companies may gain by increasing customer loyalty, plus the related factors which may affect customer loyalty, will be discussed.

2.4.1 The Origin and Meaning of Customer Loyalty

The first approach is that loyalty is a surrogate of retention; in other words, a customer who keep on buying one product or service is a loyal customer. However, the second approach regards customer loyalty as a mental conception with an affective or attitudinal component, which could in fact reflect the essence of retention ( Buttle and Burton 2002 p.217;Ennew and Binks 1996 p.219).

Loyalty is unlike repeat buying behavior; loyalty includes an attitudinal component which should firstly come to mind before repurchasing products or services (Buttle and Burton 2002 p.217; Dick and Basu 1994 p.99). Therefore , loyalty is a state of being faithful and honest to a particular product or service, and proving such faithfulness and honesty. On the other hand ,repeating purchase only represents frequent occurrence of the purchasing behavior which persists in a given period of time.

The meaning of loyalty and repurchase have common characteristics because of the frequency of use increasing when there is a high level of loyalty (Liddy 2000 p.351). Consequently, frequent customer should not be regarded as loyal customer because frequent customer possibly purchases product or service from several different companies. Moreover, customers’ purchasing behavior could be changed by different situational factors. Buttle and Burton (2002 p.217) stated a characterization of loyalty from a company’s head of customer relationship division: “It’s about having had experiences of things that you feel are important.

Putting it in personal terms, you build loyalty to your friends through personal experiences you’ve shared. Customer loyalty really is like friendship (p. 218)”. This argument implied that although many customers may carry on to purchase with particular sellers, they could be unfaithful to the product or service sellers. Hence, by explaining the knowledge of customer loyalty, many attempts has been dedicated to classify the different types of customer loyalty.

Moreover, to understand the differences between customer loyalty to goods and services as well as the typologies and the origins of customer loyalty, the benefits that businesses could obtain from increasing customer loyalty have been suggested by many authors. With the knowledge of both the characteristics of service loyalty and the promising benefits received from increasing customer loyalty as well as the importance of retaining existing customers could be obtained.

2.5 Customer Satisfaction

Generally , most customers do not criticize about their dissatisfying experiences of product or service. However , they could change to another sellers ( Boshoff 1999 p.236). If the seller cannot offer what customer want, there are many other different sellers which provide similar products or services in the market. To sum up, sellers who want to attract or retain customers have to meet customers’ needs and satisfaction (Oliver 1998 p.14 ).

Customer satisfaction has become increasingly to seller’s attention during the past decades. Nevertheless, customer satisfaction has been one of the most unquestionable theory of the modern management field (Oliver 1996 p.11-12 ). The idea of customers satisfaction have a clear, reasonable concept. Moreover, it is commonly understood that customer satisfaction could lead to customer loyalty as well as result in higher future profit(Oliver 1996 p.11-12). In many business industries, customer satisfaction has been used as the guiding principle for developing CRM strategies as well as organizing business activities.

However, customer satisfaction should not be an objective by itself. Customer satisfaction should be employed as a method for developing the company’s performance (Martensen et al. 2000 p.544-53). A number of empirical researches have revealed a relation between customer satisfaction, customer loyalty, and the economic performance of a company while customer satisfaction has been evaluated in different ways, for example, stock market value, added market value and return on investment (Anderson et al. 1994 p.53-66 ; Eklof et al. 1999 p.514-22).

On the other hand, the topic about the background of customer satisfaction, the relationship between customer satisfaction and customer loyalty as well as customers’ post-purchase behavior are presently arguable. To understand the idea of satisfaction undoubtedly and realize the benefits of customer satisfaction, relation between customer satisfaction and related matter are the main significance in this study.

2.5.1 Definition of Satisfaction

Customer satisfaction has developed into one of the main purposes for business since the 1990s. Johnson and Fornell (1991 p.267-86) termed satisfaction as a general assessment of customer’s purchasing and consuming experience. In a few years later, Oliver (1996 p.11-12) provided the recognized definition of satisfaction, which he stated to be linkage with the theoretical and empirical evidence to date: “Satisfaction is the consumer’s fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provides (or is providing) a pleasurable level of consumption-relate fulfillment, including levels of under or over-fulfillment( p. 13)”.

As a result of the importance of satisfaction, many businesses initiate to assign their job to evaluate how satisfied their customers are and to observe how satisfaction ratings affect customer retention and their profit (Bolton 1998 p.45-65).

2.5.2 Importance of Customer Satisfaction

In 1990s, there was a prevalent knowledge that satisfaction ratings has been in fact a process to reach strategic purposes, for example, customer retention which is understood to have an effect on companies’ profits directly (Jones and Sasser 1995 p.88-101). To concentrate on increasing satisfaction is necessary since satisfied customers have more potential to come back the same shop or repurchase the same product or service (Reichheld 1996). Furthermore, customer satisfaction is regarded as condition for customer retention and loyalty, and apparently it is important to understand economic target such as market share, return on investment and profitability(Hackl and Westlund 2000 p.820-25).