Is Customer Satisfaction Necessary for Profitability

Is Customer Satisfaction Necessary for Profitability
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Abstract
Customers play an instrumental role in the success of a business and evidence indicates that the kind of services, which an organization provides, affects the trust and loyalty of customers. Businesses that are able to attract a huge number of customers usually end up making higher profits compared to those that have lesser customers. There are numerous mechanisms which organizations use to attract customers, including quality product and services, better prices, discounted services, loyalty programs, and after sale services. These factors are instrumental in enabling a customer to choose to do his or her shopping in a particular establishment instead of going to another competing firm. Therefore, when a business improves its level of service delivery, it attains the opportunity of cutting on the market niche of its competitors and this translates to increased sales and revenues as well as enhanced profitability. The management is tasked with the role of ensuring that employees are well trained and qualified to handle any queries from customers to ensure that service delivery is of the highest quality.
Is Customer Satisfaction Necessary for Profitability
Introduction
Most research studies have proved that customer satisfaction leads to better business outcomes and enables an organization to attain a higher revenue as a result of the increased number of people who visit the business premises. According to a study conducted by Keiningham, Perkins-Munn, Aksoy, and Estrin (2005), when a customer is satisfied with the services that are offered by an organization, he gains a positive influence of becoming a returning customer and this contributes to the positive financial performance of an organization. In addition, numerous studies have also proved that there is a close association between the rates of customer retention and the profits that businesses make across a number of service industries. When a customer understands that an institution is dedicated to serving his needs, it is evident that a person will be motivated to make frequent purchases and this will ultimately enhance the profitability of the business.
Unlike in the past when businesses strived at making huge profits without considering how they will retain their customers, research studies have revealed that firms have improved service delivery since customer satisfaction is positively correlated to profitability. According to Alsemgeest and Smit (2013), businesses aim at having a positive return on their investment, and they have realized that this can only be achieved when they provide good services to customers. In addition, other issues such as the quality of a product, the price, and the quality of services that are provided to customers also have a huge impact on customer satisfaction. For instance, when a customer is provided with loyalty points whenever he shops at a company, the management tends to entice the shopper to make repeated visits to the business in order to increase his loyalty points (Alsemgeest & Smit, 2013). These points can later be redeemed at the same premises where a customer is able to benefit while at the same time the company benefits by having huge volumes of goods being sold. This is a win-win situation for both the business and the customer.
Through purchase discounts, loyalty, and customer satisfaction, organizations get to achieve their financial objectives and a fair return on their investment. The service-profit chain is a well-documented narrative which allows for the realization of the forecasted results by several organizations. In the recent past, there has been empirical evidence on the relationship between the evaluation of the consequences and antecedents of the customer satisfaction and profitability of an organization (Mohamed, 2016). Most of the academic literature indicates that there has been a substantial relationship between profitability and customer satisfaction. However, there has been a disparity in the understanding of the actual truth relating to individual customer-level achievement and the set organizational level performance on customer satisfaction. The truth about this matter is that businesses that are able to satisfy the needs of their customers tend to retain their trust and loyalty.
The way personnel relates with customers tends to influence the outcomes of the relationship between a business and its customers. According to numerous research studies, positive outcomes such as loyalty programs, enhanced front-line customer service, and a positive word-of-mouth initiative by customers can have a huge impact on the revenue base and profitability of an organization (Raie, Khadivi & Khdaie, 2014). This is because personal interaction between the business and its customers makes people feel valued and this impacts on their motivation to select that shopping center at the expense of another. For instance, when a customer wants to purchase an electronic asset and does not understand how to operate it, he will first approach the sales representative to ask for the mechanisms of operating it. If the sales representative shows positive signs of helping the customer to understand how to use the equipment, there is a high likelihood that the customer will purchase the equipment. Nevertheless, when the salesperson is unresponsive or rude, chances are that the customer will not make the purchase. In such a situation, not only will the business lose a potential client, but the revenue base of the business will not be positively affected in comparison to a situation where the customer would have completed the purchase.
Economic theories stipulate that profitability could be realized when there are increased returns to a business after the said customer satisfaction has been achieved, and that profitability could be recognized beyond a certain point. Customer satisfaction is, therefore, an essential impetus to the entire organizational growth and success. In most cases, dissatisfied customers do not raise concerns, and on the contrary, any complaints raised hardly reach the top management. This because customer satisfaction measures the gap that exists between the anticipated customer reactions to a service and real service being delivered (Terblanche, 2006). All customers who come to an organization have a perceived value expectation for what they pay for. Whenever a customer makes a complaint, it is the responsibility of the organization and its management to establish the actual cause of the said complaint, and work out tirelessly to make the customer happy and satisfied. Studies indicate that customer satisfaction and customer loyalty work together and they play an important role in enhancing the profitability of a business.
In the marketing literature, customer operating orientation is a marketing concept that holds that a customer is the foundation of a business, and managers should ensure that all the needs and requirements of the customer are elevated above any other needs. According to Murray and Evans (2013), this marketing concept is of huge significance since it motivates employees to put the needs of the customers above any other needs to ensure that the business attains the loyalty and trust of a client. Customer orientation is of huge significance since it impacts on the emotions and feelings of the customers, and this plays an important role in enabling clients to attract more customers. Experts say that customer orientation encourages an institution to attain the overarching objectives of satisfying the needs of the customers, which in turn enables the business to earn higher profits by increasing the level of sales (Raie, Khadivi & Khdaie, 2014).
Furthermore, it is right to insinuate that in the absence of a customer, there will be no business activity. What matters to any given business is the relationship that exists between the business entity and the customer (Javed & Cheema, 2017). Through customer satisfaction, a customer is in a position to determine the choices he/she has over the company activities. Customers will always come to the organization because of the value that they get from the purchase that they make. Most ...