The importance of customers to a business

A customer is a person who buys products (goods or services) from a shop or a business organization. Customer service is the provision of service being provided by the seller to customers before, during and after a purchase of any product. According to Turban et al. (2002), “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer expectation.” It is also the process of assisting another person or persons who buys goods and services from a shop. It can be provided either directly by a sales or service representative or through automated means like internet sites. The latter means provides 24×7 services to customers. However according to the survey conducted by National Retail Foundation (NRF) along with American Express in 2004, Just 16 percent of traditional shoppers were extremely satisfied with their most recent customer service experience while an additional 51 percent were very satisfied. In contrast, By contrast, 44 percent of online shoppers were extremely satisfied with their customer service experience and an additional 45 percent were very satisfied. Much of the profits of most businesses rely on repeat custom. According to the marketing theory, it costs as much to gain ONE new client as to keep FIVE existing ones.

Qualitative customer service is almost always identified as one of the key success factors for a small and medium enterprise (SME). Any business in which the total number of employees is less than 500 is called a small business enterprise. However different countries provide different definitions for a SME. Any business, especially a small business, needs repeat customers to survive. To achieve this, a business needs to offer excellent customer service. Great customer service is essential to help small businesses attract and retain the customers they need to survive and compete against the big boys, and more so in a downturn economy (Isabel M. Isidro: 2007). A small business owner has to hire a third party to identify and analyse the quality of its customer service (Kathy: 2008). This third party had to conduct inspections and share its results with the staff and the employees of the SME on a regular basis. When employees are aware of such programs they will perform better leading to the competitive advantage for the SME over its large counterparts.

Generally small businesses often complain that they cannot really compete with larger firms because of the large scale of economies to scale being enjoyed by the latter. Large firms are able to purchase raw materials and stock on a scale that a small business could never afford. However if they are able to offer better and more personal customer service than a large multinational corporation, they can easily enjoy the benefits of competitive advantage. The customer service in a small and medium business should be able to achieve the following for the business it supports:

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Quick turnaround – If the business owner is able to promptly get back to the customer, say within 24 hours, it means that the SME is well on its way to winning the customer’s seal of approval. The customers should know that the request has been attended to by a live person, not by an automatic mail responder.

Trustworthiness – A SME should always create an impression that its products are very much consistent in terms of quality and price. This will create customer loyalty and brand loyalty, as well.

Flexibility – Customer service provided by a SME should assure that complaints are dealt with accordingly and will be addressed with favorable outcome. For example, customers can easily return a defective product that can be replaced without hassles.

Real-time interaction – Every SME should understand that always customers like to call any business and speak to a live person. If a SME provides an excellent advantage of customer service during and even after office hours, then it will create a cutting edge to it over its competitors.

The importance of customer service is identified as very intensive in service industry when compared to other industries. Normally its importance varies by product, industry and customer. Even the quality and the nature of providing customer service from company to company in service industry. Some service-oriented companies allow the exchange of defective or broken merchandise often only with a receipt and within a specified time frame and some other companies may have relaxed policies towards the exchange. Retail stores will often have a desk or counter devoted to dealing with returns, exchanges and complaints, or will perform related functions at the point of sale. According to Micah Solomon quoted in Inc. Magazine, the perceived success of such interactions being dependent on employees “who can adjust themselves to the personality of the guest. As per the survey done by the NRF Foundation in 2004, for traditional retail stores, employees and the store environment are the most important aspects of customer service. For online shopping, security and on-time delivery are the greatest customer service concerns. In case of engineering services companies, customer service plays an important role in an organization’s ability to generate income and revenue. From that perspective, customer service should be included as part of an overall approach to systematic improvement. A customer service experience can change the entire perception a customer has about the organization and such perception creates a competitive advantage for a SME over its large counterparts.

Similarly the customer service in hospitality and tourism industry is very important to build customer and brand loyalty which will lead to growth of the company. The customers will generally opt to choose other hotels because they are afraid of having a bad trip. Therefore in such a case, providing good customer service more than the expectations of the customers leads to substantial reputation, growth in sales and the good rating in the competitive market. The customer service in any service-oriented company provides good number of sales, return visits by the customers and the very effective word of mouth advertising. In case of an e-commerce company, there is a need of putting some extra attention into customer service. The more happy customers the company has, the easier it will be for it to grow. So the prior focus should be on the implementation of the right strategy and hiring the right customer service team. Therefore a SME belonging to any category of service industry should concentrate on increasing efforts to improve its customer service and to measure it from time to time so that proper and immediate measures can be taken if there are any deviations in its customer service. The SME should properly design its customer service policy and implement it with lot of caution. While offering the customer service, the enterprise has to identify the barriers, if any, and the effective measures for removing them. In order to create an effective and productive performance of a SME, the customer service is the backbone.

Problem Statement

The last couple of years were very challenging for entrepreneurs. One of the main issues, besides just staying in business, is how to maintain a competitive edge. Many small and medium business owners had to lower their prices to stay in business, but it has resulted in having very lean margin for business return. And they often need more customers to make the same amount of money which they used to make. In most case, most companies are not able to secure more customers due to lack of trained staff and ignorance towards customer service when dealing with customers. There are more Small and Medium Enterprises (SMEs) companies those are established in recent years to compete with Multinational Corporations (MNCs) in the market. Other than coping with technologies to compete with the big players, SMEs are also have been facing many challenges in order to stay at competitive edge. In business today, majorities of the customers wanted to be treated with respect. Companies that provide poor customer service have resulted with many disgruntled customers. And many of these companies have gone out of business because of their poor customer service. In view of this context, the importance of customer service in small and medium enterprises is identified and the study on the same is undertaken to understand the implementation of customer service in SMEs to exercise competitive advantage over their competitors.

Aims and objectives of the Study

Based on the problem statement as explained above, the objective in this study is to find out whether by providing good customer services can achieve towards competitive advantage for companies.

To find out if providing good customer services can achieve competitive advantage for companies.

To determine ranking of the necessary criteria for successful implementation of customer services

Identify the barriers for implementation of customer services

To assess the performance of customer services in the company

To identify as to what extent of customer service implementation can lead to improvements and provide significant benefits to the company.

Significance of the Study

In any country, small and medium businesses normally have limited budgets but there is one area they can compete head to head with big companies. The area is providing best and qualitative Customer service. According to the literature survey, 35% of the large organizations do not respond to e-mails sent by their customers. This is where small businesses can outshine their larger counterparts. Regardless of the size of a SME, customer service remains a major differentiator that levels the playing field. The way customers and their issues are being managed by the enterprise makes all the difference in creating a competitive advantage. There is a general norm that in any organization, on an average if a customer has a good experience he/she will tell around 3 people. But if it ends up being a disappointing one, not only is it unlikely he will return, but the often embellished story of his poor experience will be relayed to as many as 10 people. Those 10 people are highly likely to pass it on again, and so on, resulting in a huge wave of negative publicity. It is the service that customers remember. It is the service that earns an establishment a reputation…good or bad. It is also the service that makes customers return again and again. Therefore a SME has to be very careful in offering such an important customer service to its existing and/or potential customers. If the SME manages well in providing high quality customer service to its customers, it will lead to competitive advantage over large enterprises as a result of which the survival of the small and medium enterprise is possible in the competitive market.

Limitations of the study

Organization of the paper