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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

It’s difficult to over-stress the importance of customer satisfaction. Sustained profitability is only possible through building customer value and satisfaction. Profit comes as a consequence of building customer value.

As Henry Ford said:

“Business must be run at a profit… else it will die. But when anyone tries to run a business solely for profit, then also the business must die, for it no longer has a reason for existence.”

Value Defined

Something that satisfies a consumer’s need or want has value in the eyes of the consumer. Whether or not a consumer will buy a product offering depends on whether what it costs them is greater or less than the product’s perceived value. Furthermore, when choosing between similar offers, a consumer will choose the product that offers the biggest difference between value and cost. Costs to the customer include not only monetary costs, but everything associated to acquiring it, such as time and hassle. For example, having to go and pick up concert tickets you’ve already paid for online adds an additional cost. Therefore, even if your product is more expensive, it will nevertheless be chosen if it carries more value in the eyes of the customer.

The difference between what the consumer perceives as the value of the product offering and its costs, are known by marketers as the delivered value. The goal is to ensure that the delivered value for your product is greater than the delivered value of the customer’s alternatives.

Customer Satisfaction Defined

Customer satisfaction is closely related to customer expectations. Once acquiring a product, the customer will compare the actual performance of the product with what was expected. The customer will have feelings of pleasure if product performance meets expectations, and feelings of disappointment if it doesn’t. If actual performance exceeds expectations, the customer is highly satisfied or delighted.

Customers form their expectations from a variety of sources such as friends, past experiences, competitors as well as the marketer’s messages and promises. A balancing act must be made here. If you set expectations too high with your messages, your customers are more likely to be disappointed. If you set them too low, fewer will buy. The most successful firms set expectations high and then are able to deliver performance to match – at a profit.

Creating Customer Value

Given the importance of customer value, it’s useful to use what Micheal Porter of Harvard calls the value chain as a tool to find ways to create more customer value. The value chain consists of company activities that create value and add costs in an organization. The primary activities in the value chain are:

Bringing materials into the company (inbound logistics)
Converting materials into finished products (operations)
Shipping out finished products (outbound logistics)
Marketing the products (sales and other marketing activities)
Servicing the products (customer service)

Primary activities have secondary support activities which include procurement (or purchasing), technology development, human resource management and firm infrastructure. These support activities may be handled by specialized departments or by multiple departments.

Your job as a marketer is to examine the costs and performance of each value-creating activity, and find ways to improve in each area. It’s helpful to compare competitors costs and performance in the value chain as a benchmark. If you can outperform your competitors you can gain a competitive advantage.

It’s important to note that internal departments sometimes act in ways to maximize their interests rather than those of the company or customers. For example, a credit department may take too long ensuring the credit worthiness of a customer to avoid the possibility of a bad debt. During this time, the customer is waits and waits, and the sales person becomes frustrated.

The solution to this problem, is to ensure the core business processes are managed smoothly, by using cross disciplinary teams to manage core processes.

It’s important to look beyond your own operations as well. Finding competitive advantages beyond your own operations will increase your chances of success. For example, Walmart’s suppliers are plugged directly into its inventory system so that they can track sales and replenish items as needed. This reduces the chances of stock outages.

The importance of customer retention

Often, organizations focus a lot or their marketing efforts on attracting new customers and far less attention retaining customers. Satisfied customers are loyal customers. Here are some interesting statistics from the Harvard Business Review (The Loyalty Effect by Frederick F. Reichheld and Thomas Teal):

It can cost 5 times more to get a new customer than to satisfy and retain a current customer
In a typical company, customers are defecting at the rate of 10-30% per year
The profitability of a customer tends to increase the longer the customer is retained

A 5% reduction in the customer defection rate can increase profits by 25% – 80%, depending on the industry

The consumer is faced with an infinite number of choices in his buying behavior. He makes a decision on whether to spend his money or save it. If he chooses to spend it, he has a wide range of product choices available to him. Even within the relatively narrow field of paint industries the consumer has, from five to ten different brands of paints from which to choose in the average paint shop or depot, obviously, no one brand is going to be sold for long if it stops giving the customer what he wants. Hence, it is a total error for a marketing manager to believe that the consumer must buy his product.

The consumer bestows his favor on those who give him what he wants in product, price, promotion and convenience. The penalty for disobeying his mandate is almost certain failure. There are numerous illustrations of firms that refused to obey “Key consumer”, thereby incurring his wrath. At one time, the Waltham Watch Company was held in high esteem by watch buyers decided that the wrist watch was preferable to the pocket watch and subsequently, the consumers changed their buying habit, Waltham was a stubborn until the consumer forced it to do so by refusing to buy pocket watches. Meanwhile, key consumer decided that he wishes his wrist watch to do more than ten times, he wanted a fashionably styled time piece. The majority of firm in that country immediately entered a competitive race on a fashion basis, but not Waltham. His refusal to produce a properly style watch eventually caused its failure.

Obviously, the consumer seldom directly commands a manufacturer.

1.2 STATEMENT OF THE PROBLEM

In the cause of research, answer will be provided to the following research question problems

Of what quality and quantity would they prefer to buy?
Is the price charged on the product not too high enough for them to bear?
Is there any welfare package available for the consumer at all?
Are company products readily available to any shortest possible notice from consumer?
Are there any positive responses from consumer as to the prospect of the business?

The researcher must however bear in mind and proffer proficient solution and answers to these numerous questions if he is to guarantee himself of success or survival of the business entrusted to him.

1.3 AIMS AND OBJECTIVES OF THE STUDY

To know whether the price charged on the Berger paint product is too high and ambiguous or not.
To know if Berger Paint product is readily available for the consumers
To ascertain if there is any package available for the consumers/customers who are frequent users of the Berger paint product.
To know the quantity and quality rate which the consumers want to buy.

1.4 SIGNIFICANCE OF THE STUDY

The important of the study is that it broadens and widens the researcher’s knowledge. The topic chosen has really increases or improves the standard of living of the researcher. The study serves as an impetus to participate actively without allaying fears or panic in the field of practice. The study being “Consumer Satisfaction and Retention as a key to business survival” plays a dominant role in any business ramification.

The study of this research work is a pre-requisite in partial fulfillment of the requirement for the award of Higher National Diploma in Marketing. The research equally creates awareness to the society at large as regards what consumer satisfaction is all about in running of the organization in the respect that it helps in solving problems associated with the satisfaction of consumers how consumer can be valued at a profit.

1.5 SCOPE OF THE STUDY

The scope of this study is limited to paint industry. It is therefore imperative for the researcher to carry out all necessary enquiries and activities within the boundary specified in the study. The scope will also cover the conceptual aspect in terms of user, colour, behavior, reaction and modes, friends and relative.

The market scope covers Ilorin Township to immediate consumer areas. The industrial scope will cover all the manufacturers of paint product. But the case study of this research will be BERGER PAINT NIGERIA LIMITED. The geographical aspect of the scope is going cover Ilorin metropolis area directed to the consumer.

The area of interest will be on the number of sales recorded in the five consecutive years (2007 – 2012).

1.6 LIMITATION OF THE STUDY

This is varieties of problems faced white carrying out this research work. One of this is thane constraint. There is no adequate time or sufficient time for the researcher to visit and consult all necessary sales depots, distributors, and consumers of Berger paint Nigeria Limited, since they are not geographically sited in one region. In view of the limited time available for the final submission of this project work, the researcher has to limit the research finding to Ilorin depot of the company since they offer likely services or operations.

The researcher is also faced with some administration problems from the staff of Berger Paint Nigeria Limited. The staffs were always reluctant to grant interview being carried out by the researcher. The solution to this is achieved by re-orientate them and give a kind of incentives as motivation in order to change their lackadaisical attitude towards the researcher and their customer at large. Consumer satisfaction and retention. A key to business survival.

1.7 DEFINITION OF TERMS

(a) CONSUMERS: These are groups of individuals in an organization who are buyers for consumption purpose. They are not buying to make profit, but to satisfy basic or psychology needs or wants.

(b) TOTAL CONSUMER VALUE: This is the bundle of benefits consumer expect to derive from a given product or service.

(c) TOTAL CONSUMER COST: This is the bundle of cost consumer expect to incur in evaluating, obtained using, and disposing of the product or services.

(d) MARKETING: Marketing is the total system of interrelating business activities designed to play price, promote and distribute want, satisfying goods and services to prospective customers. (would be customers).

(e) SATISFACTION: Is all about pleasing the consumer by making available what they want, need at the right time, in the right place and with the right price. To provide them with what they want, needed or asked for.

(f) RETENTION: All the activities involved in finding and retaining consumers and growing the business.

(g) CONSUMER SATISFACTION: This is the way by which the consumer pleased with the company aim and objective to make profit. It is the way by which the company makes every effort to make goods and services available for the consumer at the right time, in the right place and at the right prices.

(h) BUSINESS SURVIVAL: This is all about the improvement or growth of the business. Meanwhile, the primary aim of any business is to minimize loss.

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