Customer Centricity - Literature Review

Customer Centricity - Literature Review

Literature on this kind of topic is significant, for reviewing it can give a good idea of everything that has taken place. It becomes necessary to see what has been addressed in the past so that a much more accurate picture of the present day and the future can be completed by the researcher. In order to do this properly, customer retention information must be discussed and examined so that it can be shown whether customer centricity has been the focus of businesses for some time, and whether it has been addressed correctly. If the retention of customers has not been the focus of a specific business, this could be why they are struggling with customer centricity now. Therefore, what authors have to say on this specific issue is significant and must be examined. This will also allow for a much better idea of what should be studied in the future.

Many people have been losing the battle with customer centricity for quite some time (Achrol & Stern, 1988). Because of this it has become increasingly significant for businesses to figure out how to keep customers interested in doing business with them and how to keep loyalty at a higher level (Jackson, Cunningham, & Cunningham, 1988). Many businesses spend a great deal of funds each year not only to sell their services and products to customers but to insure that those customers will come back (Jackson, Cunningham, & Cunningham, 1988). The reason that so much funds has to be spent on this is because customers are becoming increasingly more aware of scams and difficulties with businesses and they are also much better educated now (Jackson, Cunningham, & Cunningham, 1988).

Unfortunately, the majority of the funds that is being spent by businesses is spent only to bring customers to the business and is not spent on keeping them (Jackson, Cunningham, & Cunningham, 1988). Because of this, a lot of customers will do business with a specific company but then they will not remain to continue this business relationship once that specific transaction is done (Jackson, Cunningham, & Cunningham, 1988). Now that this has really come to light in recent years, more and more businesses are realizing that what it takes to keep customers is much different and more significant than what it takes to first get customers into a business (Jackson, Cunningham, & Cunningham, 1988).

Because of this, businesses have to change the way that they look at customers and the retention strategies that they employ to keep them (Jackson, Cunningham, & Cunningham, 1988). There are customer centricity strategies that are largely used in any service industry (Jackson, Cunningham, & Cunningham, 1988). Some places offer coupons in an attempt to bring people into their business but then offer to give them discounts if they continue to utilize their services (Jackson, Cunningham, & Cunningham, 1988). Most airlines offer frequent-flier mileage programs where people who remain loyal to that airline can receive free or discounted trips (Jackson, Cunningham, & Cunningham, 1988). Some through the mail music businesses offer discounts depending on the amount of music that is bought (Jackson, Cunningham, & Cunningham, 1988).

There are various clubs in coffee shops, department stores that offer credit cards that provide discounts, and resorts and hotels that offer packages to people who stay there more often (Jackson, Cunningham, & Cunningham, 1988). Even some sports teams provide seating priorities for people that have previously held season tickets or previously bought tickets for a specific event (Jackson, Cunningham, & Cunningham, 1988). For businesses that offer mortgages and other lending type issues, lower rates are sometimes offered to people who have done business with that company before (Jackson, Cunningham, & Cunningham, 1988).

One of the things that most people learn in marketing is that it is often easier to get an individual to try a good or service from a specific company that it is to get them to continue to buy from that company (Jackson, Cunningham, & Cunningham, 1988). It is much harder to keep customers that it is to get them in the first place, and therefore it seems that more funds should be spent on retaining customers rather than getting customers to come to the business the first time (Jackson, Cunningham, & Cunningham, 1988).

It appears that this would be a good way to build a profitable and growing business, but many businesses seem to turn away from this idea or not realize its importance (Jackson, Cunningham, & Cunningham, 1988). Having customer service that is higher than the standard set for a specific industry is one of the ways that people can be brought into a business, but this customer service must grow into a bond between the consumer and business (Jackson, Cunningham, & Cunningham, 1988). This bond is called loyalty and it must be on the part of both the customer or customers and the business alike (Jackson, Cunningham, & Cunningham, 1988).

Unfortunately in today's society there is so much going on and so many options to choose from that loyalty often appears to be a fleeting idea (Jackson, Cunningham, & Cunningham, 1988). There is no blind loyalty in any type of industry anymore and many customers no longer buy something simply because they have bought it there before or because it is a specific brand name (Jackson, Cunningham, & Cunningham, 1988). Customers and customers today are much more educated and keep their eyes open for better deals (Jackson, Cunningham, & Cunningham, 1988). This is good for the customers because competitors realize that they have to provide a better deal and do more for the customers that they have in order to keep them from going elsewhere (Jackson, Cunningham, & Cunningham, 1988).

One of the best ways to compete is to offer either a new product or a new service to a customer when it appears as though he or she might be leaving to go somewhere else (Jackson, Cunningham, & Cunningham, 1988). This is not always easy to do, and sometimes might not even be possible, but it is one of the ways that a business can keep customers returning to them (Jackson, Cunningham, & Cunningham, 1988). Another way that a company can keep people coming back is to offer discounts to a customer that has shown a lot of loyalty to the business so that the customer will stay there instead of going to someone else's business (Jackson, Cunningham, & Cunningham, 1988). A lot of people believe that customer service is the best answer to all of the customer centricity issues (Jackson, Cunningham, & Cunningham, 1988). While it is very true that customer centricity is very significant and excellent service helps to keep people coming back to a business, the market is too competitive to assume that this will work all of the time (Jackson, Cunningham, & Cunningham, 1988).

Most customers have come to expect excellent service and since they feel that this excellent service is something that they should, by rights, be receiving they often do not see it as anything extraordinary (Jackson, Cunningham, & Cunningham, 1988). In the long run, excellent customer service must be upheld but it will not necessarily keep customers (Jackson, Cunningham, & Cunningham, 1988). The only way to really win at the game of customer centricity is to enhance the loyalty that customers have to the business and how much profit for the business each customer provides while insuring that the service remains extremely high (Jackson, Cunningham, & Cunningham, 1988).

Having a brand name value that customers see as being worthwhile is also very significant, but it is necessary to remember that customers will often look for better deals and if they try a product that is lower in cost and find that it is just as good in their opinion they will continue to use it rather than remain loyal to the brand that they originally utilized (Jackson, Cunningham, & Cunningham, 1988).

Brand-name value is not something that is tangible (Jackson, Cunningham, & Cunningham, 1988). It cannot be seen and it comes only from the perception that the customer prefers a specific name (Jackson, Cunningham, & Cunningham, 1988). In marketing, the strategic advantage often goes to businesses that have brand names that are easily recognizable (Jackson, Cunningham, & Cunningham, 1988). If someone were starting up a soda business they would pay billions of dollars if they had it to use the Coca-Cola name (Jackson, Cunningham, & Cunningham, 1988). This is not because Coca-Cola is such a significant name in and of itself, but because the name is easily recognizable and already has a loyal customer base from which to build (Jackson, Cunningham, & Cunningham, 1988).

This is true with anything that is on the market today including computers, theme parks, fast food, and countless other things (Jackson, Cunningham, & Cunningham, 1988). Not all industries have businesses that have a great deal of brand recognition but industries that have this rely on its importance (Jackson, Cunningham, & Cunningham, 1988). The real question, however, is how customer loyalty can be built (Jackson, Cunningham, & Cunningham, 1988). Even customers who are satisfied with something do not always return to that specific business, especially if the business is somewhat out of the way or relatively inconvenient to get to (Jackson, Cunningham, & Cunningham, 1988).

Customer loyalty is generally thought to be achieved when a customer returns to buy something that they have bought before from the same company (Jackson, Cunningham, & Cunningham, 1988). There are many other ways to measure loyalty statistically, but it basically boils down to a customer returning to a business even though there are so many other choices available (Jackson, Cunningham, & Cunningham, 1988).

There are many ways to increase customer loyalty and it is significant to discuss some of them here (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). One of the best ways is to meet or exceed many of the service standards that others in the industry have established for customers (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). This is often a difficult thing to do but it is necessary if loyalty is to be kept (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). A customer's right to their privacy is also extremely significant to many people today with the higher number of credit card and identity thefts that seem to be taking place and the problems that some have with privacy on computers in carrying out transactions (Shafiroff & Shook, 1990).

If customers believe that all of the personal information they have provided to a specific business is being shared with everyone they will likely not do business with that specific organization or will not return to do business a second time (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Customers who are assured of privacy and feel comfortable with a specific business will likely buy there again because they feel safe (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Dealing with customers that have problems or difficulties is also another way to keep customer loyalty (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Businesses should have a good method for customers who have complaints to call and have these complaints dealt with promptly and efficiently (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971).

Customers who feel they can contact the business and discuss problems that they are having are more likely to remain with that business because they feel that they are actually cared about by the people that work there (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). It is also significant to look at customer value and customer satisfaction (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971).

Most large businesses survey the customer base that they have to determine how satisfied a customer is with the business and the good or service that was bought (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). It is significant to look at these customers' opinions of how satisfied they are with a specific business, but most do not look at the values that they provide for their service based on what their competitors are providing (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971).

When this is analyzed and looked at along with customer satisfaction ratios it will help to indicate why some customers who appear to be satisfied with the business do not remain loyal to that specific business (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Not every business completely understands what customer centricity programs are but they can be very powerful tools when used for relationship management (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971).

One of the main reasons that businesses feel that customer centricity is so significant is due to the fact that maintaining a relationship with the customer that they already have is often a great deal cheaper than acquiring more customers (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Many firms find that losing the customers that they have and the customers that are most profitable have very serious effects on their profitability (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). For example, many banks find that the top 30% of the customers that they have make up 100 to 150% of the total amount of profitability that they have (Zeithaml, Pasuraman, & Berry, 1990). Because of this, the rest of the customers may not provide them many kind of profitability at all (Zeithaml, Pasuraman, & Berry, 1990).

Saving profitable customers is not the only reason that customer centricity programs are so significant (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). They also allow businesses to collect a great deal of information about the customers that they have (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). By using this data, businesses can better market to, target, communicate with, and understand the customers that they have and they can help to customize some of the future interactions that they have with these customers in such a way that the customer will feel more comfortable (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Retention programs are often relatively inexpensive and they make customers feel special and significant (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971).

In turn, this increases the buys that the customer makes at the store and also helps the customer to recommend the store to others (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). Many people look at customer centricity programs as being synonymous with customer relationship management, but this is not the case (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). There are several types of customer centricity programs that are utilized by different businesses (Rackham, Honey, Colbert, Fields, Hinson, Morgran, Morris, Sugden, & Tribe, 1971). One of these is the discount program where customers receive a discount because they have repeatedly bought from that store (Williams, Spiro, & Fine, 1990).

Another is a loyalty program which is usually based on a system of points (Williams, Spiro, & Fine, 1990). These points are given to customers based on the interactions that they have with a specific company and then these points are redeemed by the customer for discounts or other rewards (Williams, Spiro, & Fine, 1990). Another type of customer service program is one that is card based (Williams, Spiro, & Fine, 1990). These are often used by supermarkets where a card is given to the customer and then this card is swiped through the scanner at the checkout line (Williams, Spiro, & Fine, 1990). This gives the customer holding this card discounts on various items that he or she may be purchasing at the time (Williams, Spiro, & Fine, 1990).

The customer centricity programs do have expense and difficulties, however (Williams, Spiro, & Fine, 1990). Some of the retention programs can be very expensive and often they offer discounts or rewards to customers who would have bought the product anyway even if they did not receive an incentive (Williams, Spiro, & Fine, 1990). Over 87% of customers surveyed in one specific study indicated that they would have bought goods or services from a specific company even if they did not receive an incentive for doing so (Williams, Spiro, & Fine, 1990). Regardless of the benefits and the costs that come with the customer centricity strategy, the largest problem with retention programs is that they do not have enough direction (Williams, Spiro, & Fine, 1990).

There are typically four specific areas that need to be examined in order to help businesses improve the focus that they have on the customer (Williams, Spiro, & Fine, 1990). These four areas are:

The way that the organization thinks about customers and whether the success of the specific organization is centered on customers or has some other focus (Williams, Spiro, & Fine, 1990).

The way that the organization works and whether its processes are designed to be centered around the customer (Williams, Spiro, & Fine, 1990).

The way that a specific organization is structured and whether the form that the firm has taken actually follows the function to meet the needs of the customer (Williams, Spiro, & Fine, 1990).

How the culture of the organization actually manifests itself and whether everyone who works with the firm listens to, thinks about, and responds appropriately to the customers that the firm already has (Williams, Spiro, & Fine, 1990).

There are ways to overcome these hurdles but they must be recognized before they can be overcome and then they must be studied in order to assure that the difficulties that are being faced in a specific company are corrected so that customers become the main focus (Williams, Spiro, & Fine, 1990). Direct intervention is one way to improve the rate of customer centricity (Williams, Spiro, & Fine, 1990). It wasn't until 1990 that customer centricity and the significance of it were first quantified (Williams, Spiro, & Fine, 1990). A study was done then that indicated that the profits made in service industries were largely increased in proportion to the length of time that a customer had been in a relationship with the company (Williams, Spiro, & Fine, 1990).

One of the examples they used in this study was MBNA America, a credit card company (Williams, Spiro, & Fine, 1990). The results of the study indicated that persuading the customers to retain credit cards when they were planning on canceling them was very significant to this company and this was often done at a success rate near 50% (Williams, Spiro, & Fine, 1990). By doing this, the profitability of the company increased over 125% (Williams, Spiro, & Fine, 1990). In other words, keeping half of the people who planned on severing a tie with a specific business could actually double the rate of growth of company (Williams, Spiro, & Fine, 1990).

Other businesses have had similar success rates because they are willing to look for the causes of a specific problem that the individual is having which makes that individual interested in severing ties with the business (Williams, Spiro, & Fine, 1990). They then try to resolve the specific problem and make sure that they follow up with the customer (Williams, Spiro, & Fine, 1990). This experience allows the customer to feel that he or she is more strongly valued by the company and this helps the rate of retention (Williams, Spiro, & Fine, 1990).

There is also a strong link between customer centricity and customer satisfaction that has been cited by many researchers (Williams, Spiro, & Fine, 1990). There are six factors that are specific to improving the retention of customers and are often seen as imperative. These include (Williams, Spiro, & Fine, 1990):

commitment by the senior management (Williams, Spiro, & Fine, 1990).

A culture in which all managers and employees focus all of the attention that they have on customer satisfaction (Williams, Spiro, & Fine, 1990).

Information systems that deal with retention and analyze and track the reasons that people leave (Williams, Spiro, & Fine, 1990).

Empowerment of various employees on the front lines to take actions that are necessary to provide satisfaction for the customer (Williams, Spiro, & Fine, 1990).

A continuous program of development and training (Williams, Spiro, & Fine, 1990).

Incentive systems for employees that are based on how many customers are retained (Williams, Spiro, & Fine, 1990).

Other research has noted that many factors affect the quality of the service from the viewpoint of the customer (Heskett, Sasser, & Hart, 1990). These can include management perceptions of what the customers actually need and expect, the way that this firm or organization deals with the quality of service that the customer needs, and constraints that a specific business has on its resources (Heskett, Sasser, & Hart, 1990). There has also been some discrepancy noted by researchers between how the executives in a specific company perceived the quality of the various services that they provide the customers and the actual tasks that are associated with ensuring that the customers receive the services (Heskett, Sasser, & Hart, 1990).

How much gap there is between the service that a specific customer expects to get and the service that the customer actually receives has a great deal to do with the perception of what kind of quality the customer feels he or she has gotten from the business (Heskett, Sasser, & Hart, 1990). This gap can be either small or large, and can be considered either positive or negative (Heskett, Sasser, & Hart, 1990). There are four basic variables that are studied were looking at this specific gap (Heskett, Sasser, & Hart, 1990). These variables are:

How much difference there is between the actual expectations of the consumer and the perception by management of the customers' expectations (Heskett, Sasser, & Hart, 1990).

The difference between the perception by management of expectations and how well those perceptions are translated into specifications that deal with service quality (Heskett, Sasser, & Hart, 1990).

How much difference there is between the quality of the service specifications and actual delivery of the service (Heskett, Sasser, & Hart, 1990).

The difference between both the quality service specifications and service delivery and the communication that is provided externally to customers (Heskett, Sasser, & Hart, 1990).

It has been noted that these discrepancies in what a customer perceives has happened and what management actually think has happened can be very problematic when attempting to deliver service that customers would not normally see as being very high quality (Heskett, Sasser, & Hart, 1990). Specifically relevant is the fourth discrepancy in the above list as how the customer perceives the transaction has a great deal to do with how the customer is treated and what type of information about the transaction has been imparted to him or her (Heskett, Sasser, & Hart, 1990).

It has also been suggested by other studies that the low quality of service that many customers complain about seems to be built into the system (Heskett, Sasser, & Hart, 1990). This is because many customer contact jobs are designed to be what many people consider "idiot proof" (Heskett, Sasser, & Hart, 1990). Many of these jobs see conforming to the specifications of the job as all that is necessary to keep customers happy but customer centricity is much more of a high contact service that satisfies much more than just basic needs (Heskett, Sasser, & Hart, 1990).

By being able to actively understand and manage the relationship between the business and the customer it is much easier to yield higher revenues through increased rates of retention and repurchasing from those customers (Heskett, Sasser, & Hart, 1990). Another research study done on customer loyalty indicated that when customers were dissatisfied with the quality of a product only 14% of them stopped shopping at a specific business (Bowen & Lawler, 1992). However, almost two-thirds of the customers who did stop shopping at a specific business indicated that it was because they felt the service personnel were unhelpful or indifferent (Bowen & Lawler, 1992).

This is indicative of the fact that many customers put a much higher price tag on the way they are treated them they do on the quality of what they receive (Bowen & Lawler, 1992). If the customer receives a product of low quality at a store it does not mean that all products at that store are going to be low quality, so most customers will try again (Bowen & Lawler, 1992). However, customers that find indifferent or unhelpful people working at a specific store appear to feel that this signifies the opinion of all of those who work at or own that specific store or chain and therefore the customer prefers to shop elsewhere where people will treat them better (Bowen & Lawler, 1992).

Whether or not the people in question were actually unhelpful or indifferent is not relevant (Bowen & Lawler, 1992). What is relevant is the perception that the customer had about whether these people were indifferent or unhelpful (Bowen & Lawler, 1992). In other words, what the customer expected out of the transaction and what the customer actually received out of that transaction is where the largest discrepancy is and where the largest problems are for businesses (Bowen & Lawler, 1992). There are five specific dimensions of service quality and these are looked at as a perception from customers (Bowen & Lawler, 1992). These include:

Reliability (Bowen & Lawler, 1992)

Assurance (Bowen & Lawler, 1992)

Responsiveness (Bowen & Lawler, 1992)

Tangibles (Bowen & Lawler, 1992)

Empathy (Bowen & Lawler, 1992)

One study looked at customers' perceptions of the service that they received in specific businesses along a continuum that ranged from totally unacceptable quality to ideal quality (Bowen & Lawler, 1992). This depended on the customers' perceptions of the service they received and whether it fell short of, met, or exceeded the expectations that these customers had (Bowen & Lawler, 1992). It was largely found that the tangibles were seen to be the least significant to the customers that were studied (Bowen & Lawler, 1992). All of the other four criteria were all judged by the customers to rate above 9 on a 10 point scale (Bowen & Lawler, 1992).

Reliability received the highest of the individual ratings and was therefore determined by that study to be the dimension of service that was most significant to the average consumer (Bowen & Lawler, 1992). Also significant to customer centricity is whether the perceptions of quality that customers have are influenced by whether they had recently experienced a problem with service (Bowen & Lawler, 1992). By examining customers who had experienced recent problems with service and those who had not the study found that there was an adverse effect on the customers' perception of the quality of service that they received if they had recently had a service problem (Bowen & Lawler, 1992).

Customers who were not satisfied with the resolution of the service problems they recently had dealt with were more likely to be twice as dissatisfied as those customers who had a problem but found that it was resolved and met their criteria for satisfaction (Bowen & Lawler, 1992). This led to the opinion that the most significant thing that any service company can do is to perform the specific service accurately and dependably (Bowen & Lawler, 1992). The customer will therefore see them as reliable (Bowen & Lawler, 1992). Customers want businesses that do things correctly the first time and when a problem with service does appear the customer will not necessarily be lost to the business if the company handles the problem correctly (Bowen & Lawler, 1992).

If the problem is then handled to the satisfaction of the customer it is quite likely that that same customer will return to utilize that service from that business began (Bowen & Lawler, 1992). The worst thing that a company can do about a service complaint from a customer is to simply ignore it (Bowen & Lawler, 1992). Customers who find that they are ignored feel as though the business does not care about their wants or needs in any way and those customers are very likely not to return to shop at that specific store again (Bowen & Lawler, 1992).

A good delivery of service for the customer has the best outcome when it comes to looking at customer satisfaction rates (Bowen & Lawler, 1992). The next best was to deal with problems correctly so that they resulted in such a way that the customer felt satisfied (Bowen & Lawler, 1992). The lowest possible outcomes for customer satisfaction and retention came from problems that the customer had that were not resolved satisfactorily in the customer's opinion and from problems that the customer had but did not express to others (Bowen & Lawler, 1992).

This last issue is specifically unfortunate because the problem might have been resolved to the customer's satisfaction if he or she had mentioned it to the proper people (Bowen & Lawler, 1992). By not speaking up or saying anything about service or other problems, the customer does not give the business a chance to correct the problem at hand and therefore the business loses a customer without really understanding why (Bowen & Lawler, 1992).

One of the significant issues for customer centricity is that those who work in service to others should be empowered so that they are able to find effective and creative ways to solve customer problems without having to bring management into it all of the time (Bowen & Lawler, 1992). If personnel who work on the front lines are not informed about the performance of the organization and do not have problem solving skills and other basic knowledge they will not be able to do all that they can for customers (Bowen & Lawler, 1992). Allowing employees the power to do more and rewarding them based on the performance that they show can take customers who are potentially very angry and upset and turn them into customers who are satisfied (Bowen & Lawler, 1992).

It is significant to remember when looking at customer centricity that people seldom stop patronizing a business simply because of ordinary interactions that they deal with when they shop there but instead because of the failure of the specific organization to handle situations that could be potentially problematic to the satisfaction of the customer (Bowen & Lawler, 1992). Personnel who come into contact with customers need to be able to think for themselves, take responsibility for their actions, and respond well to the pressure that often comes from customers who are angry or upset (Bowen & Lawler, 1992).