However, the company can offer lower rates if they so desired. 4. Customer satisfaction is critical to customer retention. In service firms, the key point of differentiation is the service offered. Thus, if the service is not satisfactory, the customer is likely to find another service provider or to find a substitute. However, satisfied customers will tend to develop brand loyalty. The risk of switching is too high for many services.

Unsatisfied customers, on the other hand, are less likely to remain customers. The cost of attracting new customers is greater than the cost of retaining old ones, so service firms need to pay special attention to their existing customers. Moreover, if a customer is dissatisfied, this creates an opportunity for service recovery. Successful service recovery results in higher satisfaction and correspondingly higher retention.

The final dimension of the relationship between customer satisfaction and retention is that mere satisfaction often leaves the customer open to new opportunities. Thus, the customer's satisfaction level must be high enough to engender loyalty. This involves going beyond the satisfaction of basic needs, preferably to the point where the company is satisfying needs the customer did not expect nor request to be satisfied.

5. Core competencies are the source of competitive advantage for firms. They are those actions or skills that the firm does best. When those actions are better than those of their competitors, the competency becomes a competitive advantage. Core competencies tend to arise from skills that have developed over time and honed by management. Sometimes, the competency can be developed deliberately to provide advantages. Effective businesses also are able to apply their core competencies to different functions, enabling them to compete in a wider range of businesses.

As an example,...

Their advantage is in their name and their ability to set up thousands of temporary offices nationwide. Competitors cannot match this ability to expand and contract with the seasonality of the work.
The core competency for H&R Block is not their market position, however, but their hiring and training process. The majority of their workers are seasonal, and the turnover rate for such workers is high. In order to conduct business according to their model, H&R Block has developed a competency in attracting workers with the skills they need. They have also developed a competency in training that allows them to bring on temporary workers in January and have these workers preparing tax returns and giving tax advice by February. The task can be fairly complex, so it takes an excellent system and tight management in order to execute this plan every year. This hiring and training program is what allows H&R Block to follow its business model. Other firms in the industry cannot do this nearly as well, and therefore are unable to saturate the market to the degree that H&R Block does, to their disadvantage.

Works Cited:

No author. (2009). The Customer's Influence on Service Delivery. McGraw-Hill. Retrieved May 16, 2009 from http:www.busi.mun.ca/semyrden/6230/Chapter13_student.ppt

No author. (2007). The Value Chain. QuickMBA.com. Retrieved May 16, 2009 from http://www.quickmba.com/strategy/value-chain/

No author. (2006). Developing the Service Communication Mix. Thomson Learning. Retrieved May 16, 2009 from http://faculty.css.edu/salwan/Mgt3370/PPT/Chapter%2008.ppt

No author. (2007). Core Competencies. QuickMBA.com. Retrieved May 16, 2009 from http://www.quickmba.com/strategy/core-competencies/