Republic Of The Philippines Central Luzon State University College Of

Republic of the Philippines CENTRAL LUZON STATE UNIVERSITY College of Business Administration and Accountancy Science City of Muńoz, Nueva Ecija, 3121

IN PARTIAL FULFILLMENT IN ISSUES AND TRENDS IN MANAGEMENT (MNGT 245)

Customer Relations Management of Supermarkets in San Jose City, Nueva Ecija

MARLON F. BAITEC ARDIE V. CABICO EMILIE O. MAGTALAS

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION MAJOR IN MANAGEMENT

S.Y. 2009-2010

INTRODUCTION In order to compete effectively in the market, organizations must be customerfocused and because of this reason there is a need for an organization to establish a customer relationship management (CRM). Customer Relationship Management (CRM) is to create a competitive advantage by being the best at understanding, communicating,

delivering, and developing existing customer relationships, in addition to creating and keeping new customers. It has emerged as one of the largest management exhortation. In this era of fierce competition, both on a local and a global level, it becomes increasingly important to ensure that a business is "customer-centered”. Organizations should realize that retaining customers is more profitable than crating a new customer. Providing good service and then finding a way to leverage the good will created by quality service a company can tie deeply into a consumers mind and develop a strong business/client relationship. However, technology as an enabler with very low cost has come to the rescue of organizations to meet ever-changing need of customers.

Objectives This study aims to: 1. Identify the reasons for customer complaints. 2. Enumerate the benefits of the organization in having CRM. 3. Find out the actions being undertaken by the management.

4. Determine the awareness of customers regarding the CRM of an organization.

Statement of the Problem General Problem: What are the importances of having a customer relationship management in an organization? Specific Problems: 1. What are the reasons for customer complaints? 2. What are the benefits of the organization in having CRM? 3. What are the actions being undertaken by the management? 4. How aware the customers regarding

the customer

relationship

management of an organization?

Significance of the Study This study will clearly reveals the importance of a CRM in an organization especially in a supermarket and/or department stores. This study wants to inform the management of an organization that complaints are one of the most important forms of communication between a business and its customers, and constructive responses to

complaints can help retain customers who would otherwise be lost.

Conceptual Paradigm

INDEPENDENT VARIABLES

DEPENDENT VARIABLES

Customer Relation Management Customer Services/Programs

•

Customer Satisfaction

Customer Awareness

•

Customer Dissatisfaction and Complaints

•

Customer Relationship

•

Consumer, and Management Benefits

Management

Data Collection Method The data collection method being used in this research is interview method guided by constructed questionnaire that will answer the main purpose of the research. The approach that has been undertaken in doing the research is the purposive sampling, wherein the people interviewed by the researchers are the ones which are presently there

during the conduct of the interview. The people interviewed composed of customers who purchased in the supermarkets understudy and the managers of the said supermarkets.

Scope and Limitations The study is bound to know what current practices are of supermarket stores in San Jose City Nueva Ecija; the importance of customer relation management and the benefits and how to handle it.

Locale Supermarkets in San Jose City, Nueva Ecija constitutes the locale of this research. These towns are in Nueva Ecija in Central Luzon. The supermarkets that are involved in the research are the following: NE Bodega Supermarket, the CVC Supermarket, the Magic Supermarket, and the Friendship. the aforementioned supermarkets will be the ones in which the researchers will get the information that they need.

REVIEW OF RELATED LITERATURE

Evaluation of Customer Relationship Management

Customer Relationship Management (CRM) is to create a competitive advantage by being the best at understanding, communicating, delivering, and developing existing customer relationships, in addition to creating and keeping new customers. It has emerged as one of the largest management buzzword. Popularized by the business press and marketed by the aggressive CRM vendors as a panacea for all the ills facing the firms and managers, it means different things to different people. CRM, for some, means one to one marketing while for others a call centre. Some call database marketing as CRM. There are many others who refer to technology solutions as CRM. If so, what is CRM? Merchants and traders have been practicing customer relationship for centuries. Their business was built on trust. They could customize the products and all aspects of delivery and payment to suit the requirements of their customers. They paid personal attention to their customers, knew details regarding their customers’ tastes and preferences, and had a personal rapport with most of them. In many cases, the interaction transcended the commercial transaction and involved social interactions. Even today, this kind of a relationship exists between customers and retailers, craftsmen, artisans – essentially in markets that are traditional, small and classified as pre-industries markets. These relationship oriented practices have changed due to industrial revolution. Businesses adopted mass production, mass communication and mass distribution to achieve economics of scale. Manufactures started focusing on manufacturing and efficient operations to cut costs. Intermediaries like distributors, wholesalers and retailers took on the responsibilities of warehousing, transportation, distribution and sale to final customers. This resulted in greater efficiencies and lower costs to manufacturers but brought in many layers between them and the customers. The resulting gap reduced direct

contacts and had a negative impact on their relationships.

Technological Advancement More information, communication and production technologies have helped marketers come closer to their customers. Firms operating in diverse sectors ranging from packaged goods to services started using these technologies to know their customers, learn more about them, and then build stronger bonds with them through frequent interactions. Marketers could gain knowledge about customers, which helped them respond to their needs through manufacturing, delivery, and customer service. Technology also enabled ordering and product-use related services. Though the emergence of CRM in recent times coincided with the information age, one must remember that technology is just an enabler. Technology enabled marketers overcome several long felt shortcomings of mass marketing. Some of these included:

- Inefficiencies of mass marketing: 1980s and early 1990s witnessed some of the most radical business transformations that resulted in cost reductions in almost all functional departments except marketing. Manufacturing and related operations costs were reduced through business process reengineering, human resource costs were reduced through outsourcing, restructuring and layoffs, financial costs were reduced through financial reengineering but marketing costs kept increasing due to increased competition and product parity in virtually every industry. - Lack of fast, effective and interactive models of customer contact, feedback and information.

- Lack of consolidated information about customer interactions, purchase behavior and future potential.

Intensive Competition In competitive markets, specially the ones that were maturing and witnessing slow or no growth, marketers found it more profitable to focus on their existing customers. Studies have shown that it costs up to 10-12 times more to attract a new customer than to retain an existing customer. Marketers have now started focusing on the lifetime value of customers. They are moving away from just trying to sell their products to understanding, customers needs and wants and then satisfying their needs. This has led to a relationship orientation which creates opportunities to cross sell products and services over the lifetime of the customer.

Growing Importance of the Service Sector The service sector contributes to over two-third of the GDP of most advanced economies. In India, the services sector contributes to over 50 per cent of the economy. One of the characteristics of the service industries is the direct interaction between the marketer and the buyer. In services, the provider is usually involved in the production as well as delivery directly. For example, professional service providers like a doctor or consultant are directly involved in production as well as delivery of their services. Similarly, the customers are directly involved in production in the purchase and consumption of these services. These direct contacts create opportunities for better understanding, a better appreciation of needs as well as constraints and emotional

bonding all of which facilitate relationship building. Therefore it should come as no surprise when you see the service firms pioneering many of the customer relationship initiatives. Firms operating in the financial services, hospitality business, telecom, and airlines are the early adopters and extensive users of CRM practices.

Adoption of total Quality Management (TQM) Programs Total quality management programs help companies offer quality products and services to customers at the lowest prices. To enable this value proposition, organizations needed to work closely with their customers, intermediaries as well as suppliers thus fostering close working relationships with members of the marketing system. Companies such as Intel, Xerox, and Toyota formed partnering relationships with suppliers and customers to practice TQM. Other developments such as an increase in the number of demanding customers, increased fragmentation of markets, and generally high level of product quality forced business to seek sustainable competitive advantages. A competitive advantage is sustainable only when it is not easily replicated. One such sustainable competitive advantage is the relationship that a firm develops with its customers.

Schools of Thought on CRM The relationship marketing is supported by the growing research interest in different facets of this concept. Researchers in different countries observed this shift in marketer’s orientation towards customer relationship and started exploring the

phenomenon. The initial approaches to CRM can be broadly classified as: 1. The Anglo-Australia Approach, 2. The Nordic Approach, and 3. The North American Approach. The Anglo-Australian approach integrated the contemporary theories of quality management services marketing and customer relationship economics to explain the emergence of relationship marketing. The Nordic approach views relationship marketing as the confluence of interactive network theory, services marketing and customer relationship economics. The interactive network theory of industrial marketing views, marketing as an interactive process in a context where relationship building is an area of primary concern for marketers. In contrast, the initial focus of the North American scholars was on the relationship between the buyer and seller operating within the context of the organizational environment which facilitated the buyer seller relationship. One of the broader approaches to CRM emerged from the research conducted by academics at the Centre for Relationship Marketing and Service Management at the Cranfield University, U.K. The broadened view of relationship marketing addresses a total of six key market domains, not just the traditional customer market. It also advocated for a transition for marketing from a limited functional role to a crossfunctional role and a shift towards marketing activities for customer retention in addition to the conventional customer retention in addition to the conventional customer acquisition.

The six markets are as follows 1. Customer markets – existing and prospective customers as well as intermediaries. 2. Referral markets – existing customers who recommend to other prospects, and referral sources or ‘multipliers’ such as doctors who refer patients to a hospital or a consultant who recommends a specific IT solution, 3. Influence markets – government, consumer groups, business press and financial analysts. 4. Recruitment markets – for attracting the right employees to the organization, 5. Supplier markets – suppliers of raw materials, components, services, etc., and 6. Internal markets - the organization including internal departments and staff.

Customer Relation-Profile

When mapping the quality of a customer relationship, we use the following model where the head symbolize the competencies we exchange. The Heart symbolizes our communication and co-operation, and the Legs concern the responsibility and professionalism with which we implement or deliver the competencies we have agreed upon.

Model for Customer Relationship

The essence of this process is mutually to discover weak, strong and wanted sides of the organizations, in order to improve future relations. Using the Customer Relation Profile, organization should be able to identify the terms of relationship with others and the profile will indicate what to focus on if organizations want to develop it further. If organization wants an "easy to use tool" to realize how organization can maximize business relations, this is the tool for organization and organization. RESULTS AND DISCUSSION

Based on the survey undertaken by the researchers in supermarkets located in San Jose City, the following were the results of the statements of the problem:

Question #1: What are the reasons for customer complaints? Results: Most customers complain because they purchased a product or service with certain expectations and, for any number of reasons, those expectations was not met. Some of the research done by organizations found the following to be among the major causes of consumer complaints. MAJOR CAUSES OF CONSUMER COMPLAINTS: A. Product Service Causes: 1) Poor product quality. 2) Maintenance difficulties. 3) Inadequate or poor repair work. 4) Delays in delivery of goods or services. 5) Failure to fulfill product or service warranties. 6) Incompetent or discourteous employees B. Accounting Causes: 1) Billing errors 2) Failure to provide timely refunds and adjustments, as promised C. Sales Practice Causes: 1) Deceptive or inaccurate advertising 2) Advertising products that are not available, or are in limited supply 3) Misleading or false representations by sales staff

Rude, unfriendly, uncooperative, or inappropriate behavior on the part of company representatives who are in direct contact with customers may translate into loss of

business, regardless of the quality of the goods or services the company has to offer. Furthermore, customers who encounter this type of treatment are likely to tell others about their experience, who in turn, will not be very interested in dealing with that particular company, thereby magnifying the extent of customer loss (actual and potential).

In sum, the general reason for the customer complaints is the dissatisfaction. The supermarkets are not able to meet the expectations of their customers. The expectations of the customers’ lies on the results formulated in the major causes of customer complaints. These expectations should be met in order to achieve success in the organization.

Question #2: What are the benefits of the organization in having CRM? Results: a. Customers are Profitable over a period of time A customer becomes more profitable with time because the initial acquisition cost exceeds gross margin while the retention costs are much lower. When an organization retains the customer, it gets a larger share of the customers’ wallet at a higher profit-one percent increase in sale to existing customer increase profits than with new customer. This huge difference is explained by the fact that for most companies the cost of acquiring the customer is very high. It costs six to eight times more to sell to a new customer than to sell to an existing one. A company can boost its profit up 85 per cent by

increasing its annual customer retention by only 5 per cent. Thus, the time, the effort and the costs of selling are much lower for an existing customer.

b. Marketing Benefits of CRM CRM will gradually reduce organization’s dependence on periodic surveys to gather data. Collection of data related to buying and consumption behavior will be an ongoing process. In many cases, the transaction data is automatically collected some times real time as in the e-commerce transaction. This rich repository of customer information and knowledge updated through regular interactions and actual customer transactions and purchase behavior will help marketers to develop and market customer centric products successfully. Customized promotions-based customer preferences and purchase patterns will substantially reduce the wasteful expenditure of mass communication and even direct mailing. As a customized promotion are more focused and are based on a deeper insight of existing customers, they have a greater chance of conversion to sales.

c. Service Benefits of CRM The customers do not bother to complain, they just take their business else where. Most loyal customers take time to complain. This enables the product / service provider to improve and ensure that such mistake does not recur. Through this, the organization will improve based on the complaint that has been brought by the loyal customers. Mostly, the aim of the loyal customers in complaining is to improve the service of the organization, and not to destroy the image of the company where he/she had bought a defective product. A typical dissatisfied customer will surely tell many others about

his/her dissatisfaction that he/she had gone through, and he will tell about his satisfaction in the same company, lesser than the number of people which he/she had told about his dissatisfaction. As a matter of fact, most customers who complain will do business with a company again if it quickly takes care of a service problem.

Question #3: What are the actions being undertaken by the management? Results: Based on the results of the survey, the following are the steps that are being undertaken by the supermarkets in San Jose City in dealing with customer complaints: Complaint Handling Procedures: Complaint handling system, which is structured from customer relations policy, must operate simply, effectively, and quickly. Speed is essential in responding to customer dissatisfaction. Customer should be assured that organization care and that prompt remedial action will be taken to resolve any reasonable problem. A sound complaint handling system should include the following essential procedures. There should be a formal procedure for recording the date a complaint is called for attention, along with a record of pertinent information. For example, the type of product or service; manufacturer/brand name; model name/number; date of purchase/contract; warranty expiration date; salesperson; cost of product/service; date problem occurred; and a description of the problem should be listed. This will allow organization to exercise control, and assure proper follow-through. Customer's explanation of a problem can provide much information. Nevertheless, to assure we have all the information needed for

a thorough review of the facts involved, by researching in-house records on the customer; requesting receipts, or other records; inspecting the product, or service performed; and following-up with the customer for any necessary additional information. When organization cannot resolve an issue immediately, it is important to let customer know that the matter is receiving attention. Prompt acknowledgment will set customer at ease, demonstrate that organization care, and begin the process of preserving goodwill. Whenever possible, tell customer how long it will take to complete action on the complaint. If there is further delay, be sure to advice customer why and when organization expects to have an answer. Solution must be consistent with established customer relations policy and should take into account a number of important criteria. Organization should consider contractual and/or warranty obligations, the customer's expectations, expectations of the customer, the cost/benefit of alternative solutions, the probability and cost of customer seeking redress in some other way, the comprehensiveness and fairness of solution, ability to perform the solution; and what to do if the customer rejects solution. The response should be clear and appropriate. The customer must understand the response, and the response must address the issues raised in the customer's original complaint. The supermarkets in San Jose City avoid "stock" language and form letters when an individual response is needed, and refrains from using excessive technical jargon. An explanation of decision may preserve the goodwill of customer, even if the decision itself is adverse. Contact customer following response to verify whether or not the matter has been resolved satisfactorily.

If customer is unhappy with response, supermarkets refer the matter to a third party dispute resolution mechanism for assistance. If the supermarkets intend to seek the assistance of a third party, they assure to give the customer a name and telephone number of the person, or office to be contacted. The follow-up step is critical to ensure the effectiveness of system. While organization may never satisfy everyone, this contact will provide direct feedback, and can be extremely valuable in making customer relations the best possible.

Question #4: How aware the customers regarding the customer relationship management of an organization? Results: Based on the results, not all the customers who answered the questionnaires is aware of the customer relationship management that is being implemented by the supermarkets. This may mean that the CRM of these supermarkets are ineffective, and that it does not add to the profits of the company. Most of the customers, when they purchased a product in the supermarket, and the good/s that they had purchased is defective, or they were not able to achieve their expectations with the products and within the organization as a whole, they do not remind the supermarket about this issue, and they just shift from one supermarket to another, where they could satisfy their expectations. The customers are reluctant to inform the organization about their complaints because they are ashamed to do it. Their thinking is that, the organization may not answer

their complaint, or that the organization may refuse to give what the customer is asking. Other customers fear rejection that is why customer complaints are being taken for granted, and their remedy is not to purchase anymore in that store. There are some customers who answered that they informed the supermarkets about their complaints regarding the service and the products of the supermarkets. When they inform the supermarket about their complaint, some organization responds promptly and courteously. The others respond but the issue is not resolved because it had taken a long time to resolve the issue. The Customer Relationship Management is the root of the loyalty of the customers. The supermarkets with high customer relationship have a higher possibility of customer loyalty. Since the supermarkets are friendly with customers, they create a higher degree of customer relationship with their customers. Their customers would feel very important and being taken cared when they enter the store.

CONCLUSION

Based on the results of the study, the researchers found out the following: The reasons for the customer complaints are divided into three subsections; the product service causes, accounting causes, and sales practice causes. The product service and the sales practice causes are the major causes of customer complaints. Product and service causes are the sources of complaints that include the way in which the employees treat the customers. The accounting causes include billing errors and failure to provide timely refunds and adjustments, as promised. Sales practice causes are the causes which includes all the efforts of the supermarkets in advertising their products and sales. The reason for the customer complaints comes from the unmet expectations of the customers. The attitudes of employees in treating the customers affect greatly the customer satisfaction. This scenario affects greatly the sales of the company. For instance, a certain customer might do not want the way a certain employee treats him/her, this may be a reason why that customer would refuse to buy to that store anymore. This is serious issue which sources from the employee attitude. Customer retention would give the supermarket additional profit. It was found out that the supermarkets incur lesser losses in retaining a customer than in acquiring new customers. When the supermarkets were able to gain customer loyalty, the customer complaints will give them additional ideas on how they will improve their service. A customer, who is loyal in a certain supermarket, when he/she had experienced dissatisfaction, will not tell other customers about the dissatisfaction that he/she had felt. Instead, he/she will tell the supermarket about the issue, for the issue to be resolved and to help the supermarket to be improved with the areas that are covered with the dissatisfaction. In handling customer complaints, the mentioned supermarkets undergo a certain

procedures in order to resolve the issue and to make improvements in the organization. Not all the customers are aware of the customer relationship management that is being implemented by the supermarkets. When a certain customer has a complaint with the supermarket, the customer is hesitant to make a complaint with the involved supermarket with the number of reasons but in general, the reason for the refusal of the customers in making complaints is the fear of rejection. The researchers were able to generate some principles regarding the Customer Relationship and Complaints. First, the better the CRM, the more the customers. And second, the higher the involvement of CRM, the higher the customer loyalty.

RECOMMENDATION

The foundation of customer goodwill is the existence, promotion, and practice of a sound customer relations policy. Such a policy is a formal promise to customers representing commitment to their satisfaction. A customer should not be forced to run from department to department, or individual to individual to get satisfaction. The policy should spell out specifically how, when, where, and who handles complaints or questions.

One person within the company should have ultimate authority and responsibility for customer relations. In a small firm, it may be the owner, while in a large organization it may be customer affairs executive. It is important that the person designated be readily available, and authorized to act on behalf of the company in all customer relations matters. The organization may want to consider incorporating a commitment to a third party dispute resolution mechanism into customer relations policy. Even if organization follows and carries out a sound customer relations policy, there still will be some complaints that are difficult to settle, and a few customers whom the company cannot seem to satisfy. Alternatively, we may consider offering resolution through a third party mechanism on a case-by-case basis. An independent and neutral third party will act as a mediator, helping organization and customers communicate to reach an understanding. In the event that an agreement is not reached, organization should be prepared to offer arbitration. Arbitration is a process where a neutral person listens to both sides and makes a final decision based on fairness and equity. While acknowledging the benefits of CRM (a technology which would seem to be

mainly applicable to large organizations), it must be recognized that CRM covers only a small percentage of what we refer to as "Customer Relations." Customer relations is a multifaceted domain which ranges from business policies, practices and strategy at the management level, to enthusiasm, eagerness to achieve customer satisfaction, resourcefulness, flexibility, and a positive attitude towards customers on the part of employees and company representatives who are in direct contact with customers or clients.

Both management decisions and employee behaviorsp/interactions should be governed by what is referred to as "organizational culture". It is the perceived internal environment of the organization that has a major influence on how a organization operates, values it espouses, and how it treats its employees. In a company culture that stresses customer satisfaction, strives for excellence, values its employees, and is able to instill in them a sense of mission, or of common purpose, all members of the organization will recognize that their contributions play an important role in the overall success and profitability of the organization of which they are a part.

Unfortunately, in many organizations, ambitious and well-meant plans are made at the top management, while the behavior of employees who are in actual contact with customers may be negatively influenced by a number of factors. Some of the factors are, 1) Feelings of not being appreciated by management, 2) Unwillingness to go beyond the basic requirements of their jobs and to tap into their own resourcefulness/Entrepreneurship,

3) Seeming lack of interest in advancing the company's business through their interactions with customers.

What seems to be misunderstood by people working for companies is that everyone, from the business owner or manager to the telephone operator or receptionist or the sales associate, plays an important part in how customers view a company. Rude, unfriendly, uncooperative, or inappropriate behavior on the part of company representatives who are in direct contact with customers may translate into loss of business, regardless of the quality of the goods or services the company has to offer. It has been estimated that 68% of business losses are because rude behavior of employees.

Furthermore, customers who encounter this type of treatment are likely to tell others about their experience, who in turn, will not be very interested in dealing with that particular company, thereby magnifying the extent of customer loss (actual and potential). In this era of fierce competition, both on a local and a global level, it becomes increasingly important to ensure that a business is "customer-centered." There is an abundance of merchandise available, and there is no shortage of businesses that offer the same type of goods. It is therefore necessary for companies to try to set themselves apart from their competitors by offering superb customer service. This can be achieved by listening to customers' comments and suggestions; by upper management spending time at the reception desk, at the service counter, or in the store, observing customers' comments and reactions. Anyone associated with a company needs to see him/herself as a

company representative who contributes to the company's image. Of course, everyone working for a company needs to receive recognition for special efforts, ingenuity, and problem solving, geared towards achieving customer satisfaction. No doubt, excellent plans are made at the management level of many companies, but inadvertently, the message communicated to customers or potential customers often is more akin to saying, "We do not really care whether the organization become or remain our customer or not!" How else could one interpret the message that "Our computer department is too busy to take order," or "We will let organization know when the item you wish to purchase is in stock," and never getting back to the customer. Alternatively, turning away a group of patrons in a restaurant, just because the kitchen will close in ten minutes?

Similarly, customer complaints or suggestions do not seem to receive the attention they deserve. It has been pointed out that customer complaints should be treated as gifts because they enable a company to take corrective action and to make improvements. Apparently, customer complaints are relatively rare--customers are inclined to tell their friends and relations about negative experiences, rather than informing the companies in question. For that reason, it seems incomprehensible that some large companies tend to dismiss customer complaints and consider them immaterial (if one goes by the reactions of the company representative receiving the complaint).

In order to ensure excellence in customer relations and customer service,

organizations need to assess all aspects of their operations, in order to determine whether any of their business practices and interactions with customers needs to be improved. Corrective actions could take the form of training or retraining staff, establishing a code of conduct, empowering staff to apply company guidelines less rigidly, where warranted, and keeping focused on the customer at all times.

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