Customer Service as Strategy for Unorganized Retailers: A Case Study of Ajmer
Purpose The paper seeks to understand the importance of customer service as strategy for the unorganized retailers in Ajmer to compete with the organized retailers.
Design / methodology / approach A questionnaire was designed for the purpose of data collection and was sent to 30 unorganized retailers and 30 customers in Ajmer in order to analyze the role and importance of customer service as competitive advantage for unorganized retailers. Multivariate statistical technique was used to analyze the data collected.
Findings Customers expectations of the service of the unorganized retailers is positively related to the location, trustworthy salespeople, cleanliness etc but with respect to customer service the organized retail stores have a competitive edge. So the unorganized retailers should strategically use customer service as a tool for competing with the organized retailers.
Research limitations / implications The unorganized retail stores have major disadvantages on all customer perceptions except location. Given the nature of sample a larger sample is needed to determine the factors influencing the customer service to be taken into consideration for the purpose of creating a competitive edge over the organized retailers.
Practical implications Customer service is one critical key to business success and retaining the existing customers’ along with acquiring new ones. The unorganized retailers need to upgrade their facilities so as to provide customer satisfaction and maintain their customer base.
Originality / value The paper predicts whether the foray of the large organized stores would influence the customer base of unorganized stores on the basis of customer service as strategy and suggesting measures to counter the onslaught. Further, insights are provided into the activities that can be used by retailers as competitive advantage by identifying the type of benefits they can offer.
Keywords customer service, retailing, strategic planning, competitive advantage
Paper type Research paper
Customer Service as Strategy for Unorganized Retailers: A Case Study of Ajmer
In today’s competitive environment, every business looks for opportunities to stand out from the rest. One of the ways one can differentiate business is by providing superior customer service. Customer service is more than merely selling skills. While selling skills focus on making or closing the sale, customer service concentrates on the total relationship you maintain with customers.
Retailing is one of the world’s largest industries. It is in a permanent state of change, and the pace of this change has been accelerating over the last decade. Retail outlets are the main source of purchase for consumers. Retailing is the final stage in the distribution process (from manufacturers to consumer), in which the retailer, as an intermediary, collects an assortment of goods and services from various sources and offers them to the customer.
Measuring and improving service performance is an essential strategy for success and survival in today’s competitive situation, as service industries are sprouting at an incredible rate. Customer satisfaction is perceived to be a key driver of long term relationships between retailers and customers, especially when customers are well acquainted with products and markets and when industries are highly competitive. Services efficiency is one of the principal factors which influence customer satisfaction in a business to business context and help building customer retailer relationship.
Retailers are always looking around them to find out some strategies to differentiate their outlet or store from their competitors because of the fierce competition climate. One possible and important strategy is focused on providing high quality customer services. Customer services can be one possible competitive advantage for companies in all resorts. Customer service is the set of activities and programs undertaken by retailers to make shopping experience more rewarding for their customers. These activities increase the value customers receive from the merchandise and services they purchase. All employees of the retail firm and all elements of retail mix provide services that increase the value of merchandise. The services that a retail store can offer include acceptance of credit cards, alteration of merchandise, assembly of merchandise, ATM terminals, check cashing, child care, home delivery, demonstration of merchandise, display, dressing rooms, extended store hours, signage.
The challenges of providing consistent hi – quality service provides an opportunity for the retailer to develop sustainable competitive advantage. Small, independent retailers often attempt to develop a strategic advantage over large, national chains by providing customized customer service. Large chains can use their purchasing power to buy merchandise at lower prices than small local stores can. But small retailers can overcome this cost disadvantage by providing better customer service than a large, bureaucratic chain.
The aim of this paper is to present customer service as strategy for retailers especially in the unorganized sector so as to compete with the organized sector. Thus, the objectives of the present study are:
1. To analyze customer’s expectations with respect to the service delivered to them at the unorganized retail stores.
2. To know the retailers view of using customer service as a strategy to create a competitive edge over the organized retailers.
Customer service includes all activities that enhance or facilitate the sale and use of the product. Like products, customer service gives firms the opportunity to gain market share and establish dominance in their industry (Kyz et al., 1989). Services are unique, and unlike industrial and consumer goods, services are intangible, heterogeneous and have a production inseparable from consumption (Parasuraman et al., 1988). Service value lies in the result of a process; the creation cannot be separated from the consumption. Furthermore services are not mass but individually produced, thus existing within the exchange between customer and company (Ghauri and Cateora, 2006).
Customer service as defined by Kotler (1994) is “the level of the person’s felt state resulting from comparing a product’s perceived performance (or outcome) in relation to the person’s expectations. Basically this means that a customer’s perception, which may or may not be what actually occurred, of the entire shopping experience is compared to the customers idea of what should have occurred. If the actual experience is less than the expected experience then the customer leaves with a sense of having received poor customer service. Customer services are everything, what company does for satisfaction of its customers. They help to gain higher profit from sold products. According to Bovee and Thill (1992), quality and customer services present strong barrier against the competition, ensure customer loyalty, differentiate product, decrease marketing cost and increase company profit.
Most research on customer perception of quality in the service industry has proven that focusing on perceptions of quality, value and satisfaction in service encounters has positive results for retailers. The retail industry is unique because it combines a product with service elements into the shopping experience. Often, dissatisfaction with the retailer has to deal with product dissatisfaction rather then the manufacturer, resulting in more customer service mishaps with the end user (McGoldrick, 2001).
Karl Albrecht describes customer service as:
Quality = Results – Expectations
To deliver positive quality a business must come up with a result beyond their customer expectations.
Zeithaml & Bitner (1996) suggest that competitive equality has been reached with many manufactured goods. Technological superiority is increasingly more difficult to maintain as a lasting strategy and maintaining low prices is equally challenging as a differentiating strategy. Therefore, one potential competitive strategy is the development of a service strategy.
The study is based on primary data collected from 60 respondents in Ajmer city comprising of 30 unorganized retailers and 30 customers. Customers usually see what they expect to see and what they expect to see is usually based on familiarity, past experience, or preconditioned set. In a marketing context, people tend to perceive products and product attributes according to their expectations (Leon G. Schiffman and Leslie Lazar Kanuk, 1999). Study includes 29 features of retail outlets having due importance for the retailers to rate or analyze themselves and also for customers to analyze the quality of customer service provided to them.
The data was collected on the basis of the questionnaire which was prepared after a detailed literature review on customer perception of service attributes of the unorganized retail stores. A detailed literature review suggested the customer service variables of relevance as far as unorganized stores are concerned some of such attributes are: easy accessibility, layout of the store, performance of service at right time, availability of merchandise, price consciousness, employees knowledge, cleanliness, quality of merchandise, store ambience, parking, provision for credit and credit cards, refund / exchange etc.
Findings and Analysis
The data collected from both the category of respondents was factor analyzed using principal component analysis method with varimax rotation. The resultant factors were identified using Eigen value greater than 1 criterion. The results for the retailer’s survey showed the approximate chi – square value as 693.459 at 300 degree of freedom under the Bartlett’s Test of Sphericity which is significant at 0.000 level implying overall significance of correlation matrix and the results for customer’s survey showed the approximate chi – square value as 1219.752 at 406 degree of freedom under the Bartlett’s Test of Sphericity which is significant at 0.000 level implying overall significance of correlation matrix.
The Kaiser – Meyer – Olkin measure of Sampling Adequacy was 0.527 for retailers and 0.782 for customers which is sufficiently large. Thus, factor analysis may be considered appropriate for analyzing the data. Further analysis was therefore carried out. In the final results, total 7 factors out of 25 from the retailers survey and 8 factors out of 29 from the customer survey have been extracted. Customers were asked to rate the expectation of customer service from the unorganized retail stores on five point scale and the owners of the retail stores were asked to rate their service on the five point scale as well.
Customer survey results
KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .782 Bartlett’s Test of Sphericity Approx. Chi-Square 1219.752 df 406 Sig. .000
S.No Attribute Mean Std. Deviation Q1 The outlet has clean, attractive and convenient public areas 3.5667 .67891 Q2 The layout at this store makes it easy for me to find what I need 3.6000 .77013 Q3 The layout makes it easy for me to move around in the store 2.9667 .88992 Q4 The outlet performs all services right all the time 3.5000 .73108 Q5 The outlet has merchandise / products available when I want it 3.7333 .63968 Q6 Employees in the outlet have the knowledge to answer my questions 3.4000 .77013 Q7 I feel safe in my transactions with this store 4.1000 .30513 Q8 Employees in the outlet give quick services to customers 3.6333 .49013 Q9 Employees in this store tell customers exactly when the services will be performed 3.0333 .71840 Q10 Employees in this outlet are never too busy to respond to my requests 3.2000 .55086 Q11 The outlet gives me individual attention 3.4667 1.04166 Q12 When I have a problem, this outlet shows a sincere interest in solving it 3.6667 .71116 Q13 Employees in this outlet are able to handle customer complaints directly and immediately 2.9333 .94443 Q14 The outlet offers high quality merchandise / products 3.9333 .63968 Q15 The outlet provides plenty of convenient parking for customers 2.4667 .89955 Q16 The outlet has operating hours convenient to all their customers 3.9333 .58329 Q17 The outlet provides for credit 2.4000 1.06997 Q18 Merchandise / products are conveniently located and reachable 3.2333 .85836 Q19 The merchandise / products are properly organized 3.3000 .79438 Q20 The shelf where the items are placed is clean 3.6000 .77013 Q21 The outlet willingly handles returns and exchanges 2.5667 1.10433 Q22 The behaviour of employees in this outlet gives confidence in customers 3.3000 .83666 Q23 The overall service is good when shopping at this store 3.5667 .56832 Q24 Overall outlet environment can stimulate my purchase intention 3.4667 .50742 Q25 I received value for money at this outlet 3.5000 .50855 Q26 The service provided by this outlet meets my needs 3.5667 .50401 Q27 The service quality of this outlet is acceptable to all customers 3.4000 .56324 Q28 I am able to contact this outlet easily when needed 3.1667 1.01992 Q29 Overall I am satisfied with the services provided by this outlet 3.6667 .47946
Total Variance Explained
s.no Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative % 1 8.567 29.542 29.542 8.567 29.542 29.542 4.763 16.424 16.424 2 4.546 15.675 45.217 4.546 15.675 45.217 4.717 16.266 32.689 3 3.775 13.016 58.233 3.775 13.016 58.233 3.303 11.391 44.081 4 2.430 8.378 66.610 2.430 8.378 66.610 3.173 10.941 55.022 5 2.007 6.922 73.532 2.007 6.922 73.532 2.917 10.059 65.080 6 1.451 5.003 78.535 1.451 5.003 78.535 2.128 7.338 72.418 7 1.255 4.327 82.862 1.255 4.327 82.862 2.063 7.114 79.531 8 1.026 3.537 86.399 1.026 3.537 86.399 1.992 6.868 86.399 9 .876 3.021 89.420 10 .686 2.367 91.787 11 .595 2.052 93.839 12 .502 1.733 95.572 13 .353 1.217 96.788 14 .245 .845 97.633 15 .220 .758 98.391 16 .145 .501 98.892 17 .112 .387 99.279 18 .063 .218 99.497 19 .045 .156 99.653 20 .037 .128 99.780 21 .025 .086 99.866 22 .017 .059 99.926 23 .010 .033 99.959 24 .004 .015 99.974 25 .003 .011 99.985 26 .002 .009 99.993 27 .001 .005 99.998 28 .000 .002 100.000 29 3.101E-05 .000 100.000 Extraction Method: Principal Component Analysis.
Retailers survey results
KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .527 Bartlett’s Test of Sphericity Approx. Chi-Square 693.459 df 300 Sig. .000
Sno Attributes Mean Std. Deviation 1 The physical facilities at the store are visually appealing 3.9333 .73968 2 The store layout makes it easy for customers to find what they need 3.8667 .77608 3 The store layout makes it easy for customers to move around the store 3.0667 1.48401 4 When the store promises to do something by a certain time it will do so 3.4667 .50742 5 The store performs the service right all the time 3.6667 .71116 6 The store has merchandise available when the customers want it 4.4667 .50742 7 Employees in the store have the knowledge to answer the customers’ questions 4.2000 .66436 8 The behaviour of employees in the store instil confidence in customers 3.7667 .72793 9 Customers feel safe in their transactions with the store 4.1333 .73030 10 Employees in the store give prompt service to customers 3.8000 .76112 11 Employees in the store are never too busy to respond to customer’s requests 4.0333 .76489 12 The store gives customers individual attention 3.9667 .71840 13 Employees of the store are consistently courteous with customers 4.0000 .74278 14 Employees of the store treat customers courteously on the telephone 2.6000 1.37966 15 The store willingly handles returns and exchanges 3.0000 1.36458 16 When a customer has a problem the store shows sincere interest in solving it 3.8333 .74664 17 Employees of the store are able to handle customer complaints directly and immediately 3.8000 .80516 18 The store offers high quality merchandise 4.2333 .72793 19 The store provides plenty of convenient parking for customers 2.6000 1.03724 20 The store has operating hours convenient to all their customers 4.1667 .79148 21 The store accepts major credit cards 1.5000 .50855 22 The store gives personalized services to the customers 2.1333 1.30604 23 Cleanliness and tidiness are the important priorities of the store 3.8333 .83391 24 Overall outlet environment can stimulate the purchase intentions of customers 3.7000 .65126 25 The merchandise/ products are properly organized 3.9667 .76489
Total Variance Explained
Sno Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative % 1 6.863 27.453 27.453 6.863 27.453 27.453 5.312 21.248 21.248 2 3.683 14.731 42.184 3.683 14.731 42.184 4.289 17.154 38.402 3 2.811 11.243 53.427 2.811 11.243 53.427 2.996 11.986 50.388 4 2.597 10.388 63.815 2.597 10.388 63.815 2.541 10.163 60.551 5 1.797 7.187 71.003 1.797 7.187 71.003 2.117 8.467 69.018 6 1.237 4.948 75.951 1.237 4.948 75.951 1.497 5.989 75.006 7 1.127 4.508 80.459 1.127 4.508 80.459 1.363 5.453 80.459 8 .971 3.883 84.342 9 .857 3.428 87.771 10 .679 2.716 90.487 11 .556 2.225 92.712 12 .374 1.495 94.207 13 .366 1.462 95.669 14 .286 1.146 96.815 15 .251 1.005 97.821 16 .150 .599 98.419 17 .110 .442 98.861 18 .081 .323 99.184 19 .072 .289 99.473 20 .039 .155 99.628 21 .033 .132 99.760 22 .028 .112 99.872 23 .023 .090 99.962 24 .009 .035 99.997 25 .001 .003 100.000 Extraction Method: Principal Component Analysis.
The results thus imply that the unorganized retail outlets have locational advantage as compared to the organized outlets but with respect to customer service they need to work more as the customers residing in Ajmer city are likely top be loyal to the unorganized store if the adequate amount of required service is provided to them. Thus the unorganized retail store owners need to strategically think on these aspects of customer service and frame the policies required to do so. Hence the unorganized stores need to upgrade their facilities at war footing to be able to compete with the organized retailers.
The unorganized / traditional retail stores and the organized modern formats have certain positive as well as negative aspects that draw or repulse a consumer from buying from them. The major aspects that have come out in this study is that the organized retailer is preferred for their cleanliness, offers, exclusive store brands whereas the unorganized stores are preferred because of their location and some of the offers that are not expected to be offered at the organized stores for example cash credit, etc.
The study is an attempt to reveal the fact that if the unorganized retail store owners strategically think of providing customer service and it matches up the expectations of the customers, the customer will definitely not switch over to the organized formats where he may get all he wants under one roof but the choice of making selection at times is not as per the expectation which a customer gets from the unorganized stores.
1. DeCoster, J. (1998). Overview of Factor Analysis
2. Ghauri, P., Cateora, P., (2006), ‘International Marketing’ (2nd edition.) McGraw Hill Companies, Berkshire.
3. Kotler, P. (1994). Marketing management: Analysis, planning, implementation, and control. 8th ed. Upper Saddle River, NJ: Prentice-Hall.
4. Kyj, L., and Kyj, M., (1989), “Customer Service: Product Differentiation in International Markets.” International Journal of Physical Distribution and Materials Management, Vol. 19, No. 1, pp. 30-38.
5. Malhotra, K. Naresh, 2007, Marketing Research: An Applied Orientation, Fifth Edition, Pearson Education, Inc and Dorling Kindersley Publishing Inc.
6. McGoldrick, P., (2002), ‘Retail Marketing’, McGraw-Hill, England.
7. Parasuraman, A., Zeithaml, V., and Berry, L., (1988), “SERVQUAL: A Multiple-Item Scale for Measuring Customer Perceptions of Service Quality.” Journal of Retailing, Vol. 64, No. 1, pp. 12-40
8. Bovée, C. L., & Thill, J. V. (1992). Study guide to accompany Marketing, McGraw-Hill, 332 p.
9. Zeithaml, V.A., & Bitner, M.J. (1996). Services Marketing, McGraw-Hill Agencies, Inc, Singapore 700 p.