Customer satisfaction @ virtual organizations
Nasser Alomaim
Keywords
Electronic commerce,
Total quality management,
Virtual organizations,
Customer satisfaction
Abstract
Current organizational practice
worldwide has responded to the
demands of an increasingly
competitive global market.
Market or customer priorities
derive from a focus on value,
combining quality and cost
integration according to the
perception of the customer. The
organizational improvement
strategies described by Deming
(1986) and Juran (1993), based
on the post-war Japanese
reconstruction, have advanced the
philosophy and strategy of total
quality management (TQM) as a
management strategy. The recent
steep decline in the values of
shares in Internet-linked
companies, which has led to a
number of high-profile failures,
shows the importance of applying
the concept of TQM to virtual
environments. As the ultimate
goal of TQM is customer
satisfaction, it is important for the
Internet companies to focus on
unconditional customer
satisfaction. This paper discusses
the importance of customer
satisfaction for virtual
organizations.
Management Decision
41/7 [2003] 666-670
# MCB UP Limited
[ISSN 0025-1747]
[DOI 10.1108/00251740310495595]
[ 666 ]
University of Bradford, Bradford, UK
Mustafa Zihni Tunca
SuÈleyman Demirel University, Turkey
Mohamed Zairi
European Center for Total Quality Management, University of Bradford,
Bradford, UK
1. Introduction
The Wall Street Journal Europe (2001) has
reported that a total of 555 Internet
companies have shut down since January
2000 (Kemmler et al., 2001). Recent research,
however, concludes that many of these
closures are not as a result of a failure in
confidence on the part of investors (Kemmler
et al., 2001). It also highlights that the
survivors will be the ones which have
identified and implemented a winning
business model.
Aboelmaged and Tunca (2000) emphasize
that the Internet companies, as with many
virtual organizations, face not only financial
problems, but are also challenged by several
internal and external threats. These threats
are potential crises that may be responsible
for final closure.
Although there is only a limited number
of studies of the recent failures of the
Internet companies, they essentially focus
on the financial, marketing or logistics
perspectives. Indeed, the transformation
process in virtual organizations includes
consumers as a major input of an
operation, in which the demand is
processed to create a satisfied customer as
an output. Thus, a satisfied customer is a
key factor for a successful Internet
company.
Customer satisfaction is the ultimate
reason for total quality management
(TQM). In Deming's (1986) seminal
interpretation of TQM, the whole concept of
total quality was entirely devoid of
meaning without reference to the customer.
Therefore, in this paper, an overview of
TQM and electronic commerce integration
will be introduced with special reference to
the customer focus and satisfaction for
virtual organizations.
The Emerald Research Register for this journal is available at
http://www.emeraldinsight.com/researchregister
2. TQM and customer satisfaction
Feigenbaum (1986) defines TQM as follows:
An effective system for integrating the
quality development, quality maintenance
and quality improvement efforts of the
various groups in an organization so as to
enable production and service at the most
economical levels which allow for full
customer satisfaction.
In the case of the Federal Quality Institute
(FQI) (1991), the standard for determining
quality lies in meeting customer
requirements and expectations the first time
and every time. The FQIs definition is:
Total Quality Management (TQM) is a
comprehensive, customer-focused system
that many organizations are adopting to
improve the quality of their products and
services. It is a way of managing the
organization at all levels, to achieve customer
satisfaction.
Cox and Dale (2001) cited that, the key
element to business achievement is quality.
The authors also emphasise that without a
quality management approach that
guarantees quality from its systems, staff and
suppliers, a business will not be able to
deliver the appropriate level of service
quality to satisfy its customers.
Evans and Lindsay (1998) directly
connected ever-improving value of products
and services with satisfaction of customers.
Retaining customers was viewed as being
dependent on achieving higher levels of
satisfaction than those of the organization's
competitors. Globally, customer satisfaction
approaches are fairly universal among
successful and award-winning TQM
organizations. According to Nadkarni (1995)
focusing on customer satisfaction was a
major reason for the success of Baldrige
Award winners. The highest percentages of
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0025-1747.htm
Nasser Alomaim, the award's scores relate to customer focus
Mustafa Zihni Tunca and and satisfaction.
Mohamed Zairi Takeuchi and Quelch (1983) highlight that
Customer satisfaction @
virtual organizations universally, there is apparently no doubt
Management Decision whatsoever that quality must be driven by
41/7 [2003] 666-670 customers. According to Peters and
Waterman (1982), aligning organization
strategies to customer requirements has long
been regarded as the basis of an
organization's success. Exceeding customer
expectation marks the success of the fastest
growing quality organizations, such as
Home-Depot, ranked first among US
companies in a ten-year growth in earnings
per share (Evans and Lindsay, 1998).
Richardson (1997) reports that, while
Motorola reinvented itself through assiduous
analysis of customer needs and associated
components of customer analysis, Wang
Laboratories lost its business as an advanced
technology leader because it did not follow its
own customers' demand for personal
computers.
Although many researchers concerned
different aspects of TQM, the ultimate
purpose was to provide full customer
satisfaction. Customer satisfaction initially
involves customer focus. According to Evans
and Lindsay (2001), customer focus addresses
how an organization determines current and
emerging customer requirements and
expectations, as well as customer
satisfaction. The authors also pointed out
that, in order to satisfy customers, achieve
higher customer satisfaction than the
competitors, retain customers in the long run
and gain market share, the business must
deliver ever-improving value to its
customers.
The literature on customer satisfaction
reveals the following three main themes that
have started to emerge over the last few
years:
1 The main enabler-type activities that
appear to be linked to customer
satisfaction.
2 The link between customer satisfaction
and ``bottom-line'' business results.
3 Will customer satisfaction continue to be
the primary focus for successful
organizations in the future.
According to Oakland and Porter (1994),
many quality award-winning companies,
award applicants, and other organizations
reporting successful business results share
certain common approaches and basic
philosophies regarding customer
satisfaction. These companies have an
intense customer-centred focus, in which
employees at all levels are involved,
informed about, and committed to. They
listen to their customers by gathering
multi-source information, and act on that
information.
According to Spring et al. (1998), in order to
satisfy the customer, a company must
identify customer needs to design the
appropriate product or service. Chan et al.
(2001) report that one appropriate TQM
technique is quality function deployment
(QFD), which is a customer-oriented
approach for translating customer voices
into various design features of products and
services. Zairi and Youssef (1995) state that
there are three objectives of QFD:
1 to identify who is the customer;
2 what the customer wants; and
3 how these wants can be fulfilled.
Govers (2001) emphasises that customer
requirement and their relationship with
design characteristics are the driving forces
of QFD methodology. According to Shin et al.
(1998), QFD stresses cross-functional and its
intent is to incorporate the:
. . . voice of [the] customer into phases of
product development and production cycle
through planning and into the marketplace.
3. Virtual organizations and
customer satisfaction
The fast growing Internet technology
introduced a new digital economy on a
virtual environment. Cox and Dale (2001)
define that:
. . . E-business or e-enterprise is the term used
to define a business that has a virtual
presence or Web site on the Internet either to
promote brand awareness or enable
e-commerce.
E-commerce can also be defined as:
. . . the conduct of business among
e-enterprises and consumers . . .
where e-business means:
. . . a business enterprise with the capability to
exchange value (money, goods, services and
information) electronically (Anderson
Consulting, 1999).
Tapscott et al. (2000) argue that, in order to
win in such an economy, it is vitally
important to deliver better value. Mouyagar
(1998) claims that a cheaper price can be a
better value, which can be reached by
contacting the customers with a minimum
number of intermediaries in the supply
chain.
In relation to corporate views,
organization goals have had to change over
the past few years to align with e-commerce
initiatives. In the past, company goals have
always focused on profitability and the
bottom line. Schein (1992) notes that the focus
[ 667 ]
Nasser Alomaim, has shifted to competitiveness along with
Mustafa Zihni Tunca and staff and customer satisfaction in order to
Mohamed Zairi achieve long-term success. Surveys and
Customer satisfaction @
virtual organizations research carried out by a variety of sources
Management Decision (for example, Active Media Research LLC,
41/7 [2003] 666-670 2000; PR Newswire, 2000) have shown that the
medium of the Internet and the development
of e-commerce are progressing extremely fast
on a global scale. However, while the Internet
acts as a faster and less costly platform for
consumers and businesses it has
inadvertently increased the importance of
customer satisfaction.
Caruso (2000) reports that IT and business
executives from all industries surveyed in
the Information and Business Week survey
agree that generating new sources of revenue
is not the main goal of deploying e-business
applications. In fact, this factor ranked well
behind creating or maintaining a competitive
edge, improving customer satisfaction, and
keeping pace with the competition (Dalton,
1999). Heskett et al. (1994) assert that the
importance of customer satisfaction is to
achieve good financial performance in
services in the physical world, and the same
can be said of e-commerce where a customer
can be lost if unable to access a Web site or if
the experience proves unsatisfactory.
It is clear that e-commerce will
dramatically change the way business
operates with large-scale changes requiring a
similarly large-scale focus on the needs of the
customer. Ody (2000), emphasise that the
main reasons why customers go onto the
Internet are to find information or buy a
product or service with an emphasis on
convenience and speed. Ziff-Davies (2000)
maintains that the concept of the Internet has
raised customers' sensitivity to fast customer
service.
An overview of virtual organizations is
presented by Aboelmaged and Tunca (1999).
Figure 1 illustrates the customer
contact-customer focus matrix for the
Internet companies. In Figure 1, the Y-axis
shows the level of customer contact on the
Internet companies. The X-axis, however,
shows the level of customer focus.
Customer contact level of the Internet
companies is highly dependent on the nature
of the business. While a bookstore, for
instance, has a high customer contact, the
content providers could have relatively lower
customer contact. Customer focus, on the
other hand, crucially depends on strategic
decisions.
The highest customer satisfaction can be
reached, where both the customer contact
and the customer focus is high. A company
with a high customer contact and focus is
likely to be a ``winner'', while in a high
[ 668 ]
customer contact environment, if the
customer focus is low, then the company is
likely to be a ``loser''. The loser causes the
highest customer dissatisfaction and is very
likely to disappear in a competitive
environment. The ``prudential'', not to be
confused with the UK Insurance giant of the
same name, is the most cautious type of
company with a high customer focus in a low
customer contact environment. Finally, the
``neverminder'' is the less cautious company
in an environment that requires relatively
less customer contact along with a low
customer focus.
4. Cost of customer satisfaction
Quality costs are used by management in its
pursuit of quality improvement, customer
satisfaction, market share and profit
enhancement. It is the economic common
denominator, which forms the basic data for
TQM. A quality cost programme provides a
warning of oncoming dangerous financial
situations. Managers need the information
to obtain a greater commitment to the
benefits of quality and know that a positive
cost trend would prove the economic value
of quality.
In 1991, the American Society for Quality
Control claimed that the traditional
``prevention, appraisal, failure'' model for
quality costs had been introduced as far back
as 1967.
The prevention and appraisal costs are
known as conformance costs and defined as
those costs incurred to insure that the
manufactured products or delivered services
conform to specification, while the internal
and external failure costs are known as non-
conformance costs which are associated with
products or services that do not conform to
the customer's requirement.
As presented in the previous section, the
traditional cost of quality model assumes
that failure costs reduce as the money spent
on assessment and prevention increases
(Feigenbaum, 1986). The model can be
adopted for the Internet companies,
particularly with respect to customer
satisfaction.
As seen in Figure 2, the total cost and the
cost of customer dissatisfaction gradually
decrease as the cost of customer satisfaction
rises. The cost of customer dissatisfaction
involves all the costs to recover the
unsatisfied customers including cost of
returned goods, cost of customer regain and
cost of losing potential customers, who are
influenced by the unhappy customer. The
cost of customer satisfaction is essentially
Nasser Alomaim, Figure 1
Mustafa Zihni Tunca and Customer contact ± customer focus matrix
Mohamed Zairi
Customer satisfaction @
virtual organizations
Management Decision
41/7 [2003] 666-670
more comprehensive and it covers all direct
and indirect costs incurred to keep the
customers satisfied. This can be classified
under two broad headings; the cost of
gaining the new customer and the cost of
keeping the customer's satisfaction and
loyalty.
The current practices of many Internet
companies only partially concentrates on
the ultimate customer satisfaction. While
the companies are essentially interested in
the cost of gaining new customers, they have
paid little or no attention to the cost of
keeping the customer satisfied. However,
the recent dot-com crisis, which has led to
many shut downs, is expected to change the
companies' attitude to customer
satisfaction.
Figure 2
The cost customer satisfaction curve
5. Conclusion
This paper has intended to provide a brief
overview of the TQM focus of the Internet
companies from the customer satisfaction
standpoint. The essential points relating to
customer satisfaction within the virtual
environment have been briefly introduced.
Many Internet companies have yet to
practice TQM principles. Indeed, the virtual
business environment has to develop a clear
and correct concept of and treatment for
success. The ultimate goal of TQM is
customer satisfaction, which requires an
intensive focus on the customers.
The ultimate customer satisfaction is,
however, not free. The more attention
companies pay to the cost of customer
[ 669 ]
Nasser Alomaim, satisfaction, the less overall cost is incurred
Mustafa Zihni Tunca and in the virtual environments leading to the
Mohamed Zairi ultimate goal of any business, higher
Customer satisfaction @
virtual organizations profitability.
Management Decision It is recommended for the researchers to
41/7 [2003] 666-670 fully analyze not only the reasons of the
recently shut-down dot-coms but also the
current weaknesses of the successful virtual
organizations, which might cause customer
dissatisfaction, to be able to reach realistic
solutions, in which TQM principles can help
those organizations to provide ultimate
customer satisfaction.
References
Aboelmaged, M.G. and Tunca, M.Z. (1999),
``Electronic commerce: real crisis in a virtual
context'', paper presented at the 4th Annual
Crisis and Disaster Management Conference,
Cairo.
Aboelmaged, M.G. and Tunca, M.Z. (2000),
``Virtual organizations: are they crisis-free?'',
Proceedings of the First Annual Global
Information Technology Management World
Conference, GITM 2000, GITM Association,
Memphis, TN, pp. 96-9.
Active Media Research LLC (2000), Top 100
E-commerce Consumer Web Sites, Active
Media Research LLC, Peterborough.
Anderson Consulting (1999), ``e-Commerce:
what's all the fuss'', Presentation, Section 1,
p. 5.
Caruso, J. (2000), ``Revving the e-commerce
engine'', Network World, Vol. 17 No. 5,
pp. 1, 80.
Chan, K., Chan, S.F. and Chan, C. (2001),
``Integrated management'', in Ho, S.M. and
Donnelly, M. (Eds), Proceedings of the
International Conference on ISO 9000 and
TQM.
Cox, J. and Dale, B.G. (2001),``Service quality and
e-commerce: an exploratory analysis'',
Managing Service Quality, Vol. 11 No. 2,
pp. 121-31.
Dalton, G. (1999), ``E-business evolution'',
Informationweek, pp. 737, 50-66.
Deming, W.E. (1986), Out of the Crisis,
MIT Center for Advanced Engineering Study,
Cambridge, MA.
Evans, J.R. and Lindsay, W.M. (1998), The
Management and Control of Quality, 4th ed.,
West Publishing, St Paul, MN.
Evans, J.R. and Lindsay, W.M. (2001), The
Management and Control of Quality, 5th ed.,
West Publishing, St Paul, MN.
Federal Quality Institute (1991), Introduction to
Total Quality Management in the Federal
Government, Government Printing Office,
Washington, DC.
Feigenbaum, A.V. (1986), Total Quality Control,
McGraw-Hill, New York, NY.
Govers, C.P.M. (2001), ``QFD not just a tool
but a way of quality management'',
[ 670 ]
International Production of Economies, Vol. 69,
pp. 151-9.
Heskett, J.L, Jones, T.O, Loveman, G.W,
Scsser, W.E., Schlesinger, L.A. (1994),
``Putting the service profit chain to work'',
Harvard Business Review, Vol. 72 No. 2,
pp. 167-74.
Kemmler, T., Kubicova, M., Musslewhite, R.
and Prezeau, R. (2001), ``E-performance.
II: The good, the bad, and the merely
average'', available at: www.mckinsey
quarterly.com
Mouyagar, W. (1998), Opening Digital Markets,
McGraw-Hill, New York, NY.
Nadkarni, R.A. (1995), ``A not-so-secret recipe for
successful TQM'', Quality Progress, Vol. 28
No. 11, pp. 91-6.
Oakland, J.S. and Porter, L. (1994), Cases in Total
Quality Management, Butterworth
Heinemann, Oxford.
Ody, P. (2000), ``The challenging task of building
strong e-loyalty: customer relationship
marketing'', The Financial Times.
Peters, T. and Waterman, R. (1982), In
Search of Excellence, Harper & Row,
New York, NY
PR Newswire (2000), ``US e-commerce market
phcs plenty of room to grow'', IDC Reveals.
Richardson, T. (1997), Total Quality Management,
Delmar Publishers, Albany, NY.
Schein, E. (1992), ``The role of the CEO in the
management of change'', in Kochan, T. and
Useem, M. (Eds), Transforming the
Organisation, Oxford University Press,
New York, NY.
Shin, J.S., Fong, K.H. and Kim, K.J. (1998),
``Complexity reduction of a house of quality
chart using correspondence analysis'',
Quality Management Journal, Vol. 98 No. 5,
pp. 46-58.
Slack, N., Chambers, S. and Johnston R. (2001),
Operations Management, Financial Times,
Prentice Hall, Hemel Hempstead.
Spring, M., McQuater, R., Swift, K., Dale, B. and
Booker, J. (1998), ``The use of quality tools and
techniques in product introduction: an
assessment methodology'', The TQM
Magazine, Vol. 10 No. 1, pp. 45-50.
Takeuchi, H. and Quelch , J.A. (1983), ``Quality is
more than making a good product'', Harvard
Business Review, Vol. 61 No. 4.
Tapscott, D., Ticoll, D., Lowy, A. (2000), Digital
Capital, Nicholas Brearley, London, p. 6.
(The) Wall Street Journal Europe (2001), ``A total
of 53 dot-coms shut down in June'', (The) Wall
Street Journal Europe, 4 July, p. 3.
Zairi, M. and Youssef, M.A. (1995),
``Benchmarking critical factors for TQM:
Part I: Theory and foundation'',
Benchmarking for Quality Management &
Technology, Vol. 2 No. 1, pp. 5-20.
Ziff-Davies (2000), ``Hold please'', PC Week.