Operations Perspective of Consumer Behaviour

Posted in Operations & IT Articles, Total Reads: 510 , Published on 20 September 2016
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Every business exists for its customer. It is the customers who represent the raison d’etre for any business. Without the customer no business can exist, for he is the one who buys a company’s products and services, which brings revenue and a profit to the organization, maintains the growth and retain a steady cash-flow. The most important asset for any organization is its customers. A company’s success depends upon its customer base, their buying preference and frequency of their purchase.


It was Mahatma Gandhi who represented a simple, yet powerful, focus on the customer. In a speech in South Africa in 1890, he said: “A customer is the most powerful visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption to our work. He is the purpose of it. He is not outsider of our business. He is part of it. We are not doing him a favour by serving him. He is doing a favour by giving us an opportunity to do so.”


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Just as the customer represents one end of a business to whom the products and services are sold, there is another set of organization known as suppliers from whom an organization buys all its input it requires, and will invariably depend on external suppliers to source these resources in the form of raw materials, intermediates, consumables, etc. and various services.


Customer Relationship Management (CRM) is a key business tool in managing the vital functions. The idea behind CRM is by engaging in a smarter and keener relationship, a company can learn its customers’ preferences and develop trust over a period as an opportunity to understand and record such information and learn the customers’ preference. Complaints and errors are not considered as mere fixes that are forgotten once resolved, but a valuable repository of learning and experience.

Thus, every organization depends on its suppliers at one end for inputs, processes them in its facilities, and offers the finished products and services to its customer at the other end. Without these two entities, it is clear that no organization can exist. Recognizing this interdependence lies at the heart of ‘Managing Customer and Supplier Relationship.’


Let us briefly look at three related concepts in this concept:

1) Value Chain-

Every organization basically exist for the purpose of creating value to the customer and delivering value to the customers. The consumer does not buy a product or services by paying a price- he is buying ‘Value”, a bundle of expected benefits. Therefore, all the organizations involved in the chain in creating and delivering this value to the customer are part of a ‘Value Chain’.

2) Balanced Scorecard-

The balanced scorecard is a management concept that helps managers at all levels monitor results in their key areas. Developed by Robert Kaplan and David Norton and first published in Harvard Business Review in 1992 “The Balance Scorecard- Measure that drive performance”, the Balanced Score Card (BSC) is today a widely used tool in the arsenal of a a manager. It is both a strategy planning and performance measurement tool.

3) Total Quality Management-

The evolution of ‘Total Quality Management’ (TQM) concepts, originally developed and implemented successfully in Japan, and later embraced by the rest of the world, gave a fillip to this development of relationships with customers and suppliers. TQM became an over-arching philosophy in managing business.

 

While there had always been companies such as IBM, 3M, Kodak, Rolls Royce, ICI, etc. who are known for their quality products, it was not until a war-betted Japan adopted “Quality” as a die-hard philosophy, a way of life, that companies embraced the most important concept whole-heartedly. Till then the focus of most organizations across the globe was on top-line and bottom-line, i.e., purely on financial performance. The invasion of US markets by Japanese auto and consumer electronics majors in early 1970’s altered the scenario forever. In the initial years, the focus was on producing quality products. Then, with the wider understanding and adoption of TQM practices, organizations began adopting a more holistic approach – ‘Quality in everything we do.’ This brought in the in the much needed attention and focus on customer and suppliers.


Notwithstanding these developments, even today, many organizations remain inward-looking, getting lost in their own grandiose plans, R&D and product launches, without really understanding whether their products and services are really required by the customers, whether they are wanted or fulfill the needs of the customers. Quite often we find companies rushing in with their products or services with much fanfare, only to withdraw them quietly soon thereafter. The grand schemes and services offered many airlines in India in recent years and their fate are too well known.

However, excellent organizations remain steadfast in their focus on meeting, and even exceeding, their customer’s expectations.

Clause 5.3 of ISO 9001:2008 deals with “Customer Focus” as: Top management shall ensure that customer requirements are determined and are met with aim of enhancing customer satisfaction.


Consider how great companies translate these into their operating philosophy through Vision and Mission statements to create a culture focused on customers:

• Procter & Gamble: “Our Purpose unifies in a common cause and growth strategy of improving more consumers’ lives in a small but meaningful ways each day. It inspires P&G people to make a positive contribution every day.”

• Tata steel: “By becoming the supplier of choices, delivering premium products and services and creating value for our customers.”

• Dabur: “Dedicated to the health and well being of every household.”

• FedEx: “FedEx Corporations will produce financial returns for its superior financial returns for its share owners by providing high value-added logistics, transportations and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.”

• ITC: “We are always customer focused and will deliver what the customer needs in terms of value, quality and satisfaction.”

 

This article has been authored by Keval Boricha from IIM Raipur

 

References-

• “Conceptual Foundations of the Balanced Scorecard”- By Robert S Kaplan, Harvard Business School, Harvard University- Working paper: 10-074

• http://www.thehindu.com/2000/10/15/stories/1315046y.htm

• http://www.acrwebsite.org/volumes/7772/volumes/v22/NA-22

• http://investors.fedex.com/company-overview/mission-and-goals/default.aspx

• https://www.academia.edu/19567357/Implementing_ISO_9001_2015

• http://www.ictmumbai.edu.in/Deptindex.aspx?page=a&ItemID=17&nDeptID=3


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