Is Customer Satisfaction Necessary for Profitability

Is Customer Satisfaction Necessary for Profitability
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Abstract
Customers play an instrumental role in the success of a business and evidence indicates that the kind of services, which an organization provides, affects the trust and loyalty of customers. Businesses that are able to attract a huge number of customers usually end up making higher profits compared to those that have lesser customers. There are numerous mechanisms which organizations use to attract customers, including quality product and services, better prices, discounted services, loyalty programs, and after sale services. These factors are instrumental in enabling a customer to choose to do his or her shopping in a particular establishment instead of going to another competing firm. Therefore, when a business improves its level of service delivery, it attains the opportunity of cutting on the market niche of its competitors and this translates to increased sales and revenues as well as enhanced profitability. The management is tasked with the role of ensuring that employees are well trained and qualified to handle any queries from customers to ensure that service delivery is of the highest quality.
Is Customer Satisfaction Necessary for Profitability
Introduction
Most research studies have proved that customer satisfaction leads to better business outcomes and enables an organization to attain a higher revenue as a result of the increased number of people who visit the business premises. According to a study conducted by Keiningham, Perkins-Munn, Aksoy, and Estrin (2005), when a customer is satisfied with the services that are offered by an organization, he gains a positive influence of becoming a returning customer and this contributes to the positive financial performance of an organization. In addition, numerous studies have also proved that there is a close association between the rates of customer retention and the profits that businesses make across a number of service industries. When a customer understands that an institution is dedicated to serving his needs, it is evident that a person will be motivated to make frequent purchases and this will ultimately enhance the profitability of the business.
Unlike in the past when businesses strived at making huge profits without considering how they will retain their customers, research studies have revealed that firms have improved service delivery since customer satisfaction is positively correlated to profitability. According to Alsemgeest and Smit (2013), businesses aim at having a positive return on their investment, and they have realized that this can only be achieved when they provide good services to customers. In addition, other issues such as the quality of a product, the price, and the quality of services that are provided to customers also have a huge impact on customer satisfaction. For instance, when a customer is provided with loyalty points whenever he shops at a company, the management tends to entice the shopper to make repeated visits to the business in order to increase his loyalty points (Alsemgeest & Smit, 2013). These points can later be redeemed at the same premises where a customer is able to benefit while at the same time...