IMPACT OF TOTAL QUALITY MANAGEMENT PRACTICES ON CUSTOMER RETENTION AND SATISFACTION

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Total quality management practice is a firm-wide management philosophy of continuously improving the quality of the products/services/processes by focusing on the customers’ needs and expectations to enhance customer retention, satisfaction and firm performance. There are mixed results about the relationship between total quality management practices and customer retention, satisfaction and performance. However, this study will examine the impact of total quality management practices on customer retention and satisfaction. A growing number of organizations use total quality management as a strategic foundation for generating a competitive advantage (Reed, Lemak, & Mero, 2000) and improving firm performance (Hendricks & Singhal, 1997; Lemak & Reed, 1997) and customer retention and satisfaction (Samson & Terziovski, 1999).

Firms that have won quality awards generally outperform other firms with respect to both income measures (Hendricks & Singhal, 1997), customer loyalty and stock market value (Lemak & Reed, 1997). It is no surprise that the links among market orientation, total quality practices, and performance have attracted the attention of marketing and operations management researchers’ alike (Ettlie & Johnson, 1994; Flynn, Schroeder, & Sakakibara, 1994; Kohli & Jaworski, 1990; Narver & Slater, 1990; Samson & Terziovski, 1999). Total quality management practices have been shown to enhance organizational performance for both product and service organizations (Powell, 1995). However, there is relatively little research on the differences between product and service offered by companies with respect to the impact of quality practices on customer retention and satisfaction. We know little about how these two different types of organizations view what they do, how well they do it, and its consequences. The concept of total quality management practice has been developed as a result of intense global competition. Organizations with international trade and global competition have paid considerable attention to philosophies of total quality management, procedures, tools and techniques. According to Juran (2001), international competition requires higher levels of quality achievement by organizations.

Total quality management is the popular area of research in management. Total Quality Management has been practiced in diverse manufacturing industries and now there is a growing interest in the service sector, even from non-profit organizations (Nwabueze, 1998). But the service industry differs from the manufacturing industry in a number of ways, such as service intangibility, simultaneity of production, delivery and consumption, perishability, variability of expectations of the customers and the participatory role of customers in the service delivery but the main aim by both sector is to achieve customer retention and satisfaction. Several authors have proposed models of total quality management. However, most of the models are based on theories and practices that are primarily derived from the manufacturing industry where this has been effectively practices in the recent decades. Furthermore, total quality management has become the buzz word in the management practice. It has been defined in many different ways. The International Standard ISO 8402, Quality Management and Quality Assurance-Terminology has defined total quality management as the ―management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society (Ljungstrom & Klefsjo, 2002). Temtime and Solomon (2002) said that total quality management seeks continuous improvement in the quality of all processes, people, products, and services of an organization. Total quality management is also a systematic approach to management that aims to enhance value to customers by designing and continually improving organizational processes and systems (Kartha, 2004). The emphasis is on employee involvement and empowerment along with customers and customer satisfaction as the focal point.

The tenets of total quality are continuous improvement, top management leadership commitment to the goal of customer satisfaction and retention, employee empowerment, and customer focus (Ugboro & Obeng, 2000). Total quality management means that the organization‘s culture is defined by and supports the constant attainment of customer retention and satisfaction through an integrated system of tools, techniques and training (Sashkin & Kiser, 1993).

1.2 STATEMENT OF THE PROBLEM

Many researchers think that total quality management is old news, many of the new continuous improvement initiatives are based on total quality management philosophies. Total quality management encompasses a number of different initiatives. Juran (2001) wrote that the benefits and goals of total quality are lower costs, higher revenues, delighted customers (as seen in customer retention and satisfaction), and empowered employees. Costs can be lowered by reducing errors, reducing rework, and reducing non-value added work. Higher quality can also equate to higher revenues through satisfied customers, increased market share, improved customer retention, more loyal customers, and premium prices. Customers continue to demand higher quality goods and services. Delighted customers purchase over and over again, advertise goods and services for the company, and check first when they are going to buy anything else to see what is offered by the company they are loyal to.

However, it is not easy for management to implement total quality management, because it means a cultural overhaul (Rao, Youssef, & Stratton, 2004). Deming (1981) also attested that the benefits of better quality through improvement of the process are thus not just better quality and the long-range improvement of market-position, but also greater productivity and profit. Improvement of the process increases uniformity of output of product, reduces mistakes, and reduces waste of manpower, machine-time, and materials. Kaynak (2003) suggested that a positive relationship exists between the extent to which companies implement total quality management and performance as a result of satisfied customers.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the impact of total quality management practices on customer retention and satisfaction.
2. To examine the approaches to the philosophy of total quality management.
3. To determine the factors affecting the practice of total quality management in companies.

1.4       RESEARCH QUESTIONS

1. What is the impact of total quality management practices on customer retention and satisfaction? 2. What are the approaches to the philosophy of total quality management?
2. What are the factors affecting the practice of total quality management in companies?

1.5 HYPOTHESIS

H_O: There is no significant relationship between total quality management practices and customer retention and satisfaction.

H₁: There is significant relationship between total quality management practices and customer retention and satisfaction.

1.6 SIGNIFICANCE OF THE STUDY

1. The findings from this study will educate the managements of companies on the approaches to the practice of total quality management and its subsequent effect on customer retention and satisfaction.
2. This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7  SCOPE/LIMITATIONS OF THE STUDY

This study will be conducted on some selected companies in Edo State. This study will also cover the method of total quality management practice adopted by the selected company so as to ascertain its effect on customer retention and satisfaction. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview). Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

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