Academic journal article Journal of Business and Entrepreneurship

Differentiating Primary and Secondary Customers by Expectations

Academic journal article Journal of Business and Entrepreneurship

Differentiating Primary and Secondary Customers by Expectations

Article excerpt

ABSTRACT

Improving customer service quality offers the small business an opportunity to gain a competitive advantage over larger businesses; in effect, the business can retain customers by meeting or exceeding expectations. In the current study eight customer expectations differentiated primary and secondary customers of a focal organization: primary customers being those who give the majority of their business to the supplier, and secondary customers being those who do not. The results of the study demonstrate that primary and secondary customers can be differentiated by analyzing the degree to which their expectations have been met, and that specific expectation variables contributing to the discrimination between the two groups can be identified. Recommendations on how to approach the management of expectations are provided in addition to directions for future research.

INTRODUCTION

Exploring linkages among marketing concepts and the fields of entrepreneurship and small business provides a fertile ground for researchers in these disciplines (Hills & Laforge, 1992). For example, applications of marketing techniques to small business management in areas such as advertising effectiveness (Vaccaro & Kassaye, 1988), strategy (Shama, 1993), and exporting (Sriram & Sapienza, 1991) can be found in the literature. Another marketing concern, customer service, is an area in which smaller organizations can gain a competitive advantage over their larger competitors (Dent 1992).

Peterson (1992) has observed that customer dissatisfaction with large businesses appears to offer a major opportunity to small firms to differentiate and add value to their product and service offerings. Anderson and Fornell (1994) found that meeting customer expectations and satisfying customers are the most powerful weapons in the arsenals of small business managers. Small businesses, in particular, have consistently found it much more effective to compete with large firms by using defensive strategies to keep customers rather than through using conquest strategies which focus on acquiring new customers (Sewell, 1990). Systems of post-sale feedback, including data on products returned due to poor performance, number of referrals from satisfied customers, and number of warranty claims, can serve as indicators of service quality (Weinrauch & Natarajan, 1992). In fact a number of small firms have started incorporating management of customer expectations by using concepts similar to these in their marketing research practices.

However, while evidence exists to support the importance of high quality customer service to small business survival and growth, little research has been conducted to identify the purchase behavior effects of meeting customer expectations. Our hypothesis, in the current study, was that customers can be differentiated by the degree to which their expectations for service are met by a supplier. Specifically, the major issue explored in relation to this hypothesis was whether the expectations of customers who give the majority of their business to one supplier (i.e., primary customers) differ from those customers who do not (i.e., secondary customers); additionally, analyses were performed to determine whether the individual expectations that differentiate these customers could be identified. With this knowledge, small business managers will be better able to emphasize those activities that provide maximum leverage to maintain and expand their customer base.

QUALITY, CUSTOMER SERVICE, AND EXPECTATIONS

Research related to quality management in service organizations emphasizes the importance of the customer and of long-term rather than ad hoc relationships. For example, Peterson and Wilson (1992) argue convincingly that customer satisfaction is an organization's primary responsibility. Gummesson (1993) carries the importance of customer focus and satisfaction even further in discussing quality in service organizations by describing the customer as an "asset to be tended. …

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