Customer Satisfaction – Tesco

Chapter 1. Introduction Chapter 1. Introduction “Satisfying the customer is a race without finish. ” (Vadim Kotelnikov). Many researches and academicians have defined customer’s satisfaction in their own way. Satisfying customers is always a challenging job for anyone. Customer satisfaction means providing goods and services to the customer which meets their level of expectation. So, neglecting customer and their demand can be dangerous for the existence of the organisation.

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That is the significant reason why companies are paying attention to the customer satisfaction today (Harkiranpal Singh, 2006). Similarly, researcher here tries to measure customer satisfaction and efforts to put to recognise its importance in development of the organisation. Introduction Introduction Background of the research Background of the research Background of the organization to be studied Background of the organization to be studied Research purpose Research purpose

Scope of the research project Scope of the research project Brief overview of the research methodology Brief overview of the research methodology Structure of the report Structure of the report Figure 1. 1 Structure of Chapter 1: Introduction 1. 1 Background of the Research Customer satisfaction is the buzzword of the 1990s. Unfortunately, till the date numerous amount of managers consider satisfying their customer is a good practice to do rather than crucial element of success (Dianne S. Ward, 1993).

Current economic conditions have encouraged many firms to review their approach regarding customer satisfaction management (Jonathan Parkes). Satisfaction is a crucial measure of an organisation’s achievement and it is considered as a great influencer of attitude, word of mouth communication, profit, and repurchase; in long run, lead to customer loyalty; to be appropriate predictor of buying behaviour in the future. Customer satisfaction gained by any organisation results in loyalty of customers, repeated visits and use of wide range of services and goods offered.

Therefore, it is found that greater customer retention can be achieved when customer satisfaction is taken care of, while it is also found that customer with high satisfaction received, were ready to pay higher prices (Patricia Huddleston, Judith Whipple, Rachel Nye Mattick and So Jung Lee, 2009). Customer’s satisfaction on their buying is important factor that take business towards success. In current period, customer satisfaction has received new attention within the environment of the paradigm shift to relationship marketing from transactional marketing. (Aurimas Dapkevicius and Borisas Melnikas, 2009). . 2 Background of the organization to be studied This research is based on the customer satisfaction at Tesco PLC. Tesco is the leading retailer in Britain, and one of the top three in the world. It has over 3700 stores globally and employs approximately 440,000 people. It operates in 13 other countries except UK, which are Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland in Europe, China, Japan, South Korea, Malaysia, Thailand and India in Asia and U. S. A. “Everyday life keeps changing and the Tesco team excels at responding to those changes.

Tesco has grown from a market stall, set up by Jack Cohen in 1919. The name Tesco first appeared above a shop in Edgware in 1929 and since then the company has grown and developed, responding to new opportunities and pioneering in many innovations. ” “By the early 1990s it faced strong competition and needed a new strategy. Tesco were good at buying and selling goods but had begun to forget the customers. Sir Terry Leahy, who became Chief Executive in 1997, asked customers the simple question – “what are we doing wrong? “. Tesco then invested in the things that matter to customers.

For example, it launched its loyalty scheme Clubcard and Tesco. com, its internet home shopping service. ” “Going the extra mile for customers has been key to its growth. It wants to make customers’ lives easier and better in any way it can. It wants to appeal to every customer and give them a reason to come back to Tesco. ” (www. cn. tesco. com/en/aboutus/aboutus_history. htm) Tesco UK Tesco in UK is operating more than 2700 stores. The supermarket giant of Britain has registered the pre-tax profit of ? 3. 4bn for the year 2010 (Graeme Wearden, 2010). Headquarter of Tesco is in Hertfordshire, UK.

In UK, Tesco is the leading supermarket with small sized grocery stores named as Tesco Metro; outside cities they developed big supermarkets (Tesco Extra), and 24-hour stores. In Britain, Tesco is the king of supermarkets, apart from being national leader in food sector, it is proud of retailing every goods that satisfies the needs of the customers which includes household appliances and hi-fi, books, household equipment, CD/DVD/mini-discs, flowers, apparel, wine, liquors and so on. Keeping in mind the future, Tesco has improved rapidly with the changes in the technologies. Introduction of online sales through its website named www. esco. com has benefited the company with an attractive profit. Tesco; a joint venture with the Royal Bank of Scotland facilitates it to sell general insurance (car, home, travel, pet), and life insurance, saving schemes and credit cards. Besides, it has also started owning gas (petrol) stations in many places for continuing support to its customers (Tesco PLC Company, 2010). Tesco has a largest geographic market in UK. It stocks around 40,000 food products. Apart from selling other brands, it has its own labels categorized in three levels: value, normal and finest (Company Spotlight: Tesco PLC, 2006).

Non-food sales of Tesco’s in UK operations are small in margin compared with the food products, but still it holds substantial potential growth. In order to improve customer service Tesco has heavily invested in self-service checkouts which carry out quarter of all its transactions. Such steps help ensure the cost accuracy and reduced waiting time in queue for customers, which makes their in-store experience pleasant. CRM (Customer Relationship Management) is getting introduced in every companies and Tesco has also implied it in its company to get closer with the customers and understand their needs.

For the convenience of the customers and continued improved quality of the service, Tesco has introduced a free downloadable application on iphone like Tesco loyalty card and the Clubcard, where any customer with the application stored in their iphone can use their phone instead of the card while making payment at the till (Tesco PLC, 2010). According to the recent survey; Tesco, the Britain’s largest retailer is ranked 7th in terms of customer satisfaction with the rating of 49%. 1. 3 Research Purpose

It is said that most companies lose 45% to 50% customers every five years if the companies do not meet the expectations of the customer and if such happens then it would be at least 20 times expensive to make new customers than to retain the existing customers. Moreover, a 5% reduction in the customer defection rate can increase the customers by 25% to 85%. (B2B International, Market research with intelligence, white paper: using market research for product development by Julia Cupman) ‘Customer satisfaction nowadays is considered a main concern by the business and is the critical element of its profitability’. Vadim Kotelnikov) Now business firms are investing more than ever in customer satisfaction. The purpose of the research is to measure and to detect the importance of customer satisfaction. Many factors influence the satisfaction and dissatisfaction of the customers and play an important role in satisfying the customers. In this research we will try and include all those factors that affect customer satisfaction, where customers would be the key asset for this research as they are the one who has experienced the service and goods of Tesco.

A proper survey would be conducted in a real market to best know the real vision of the customers towards goods and services of Tesco and also would outline their opinions in this research and eventually a conclusion would be drawn based on the undertaken survey. 1. 4 Scope of the research project Tesco Plc. is quite large to conduct a survey on customer satisfaction, hence Tesco at some places are only taken into consideration assuming the same level of customer service and goods are provided in all the other stores within UK and other countries.

In other words, the research is limited to the customers of some places in London, UK only. The respondents of the survey are the people who are currently residing in London and only few physical stores in London are included to conduct this research. 1. 5 Brief overview of the research methodology Methodology as the term; refers to the way in which individual approach problems and search for answers. In short, how research is conducted (Steven J. Taylor and Robert Bogdan, 1998). The purpose of the research is to inform action.

It is essential for the researcher to design a methodology or an approach on how to solve the problem. It helps any individual to stay on track and follow the steps of the methods in solving a particular problem. (S. Rajasekar, P. Philominathan, V. Chinnathambi, 2006). As per the research questions, researcher has utilized the deduction approach, for satisfying the purpose of data collection and medium of questionnaire in survey adopted by researcher. Both primary and secondary data are used and when it comes to type of research used in this case, it is known as applied research.

All the further information on research methodology is mentioned in chapter 3. 1. 6 Structure of the report The structure follows this way: Chapter 2 talks about literature review which lets reader know the relevant work that is already published on researched field. Chapter 3 is about the methods used during the research. Chapter 4 is about the data analysis and discussion, means broadly explains the how data were analysed and the techniques used to do it. Chapter 5 is the conclusion and recommendation drawn by the researcher. Chapter 2. Literature Review Chapter 2.

Literature Review 2. 1 Introduction In the current era, customer is considered as king, not only king sometimes referred to as a god. It means to be successful in any business, customers are given the most priority and their needs to be fulfilled at any cost, which make those customers to repeat again for more products, recommend the goods and services of that particular business to others. What we have heard is that in any kind of business, customer is always right and we always have to meet their expectation, indeed by hook or by crook. If not done so, would be a loss in business.

In a successful business strategy, customer satisfaction plays a key role that is recognised by retailers. It is very important for any retail company to satisfy its customer at the best because customers bring revenue for the company. Satisfied customer always comes back to you so customer satisfaction is very crucial part for retail companies. Customer satisfaction definitions have been discussed widely from the viewpoint of various researchers and organisations who wish gradually to measure it (Chapter 2- Literature Review- Customer satisfaction in call centre, 2009).

Research on customer satisfaction and dissatisfaction has predominantly concentrated upon evaluation of customer regarding particular goods and services consumed. Various investigation has took place related to incidence of satisfaction and dissatisfaction through product and service categories, efforts to identify the psychographic and demographic correlates of satisfaction and dissatisfaction with products, and theoretical models test to describe the satisfaction level that customers recognize from products (Robert A.

Westbrook, 1981). Introduction Introduction Customer Satisfaction Conceptual and Operational Definitions Why Customer Satisfaction is Important? Models of Satisfaction Customer Satisfaction Measurement Process Consequences of Customer Satisfaction Customer Satisfaction in Retail Customer Satisfaction Conceptual and Operational Definitions Why Customer Satisfaction is Important? Models of Satisfaction Customer Satisfaction Measurement Process Consequences of Customer Satisfaction Customer Satisfaction in Retail Summary Summary Figure 2. Structure of Chapter 2: Literature Review 2. 2 Customer Satisfaction The first question that arises in mind is, “What is customer satisfaction? ” In simple words, the goods and services that satisfies the customer needs. Customer satisfaction is monitored by business for the sake of determining how to maximise their profits, customer base, revenue, market share, customer loyalty, and survival. Although the primary driver is greater profit, exemplary business concentrate on the customer and her/his experience with the company.

Company does work to make their consumers happy and consider customer satisfaction as the crucial part to achieve profit and survival. Customer satisfaction in turn hinges on the quality and effects of their experiences and the goods or services they receive. The definition of customer satisfaction has been widely debated as organizations increasingly attempt to measure it. Customer satisfaction can be experienced in different types of situation and connected to both services and goods.

It is a highly personal assessment that is greatly affected by expectations of customer. Satisfaction; also depends on the experience of customer on both; contact with the firm and personal outcomes. Customer satisfaction differs depending on the situation and the product or service. There is a possibility that customer may be satisfied with a product or service, an experience, a sales person, a purchase decision, service provider, store, or an attribute or any of these. Customer satisfaction is a highly personal assessment that is reatly influenced by expectations of the individual (Customer Satisfaction, 2007). Despite the abundance of customer satisfaction literature acknowledge that customer satisfaction definition which is generally accepted has not been established (Patricia Huddleston, Judith Whipple, Rachel Nye Mattick and So Jung Lee, 2009). 2. 2. 1 Conceptual and Operational Definitions in Consumer Satisfaction Literature Conceptual Definition | Source | Focus| Response | Time| The consumer’s fulfillment response.

It is a judgment that the product or service itself or product or service feature, delivered (or is delivering) a delightful level of purchase –related fulfillment, comprising levels of under-or over fulfillment | Oliver 1997| Product or service | Fulfillment response/judgment | During consumption | Causing from the consumer’s product performance comparison to particular pre-purchase standard | Hartman, and Schmidt 1994 | Product performance compared to some pre-consumption standard | Affective response | During or after consumption | (Product satisfaction) is an attitude – like post-purchase evaluative judgment varying along the hedonic continuum | Mano and Oliver 1993 | Product | Attitude – evaluative judgment Varying along the hedonic continuum | Post consumption| An overall post-consumption evaluation | Fornell 1992 | Post-consumption perceived product performance compared with pre-consumption expectations | Overall evaluation | Post purchase | Examined whether satisfaction was an emotion.

Concluded that satisfaction is a summary attribute phenomenon co-existing with other consumption emotions | Oliver 1992 | Product attributes | Summary attribute phenomenon coexisting with other consumption emotions | During consumption | A post-choice evaluative judgment concerning a specific purchase selection | Westbrook and Oliver 1991 | Specific purchase selection | Evaluative judgment | Post choice | No conceptual definition. (with the salesperson) a function of fairness, preference, and disconfirmation | Oliver and Swan 1989 | Salesperson | | During purchase | The consumer’s response to the evaluation of the perceived discrepancy between prior expectations (or some norm of performance) and the actual performance of the product as perceived after its consumption | Tse and Wilton 1988 | Perceived discrepancy between prior expectations (or some norm of performance) and the actual erformance of the product | Response to the evaluation | Post consumption | Conceptualized as a feeling developed from an evaluation of the use experience | Cadotte, Woodruff and Jenkins 1987 | Use experience | Feeling developed from an evaluation | During consumption | Global evaluative judgment about product usage/consumption | Westbrook 1987 | Product usage/consumption | Global evaluative judgment | During consumption | the evaluative response to the current consumption event… the consumer’s response in a particular consumption experience to the evaluation of the perceived discrepancy between prior expectations (or some other norm of performance) and the actual performance of the product perceived after its acquisition | Day 1984 | Perceived discrepancy between prior expectations (or some other norm of performance) and the actual performance of the product | Evaluative response | Current consumption event … particular consumption experience … after its acquisition | No conceptual definition.

A function of consumer expectations operationalized as product attribute beliefs and disconfirmation. | Bearden and Teel 1983 | | | During consumption | Postpurchase evaluation. Cited Oliver’s (1981) definition: An evaluation of the surprise inherent in a product acquisition and/or consumption experience| LaBarbera and Mazursky 1983 | Surprise | Evaluation | Postpurchase Product acquisition and/or consumption experience | An emotional response to the experiences provided by and associated with particular products or services purchased, retail outlets, or even molar patterns of behavior such as shopping and buyer behavior, as well as the overall marketplace.

An emotional response triggered by a cognitive evaluative process in which the perceptions of (or beliefs about) an object, action, or condition are compared to one’s values (or needs, wants, desires). | Westbrook and Reilly 1983 | Experiences provided by and associated with particular products or services purchased, retail outlets, or even molar patterns of behavior such as shopping and buyer behavior Perceptions of (or beliefs about) an object, action, or condition are compared to one’s values | Emotional response | Postpurchase | Conceptually, an outcome of purchase and use resulting from the buyer’s comparison of the rewards and costs of the purchase relative to anticipated consequences. Operationally, similar to attitude in that it can be assessed as a summation of satisfactions with various attributes. | Churchill and

Surprenant 1982 | Comparison of the rewards and costs of the purchase relative to anticipated consequences | Outcome | Implies after purchase and use | An evaluation of the surprise inherent in a product acquisition and/or consumption experience. In essence, the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer’s prior feelings about the consumption experience. | Oliver 1981 | Surprise Disconfirmed expectations coupled with the consumer’s prior feelings | Evaluation Summary psychological state Emotion | Product acquisition and/or consumption experience | A conscious evaluation or cognitive judgment that the product has performed relatively well or poorly or that the product was suitable or unsuitable for its use/purpose. Another dimension of satisfaction involves affect of feelings toward the product . Swan, Trawick and Carroll 1980 | Product has performed relatively well or poorly or that the product was suitable or unsuitable for its use/purpose Toward the product | Conscious evaluation or cognitive judgment Another dimension involves affect of feelings | During or after consumption | Refers to the favorability of the individual’s subjective evaluation of the various outcomes and experiences associated with using or consuming it (product). | Westbrook 1980 | Outcomes and experiences | Favorability of the individual’s subjective evaluation | During consumption | A kind of stepping away from an experience and evaluating it. . . the evaluation rendered that the experience was at least as good as it was supposed to be. | Hunt 1977 | Experience was at least as good as it was supposed to be | A kind of stepping away from an experience and evaluating it | During consumption experience | The buyer’s cognitive state of being adequately or inadequately rewarded for the sacrifices he has undergone. Howard and Sheth 1969 | Being adequately or inadequately rewarded for sacrifices | Cognitive state of being | | Table 1. Conceptual and Operational Definitions in Consumer Satisfaction Literature Source: Joan L. Giese and Joseph A. Cote (2002) Customer satisfaction can mean virtually anything. It can include such variables as price, conformance, lead time, reliability, responsiveness, convenience and professionalism and it’s sometimes a complicated mix of all of these and more. Industry by industry, and even across product lines, the importance of each variable can differ drastically (Craig Cochran, 2003). The formal definition of customer satisfaction is the consumer’s fulfilment response.

It is a judgement that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfilment, including levels of under or over fulfilment (Richard L. Oliver, 1997). Understanding of the concept of customer satisfaction is easy. Satisfaction is simple. If one gets what he/she wanted, if ones requirement met, then he/she is satisfied. If they’re not met, then he/she will not be satisfied. “Customer satisfaction is a measure of how your organization’s ‘total product’ performs in relation to a set of customer requirements. ” This definition tells us something fundamental about customer satisfaction-it’s not absolute concept; it’s relative one. It’s relative to what the customer expected in the first place (Nigel, John and Rob, 2003).

Customer care’s nature is mostly oriented by service as most of the goods are consumed at the similar time as services are experienced. In order to satisfy customers, the supplier requires the services which customer wants. If the consumer in a certain way perceives a service, but expected less, then it ends up with satisfied customer, as the formula shows in Figure 1. Anticipation made by customer regarding products and services like how it will be performed and that is added to his/her expectation. Customers have earlier experiences and based on those experiences, they look forward to receive a service in a particular way, which can be considered as company controlled expectation creators. Uncontrollable creators are action word of mouth and the competition.

Over the time, customer’s standards form by such company uncontrollable and controllable expectations creators. Services compared by customers according to particular standards with which they are familiar and those don’t necessarily relate to the service that is performed (Heikki Koskela, 2002). CUSTOMER CUSTOMER CUSTOMER = – SATISFACTION PERCEPTION EXPECTATION CUSTOMER CUSTOMER CUSTOMER = – SATISFACTION PERCEPTION EXPECTATION

Figure 2. 2 Formula of Customer Satisfaction The customer satisfaction theories developed to date, mostly subjected to notice with the Expectancy-Disconfirmation mode. This model originally presented by Oliver where the satisfaction antecedents are expectations and disconfirmation, at that stage, the expectance disconfirmation model was generally adopted. The most immediate influence on satisfaction in this model is disconfirmation. Later on, Churchill and Suprenant clearly comprised performance in the model as an antecedent of satisfaction and included expectations and performance effects on disconfirmation and expectations effects on performance.

Accordingly, Oliver and DeSarbo mentioned that there are three factors, expectations, performance and disconfirmation, which have influence on customer satisfaction (Chih-Chung Chen and Dr. Su-Chao Chang, 2006). 2. 2. 2 Why is Customer Satisfaction Important? In any business you always look for a repeat customer, if a customer walks unhappy then they look for goods and service somewhere else. Therefore customer satisfaction is very important which would end up for repeated customers and that’s what business need today. So repeat business base is very much crucial because of that gaining and losing of short-term and new customers does not have greater impact.

In an increasingly competitive marketplace, significant differentiator among gaining customers or losing customers to firm’s competitors could be customer satisfaction (What is Customer Satisfaction? ). Repeat business is very huge part of organization’s business. Words of mouth are considered as one of the biggest assets to grow or destroy any organizations. If customers are happy with the organization, they will have a word with other people who will listen to them and on contrary if customers are unhappy, still they will tell other people and such things will lead to gaining or losing new customers all because of words of another (Melissa B. Evans, 2009).

All the types of organizations should strive for customer satisfaction, in good times and bad times (Manto, 2010). Because satisfied customers buy more. If customer receives full satisfaction from the goods and service of the company in terms of quality, price and the other services, then they will spend more with same company. If they don’t receive such kind of satisfaction, then they will go away with the purchase that they already made and never return to same company for next purchase (Melissa B. Evans, 2009). The advantages of creating and maintaining customer loyalty within existing consumers have been studied in various fields. Researchers agree that by enhancing customer loyalty companies diminish marketing costs and increase profits.

In case of engagement of word-of-mouth, loyal customers are more likely to be part in positive one than non-loyal. First and foremost, customer loyalty largely depends on customer satisfaction (Heepup Han and Kisang Ryu, 2009). 2. 2. 3 Models of Satisfaction For understanding and evaluating consumer acceptance and satisfaction, a great variety of methods and frameworks are utilized in various disciplines. 2. 2. 3. 1 Confirmation / Disconfirmation Model An individual can have various degrees of satisfaction and dissatisfaction at one particular time; for instance, an individual may be happy with the service he receives from the staff of a retail outlet but at the same time he might be unhappy with the business hours of the same retail outlet.

To best describe customer satisfaction, “confirmation /disconfirmation” paradigm is the widely used model. According to this model, the difference between the expectations (E) of customers regarding particular product or service and their perception regarding actual performance (P) supplied by this product or service determine satisfaction or dissatisfaction. Fulfilment of customers’ expectations will lead to their satisfaction; if such thing doesn’t happen then it will result in dissatisfaction. The customers’ satisfaction (S) can be expressed in the terms of mathematical equation as below, where S is Satisfaction, E is Expectation and P is Performace. S = E – P

In addition to the above mentioned three variables (S, E, and P), Locke’s general satisfaction model comprises of a third variable which is not included in the confirmation/disconfirmation model. Importance (I) of the service or product attribute under consideration is the fourth variable. This variable is related because not all attributes are equally significant to consumers; for example, a customer of the bank is likely to rate financial success as being one of the greater importance to satisfaction than, say, staff members friendliness. If the Locke model’s importance variable is included in the mathematical expression mentioned above, then following formula expresses satisfaction in mathematical terms: S = (E – P) ? I There are some problems with both of these satisfaction models.

Both the models mentioned above are plausible, but both of them show conceptual problems. One of the problems is that it is unclear what should be understood by the term “expectation”. An “expectation” might correspond to a customer’s pressing need, or an ideal, or a desire, or even a norm. Such various forms of “expectation” apparently represent various qualities, but “confirmation/ disconfirmation” model doesn’t take into consideration such distinctions. In the Locke’s model, such distinctions are at best considered only indirectly in the form of the variable of “importance”; for example, it could be assumed that the fulfilment of an ideal is of lesser importance than the fulfilment of a norm. Not paraphrased). The second problem is that each models indicate that dissatisfaction occurs when performance is less than expectation (P ; E). Although this appears to be plausible, there is possibility that satisfaction might occur if performance matches expectation (P = E). Where, it is not clear whether the “over-fulfilment” of expectation (P ; E) will produce satisfaction or dissatisfaction. For example, a consumer might be annoyed by over-friendly service at the counter of a cashier in the retail outlet, while at the same time pleased by receiving good savings on the purchase of a particular goods or service from the same retail outlet.

There is also possibility that a plateau is reached in terms fulfilment of expectations, beyond which a ‘better’ performance does not result to any further growth in satisfaction. The confirmation/disconfirmation or Locke’s model doesn’t consider any of those cases. Third problem with the satisfaction model, basing satisfaction on the difference among expectation and performance neglects the absolute expectation and performance level. If both expectations and performance are quite high, the difference among the two can be identical as when both expectations and performance are quite low. Basing satisfaction only on the relative difference means that information about absolute performance is lost, even though this might have an influence on the overall satisfaction of the customer.

Indeed, it has been plausibly argued that the same difference might be associated with a greater level of satisfaction if performance is at a higher absolute level. Finally, it is assumed that both model consider equally significant both performance and expectation in producing satisfaction. However, numerous studies have displayed that the ‘performance’ variable is more crucial than ‘expectation’ variable in predicting customer satisfaction (Uwe Peter Kanning and Nina Bergmann, 2009). 2. 2. 3. 2 SERVQUAL Model In any business, high level managers are in increasing pressure to demonstrate their services are highly customer focused and the continuous performance improvement is being delivered.

Given the financial and resource constraints under which organizations must manage it is essential that customer expectations are properly understood and measured and that, from the customers’ perspective, any gaps in service quality are identified. To study this gap, SERVQUAL model assists any managers the best in fulfilling those gaps in a cost effective ways. Hence the SERVQUAL model shows the difference between management perceptions of what customers expect and what customers really do expect, the difference between management perception and service quality specifications, the difference between service quality specifications and actual service delivery and the difference between service delivery and what is communicated externally. SERVQUAL model is one of the popular models regarding service quality.

Perception gap between the obtained quality of service and the expected quality of service is the main base of SERVQUAL, and adopted widely for explaining customer perception of quality of service. Originally proposed dimensions of service quality were 10 (reliability, competence, responsiveness, courtesy, access, credibility, communication, understanding the customer, security, and tangibles). Later on the number dimensions reduced to five (tangibles, assurances, empathy, responsiveness and reliability) (K. Ravichandran, B. Tamil Mani. S. Arun Kumar, and S. Prabhakaran, 2010). The key five dimensions are: * Tangibles – the appearance of the physical facilities, equipment, personal and information materials. Reliability – the ability to perform the service accurately and dependably * Responsiveness – the willingness to help customers and provide a prompt service * Assurance – a combination of competence, courtesy, credibility and security * Empathy – a combination of access, communication and understanding the customer However, there has been an extensive debate whether the perception-minus-expectations specification would be appropriate or assessing perception alone would be sufficient. Many authors showed concerns about SERVQUAL instrument. The argument of authors was that there are severe conceptual and operational disadvantages connected with the SERVQUAL model. Conceptual model of Service Quality (SERVQUAL)

In the above model, we could see five gaps where there are problems in delivering the service quality to the customers. Gap 1 illustrates not knowing what customers expect. Gap 2 shows the wrong service quality standards. Gap 3 is the service performance gap. Gap 4 is when promises do not match actual delivery and Gap 5 is the difference between customer perception and expectation. Tangibility Tangibility Reliability Reliability Customer Satisfaction Customer Satisfaction Service Quality Service Quality Responsiveness Responsiveness Assurance Assurance Empathy Empathy Price/CHS Price/CHS Figure 2. 3 SERVQUAL Model Source: K. Ravichandran, B. Tamil Mani. S. Arun Kumar, and S. Prabhakaran (2010) 2. 2. . 3 Kano model Customer satisfaction model of Kano classifies attributes of product based on how customer perceived it and its effect on customer satisfaction. For guiding design decisions, these classification are useful which direct when good is good enough and when more is better. Product attributes divided into three categories by customer satisfaction model of Kano divides and that is threshold, performance and excitement. High Excitement Customer Satisfaction Absent Fully Implemented Performance Threshold Low Product Function Figure 2. 4 Kano Model Source: Kano Model Analysis

Threshold attributes are the attributes which is expected by consumers or “musts” of the product, and do not supply any chance for differentiation between products. Rising the performance of above mention attributes deliver decreasing returns concerning customer satisfaction. Whereas these attributes nonexistence or weak performance lead to high level of customer dissatisfaction. Performance attributes are those for which more is generally better, and will be enhance customer satisfaction. An absent or poor performance attribute decreases customer satisfaction. Performance attributes closely tied by the price for which consumer is ready to pay for the product.

Excitement attributes are unexpected and unexpressed by consumers but can lead to high degree of customer satisfaction, nevertheless their nonattendance does not result into dissatisfaction. In the era of stiff competition, where producer of product and service provide product with similar performance, providing excitement attributes can be competitive advantage (Kano Model Analysis) 2. 2. 4 The Customer Satisfaction Measurement Process Producing reliable measures of customer satisfaction is very important, as well as the requirement regarding things needs to be done if those measures are to be successfully utilized as the basis for effective action.

Dramatic growth has been registered in customer satisfaction measurement in last few years. Many of the firms devote as much as 50% of their budget of research on measuring customer satisfaction (Alan Wilson, 2002). Let’s first have an overview of the customer satisfaction measurement process (see figure) Objectives Objectives Project planning Project planning Update Update Exploratory research Exploratory research Mid-term reveiw Mid-term reveiw Questionnaire Questionnaire CUSTOMER SATISFACTION MEASUREMENT CUSTOMER SATISFACTION MEASUREMENT ACTION ACTION Sampling Sampling Feedback to customers Feedback to customers Feedback workshops Feedback workshops Main survey Main survey Mirror survey Mirror survey

Presentation to management Presentation to management Analysis and reporting Analysis and reporting Figure 2. 5. An overview of the Customer Satisfaction Measurement Process Source: Nigel, John and Rob, 2003 The beginning point of any project work is to set objectives and for the exercise, plan a detailed critical path. Research’s first stage is to clarify with the customers what they exactly require and supplier selection criteria are so that suitable questionnaire can be designed, which ask the appropriate questions. This is done by utilizing focus groups (typically in the consumer market) or one-to-one depth interview (the norm in business market).

It is consumers’ most significant requirements, as it was indicated by the consumers themselves, which must create the basis for a customer satisfaction measurement questionnaire and should not be assumed by one about what one think might be important to customers. There are two major determinant factor of the accuracy in the customer satisfaction measurement (CSM) study. The first one is asking the right questions; second one is asking the right people. Right people are the sample of customers that reflect ones customer base. To determine the accuracy of the samples three things requires and that is; it must be large enough, it must be representative and it must be randomly selected. One can start designing the final questionnaire and start the main survey as one gets the confidence that he or she will be asking the appropriate questions to appropriate people.

How the survey will be carried out is the main question here. Survey can be done by doing self-completion questionnaires or interviews, and latter can come in various forms, containing postal, electronic and point of sale. After selecting the type of survey, researcher will carry out the next big thing which is to design questionnaire. Finally, at this point survey can be carried out quickly followed by the results analysis. Mirror survey is a worthwhile addition to the CSM study where similar questions set administered within the firms employees to discover whether they realize what’s significant to consumers and how closely they are fulfilling the requirements of customers.

Feedback should be provided quickly to employees and customers after analysing the data and producing a report. Common reason behind unsuccessfulness of various organizations to reap the full rewards of their CSM process is inadequate feedback. Only if workforces completely understand the results of survey and their implications; will effective action be taken (Nigel, John and Rob, 2003). There may be chances of occurrence of weakness in the measurement of satisfaction. Score regarding satisfaction may differ according to particular situation, because of temporary and unstable conditions customer get influenced that they happen to be in at the moment they finish the assessment.

One thing should always be kept in mind regarding satisfaction measurement and that it is not a standardized process; there may be variance in terms of the scales used to gather data, questions format may vary and the methods of data collection (personal interview, telephone, self-completion); therefore generalizing about the customer satisfaction measurement value is often very tough (Alan Wilson, 2002). 2. 2. 5 Consequences of Customer Satisfaction Many benefits can be fetched from the customer satisfaction. Customers, who are satisfied become less sensitive regarding price, buy additional products, whereas also get less influenced by the competitors and stay longer as loyal customer. Business firms must have knowledge about how well or badly its consumers are treated. Complains are rarely done by customers, but when someone does, it might be possible that it is too late for retention of that customer. In the concept of satisfaction, there is one crucial component and that is complaint management.

It is found in the study that customer satisfaction increased when they are encouraged to make complaints, and this was especially the case for the most customers’ dissatisfaction. Management of complaint not only led to customer satisfaction, but also resulted into improved financial performance and operational improvement. Customer retention increases by customer satisfaction, and the substance of the relationship between parties is the backing of customer retention. Properly served and satisfied customers are more likely to come back to your firm than are dissatisfied customers who could simply choose to go to another firms. Sometimes customer who is satisfied may unexpectedly take a decision to switch company.

A satisfied consumer may or may not aim to come back to a firm, which is the reason that it is not necessary that satisfaction always results into retention. While retention levels remain unchanged customer satisfaction still can rise. Not all of the retained customers are satisfied, there may be one reason behind staying with that firm is lack of alternatives. They might not get the products that they require somewhere else or may have to travel a long distance for that particular product, so despite of worse customer service, the consumer would come to that place for that particular product (Ove. C. Hansemark and Marie Albinsson, 2004). There may be severe consequences in case of dissatisfaction of customers.

For example, dissatisfied customers can select to stop buying goods or services, get into negative word of mouth communication, and make complain to the firm or third party and may return the purchased item (Harkiranpal Singh, 2006). Consequences of customer satisfaction in the case of satisfied customer may turn out good for company and in case of dissatisfaction may not good. So it is very important for companies to take care of customer satisfaction for the betterment of their future. 2. 2. 6 Customer Satisfaction in Retail In any retail, consumers are the target upon which all the activities are targeted. There are lots of factors which have to be taken into consideration in meeting those targets. Creating a brand image and enjoying the benefits of being the leader does not come so easy.

An organization can succeed in its mission only by taking care of its targeted consumers and maximizing their satisfaction level. Some of the factors that influence the consumers’ satisfaction in retail business are: * Accessibility – Providing the product and services at the nearest and most convenient location. * Need satisfying product – providing the product that meets the need of the consumer. * Value – The price and cost of the products and services should be reasonable and satisfactory. * Assistance – ensuring the advice and assistance when needed. * Ambience – the store should maintain an ambience which is likely to affect for the repeat of the consumer. After sales service – Proper follow up services at the end of the day to all the consumers. In past few decades, significant changes have been experienced by retail industry which is very highly competitive and challenging (Patricia Huddleston, Judith Whipple, Rachel Nye Mattick and So Jung Lee, 2009). The sector of supermarket is characterized by improved competition, a better chance for analysis of markets, and greater expectations of shopper. All these aspects advice that management of customer satisfaction is specifically critical. Variety of goods and services are simultaneously offered by supermarkets; so that, for the consumer, there is more to visit a store than just purchase of products.

Dissimilarities in the experience during shopping among retail outlets (e. g. store services, and store ambience) are often as significant to the consumer as differences in the offered goods physical features (e. g. , quality, price) (Miguel I. Gomez, Edward W. McLaughlin, and Dick R. Wittink (2004). Different consumers have different shopping motivations such as getting information about new products or trends, diversion from daily routine, or enjoyment of bargaining. There are some customers who are more of an activity oriented and other are more of a task oriented. Meaning of such differences is that the customers will get value in and also from diverse pieces of the shopping experience receive satisfaction.

These differences must have kept in mind by retailers in order to form the formats of store and offer related features that fulfil the requirement of their target segment. Expectations of customer regarding retail experience may differ across stores and products of retail which means that satisfaction will also differ by the sort of retailer and/or sort of product retail offer (Patricia Huddleston, Judith Whipple, Rachel Nye Mattick and So Jung Lee, 2009). Frequency and intensity of customer traffic is another critical characteristic of the supermarket sector. According to the Food Marketing Institute, in supermarkets, customer traffic is approximately around two times per person per week.

The presumed low costs of switching because of proliferation of supermarkets and competing retailers with same merchandise offerings, motivates customers who are unsatisfied to switch. Even customers may immediately shift to another store after receiving single unsatisfactory experience, so customer satisfaction can affect the sales performance of store in a short period (Patricia Huddleston, Judith Whipple, Rachel Nye Mattick and So Jung Lee, 2009). 2. 2. 7 Determinants of Customer Satisfaction Research suggests that physical surroundings and price perception has strong influence on customer satisfaction (Heepup Han and Kisang Ryu, 2009). Physical Environment

According to the environmental psychology research, there is strong association between human behaviour and physical environment. There are two opposite ways in which individuals generally react to the environment and that is approach and avoidance. Whereas approach behaviour can be considered as positive responses towards the physical environment of a particular place (e. g. , wish to stay, buy, and affiliate), avoidance behaviour which can be termed as negative response (e. g. , wish not to stay, buy, and affiliate). Companies always ask for diminish avoidance behaviours and increase in individual approach behaviours (Heepup Han and Kisang Ryu, 2009).

Physical environment contains various elements like layout of the store, arrangement of goods and services, the location, store design (like ambience and lighting), visual merchandising, visual communication (like graphics and signage), and so on. The appropriate store layout facilitates efficiency and flexibility to the customer. Technical Aspects Functional Aspects Decor and artefacts Spatial Layout Ambient conditions Price Perception 2. 3 Summary Customer satisfaction is the key to customer retention (Aurimas Dapkevicius and Borisas Melnikas, 2009). Companies have to make efforts to satisfy customers but for dissatisfaction no efforts required.

To satisfy a customer is an on-going and never ending process, where the efforts has to be put on in every steps in achieving the goals and objectives set by the companies. Unfortunately, satisfaction is phenomenon which lives for short time. Surveys have produced the results that even customers who are satisfied leaved the company on a regular interval (Aurimas Dapkevicius and Borisas Melnikas, 2009). The customer might be satisfied about some product for some time frame and once they are dissatisfied with something or the other in the same place, then there would be an excuse for the customer to look for other options and alternatives. Right service at the right time is very essential to have a customer forever.

In some cases, one particular factor becomes source of satisfaction for one individual and dissatisfaction for another individual for example opening and closing time. With the development of customer satisfaction measurement models, Customer satisfaction studies with retailers have also been prosperous, such as theories of service quality considered as the base of customer satisfaction measurement. Chapter 3. Methodology Chapter 3. Methodology 3. 1 Introduction In common parlance, research refers to a search for knowledge and the term method refers to techniques and procedures used to obtain and analyse data. Methodology is the system of methods followed by particular discipline. Research methodology is the way how we conduct our research.

Research can be defined by one as a scientific and systematic search for information which is relevant for a particular topic. Research is considered as an academic activity and as such the term should be used in a technical sense. According to Clifford Woody, research consist of defining and redefining problems, framing hypothesis or suggested solutions, collecting and analysing data, summarising data and making conclusions; and at the end cautiously testing the conclusions in order to decide whether they fit in the formulating hypothesis (C. R. Kothari, 2008). Business research is a systematic inquiry that supplies information in order to guide decisions of management.

More specifically, it is a process that contains the various stages of activities like planning, acquiring, analysing, disseminating relevant information, data and insights to the person who has the authority to make decision which provide mobility to firm to make a right decision regarding actions which lead to help organisation to maximize its performance (D. R. Cooper, P. S. Schindler, 2006). METHODOLOGY METHODOLOGY Introduction Introduction Research Approach Research Approach Validity, Reliability and Credibility Validity, Reliability and Credibility Research Methods Research Methods Questionnaire Designing Questionnaire Designing Sampling Sampling Data Analysis Data Analysis Ethical Issue Ethical Issue Summary Summary Figure 3. 1 Structure of Chapter 3: Methodology

Most of the research textbooks supply information about research as a multi-stage process which one has to follow for undertake and complete research project. The precise number of stages varies, but it normally contains formulating and clarifying a topic, reviewing the literature, designing research, collecting data, analysing data and writing up (M. Saunders, P. Lewis and A. Thornhill, 2007). As one can see in the Figure 1. 1 normally researchers target to produce knowledge which is necessary and improve human understanding. There are various nine stages in these process and each and every stages has its own importance to carry out trustworthy outcomes from this study. Write your project report Write your project report

Analyse your data using one or both of: Analyse your data using one or both of: Quantitative methods Quantitative methods Qualitative methods Qualitative methods Questionnaires Questionnaires Secondary data Secondary data Semi-structured and in-depth interviews Semi-structured and in-depth interviews Sampling Sampling Plan your data collection and collect the data using one or more of: Plan your data collection and collect the data using one or more of: Negotiate access and address ethical issues Negotiate access and address ethical issues Formulate the research design Formulate the research design Understand your approach Understand your approach

Critically review the literature Critically review the literature Formulate and clarify your research topic Formulate and clarify your research topic Wish to do research Wish to do research Figure 3. 2 The research process Source: Mark Saunders, Philip Lewis and Adrian Thornhill 2007 3. 2 Research Approach Without any prejudice in mind a researcher observes and faithfully records what is seen. Few of these observation statements are form as true and assist as the basis for laws and theories. Two approaches for establishing what is true or false and to reach conclusions are there, and that are induction and deduction. Empirical evidence is the base of induction, while ogic is the base of deduction (Pervez Ghauri and Kjell GrOnhaug, 2010). Deduction owns various significant characteristics and that is, there is the search to describe causal relationships among variables (M. Saunders, P. Lewis and A. Thornhill, 2007). One can understand by deduction that individual draw conclusions through logical reasoning. Often this kind of research is associated with the quantitative type of the research. In the induction, we draw conclusions from our empirical observations. Often this kind of research associated with the qualitative kind of research. This process move to conclusions from assumption (Pervez Ghauri and Kjell GrOnhaug, 2010).

This research has deductive approach as it is specified since the theories which are related will be utilized and data will be collected accordingly. Basically starting point of research is what type of research employed and that is applied research. To answer the practical problems of the modern world applied research is designed, rather than getting knowledge for the sake of knowledge (Basic vs. Applied Research). Every company involves in applied research. Exploratory research is conducted to clarify and define the problem’s nature. General problems may have find out by management, but there is a necessary of research in order to receive proper understanding of the dimensions of the problems.

Exploratory studies supply information which can be used in analysing circumstances, but uncovering conclusive evidence to decide kind of action is not the motive of exploratory research. The main motive of descriptive research, as term indicates, is to describe characteristics of a phenomenon or population. Descriptive research strive for determine the answers to who, what, when, where, and how questions. Unlike exploratory research, descriptive studies are based on few previous understanding of the nature of the research problem (William G. Zikmund, 2003). In this case researcher has selected descriptive research. Here, researcher has a certain strategy on how researcher will go about answering the research questions that has been set by the researcher.

It will contain clear objectives, derived from research questions, specify the sources from which researcher intends to collect data and consider the constraints that researcher will enviably have such as access to data, time, location and money, ethical issues (Thornhill et. al. , 2003). Most important condition for selecting research strategy is to identify the type of research question being asked. “Who”, “What”, “Where”, “How” and “Why” are the categorization schemes for the types of research questions. Two Possibilities needs to investigate by asking the “What” question. First, some types of what question are justifiable for conducting an explanatory study and the goal is to develop pertinent hypotheses and propositions for further inquiry. The second type of what question actually forms a “how many” or “how much” line of inquiry and the outcomes from a particular situation.

Hence the survey is more favourable than any other research strategies. It is popular and common strategy in business research. Survey allows the collection of large amount of data from a sizeable population in a highly economic way. Questionnaires, structured observation and structured interviews often fall into this strategy. In this research, survey has been used. A dummy test was conducted to detect weakness in design and instrumentation and to provide proxy data for selection of a probability sample. It should, therefore, draw subjects from the target population and stimulate the procedures and protocols that have been designed for data collection (Cooper and Schindler, 2003).

The basic idea of sampling is that by selecting some of the elements in a population, researcher may draw conclusions about the entire population. There are several compelling reasons for sampling, including: lower cost, greater accuracy of result, greater speed of data collection and availability of population selection (Cooper and Schindler, 2003). 3. 3 Validity, Reliability and Credibility Whatever the method selected for gathering data, it should be critically examined in order to assess to what extend it is likely to be reliable and valid. Reliability refers to the extent to which a test or process yield same results under constant conditions at all the incident.

Validity tells us whether an item describes or measures what it is supposed to describe or measure. If an item seems unreliable, then it must also lack in terms of validity, but it is not necessary that reliable item is also valid (Judith Bell, 1993). Construct validity is essential for interpretable and meaningful findings and in various ways it can be assessed (Pervez Ghauri and Kjell GrOnhaug, 2010). The study is both valid and reliable as there is real cause to belief that gathered data is representative and also can be proven. 3. 4 Research Methods Research methods are rules and procedures, and can be seen as ‘tools or ways of proceeding to solve problems’ (Pervez Ghauri and Kjell GrOnhaug, 2010). 3. 4. 1 Types of research

Three types of research design are available and that is qualitative, quantitative and mixed methods. Both kinds of approaches, qualitative and quantitative should not be seen as dichotomies or opposites; instead, they signify different ends on a continuum (John W. Creswell, 2009). Qualitative research is a tool for exploring and understanding the meaning groups or individuals ascribe to a human or social problem. There is an involvement of various elements in this process of the research and that is emerging questions and procedures, data gathered typically in the setting of participants, analysis of data inductively building from particulars to general themes, and the interpretation of the meaning of the data by the researcher.

Those researchers involve in this type of inquiry support a style of looking at research that honours an inductive style (John W. Creswell, 2009). One of the main concerns of the qualitative researchers is the meaning individuals attach to stuffs in their lives and another concern is how people think and act in their normal lives. In qualitative studies, a flexible research design is followed by researchers (Steven J. Taylor and Robert Bogdan, 1998). Quantitative research is a tool for testing objective theories by examining variables relationship. In turn, these variables, typically on instruments, can be measured, so it will lead to analysis of that data by utilizing statistical procedures.

As the qualitative researchers, those researchers involve in such kind of inquiry have assumptions regarding testing theories deductively, against bias building in protections, controlling regarding alternative explanations, and being able to replicate and generalize findings (John W. Creswell, 2009). One of the tough decisions which are faced by researcher during conducting this research is selection of research design. Where it was difficult to make up his mind regarding making selection of quantitative or qualitative design of research. Researcher consider both quantitative and qualitative approach are most suitable for conducting this research, as there is structured questions in the research and the research practising more of a survey form. Research methodology contains list regarding data collection methods which are as shown below. 3. 4. 2 Data Collection Methods

Various approaches for collecting data are available to the researcher and selection of approach will be based on the strategy of research and tactics being followed whereas research questions itself (Dan Remenyi, Brian Williams, Arthur Money and Ethne Swartz (1998). In order to fulfil requirement of research, researcher need to collect primary data and secondary data or both. Primary data is the data observed or collected directly from first-hand experience and secondary data is the data which is in the past collected and published (Primary data, 2010). Secondary data is like existing primary data that someone else collected or collected for a different purpose than current one (Secondary data, 2010).

Most of the research questions are answered by the combination of primary data and secondary data (Mark Saunders, Philip Lewis and Adrian Thornhill, 2007). A numerous amount databases are available which comprises of beneficial evidence and information for research in business and management studies, and the Internet and World Wide Web are speedily growing as a crucial source of secondary data (Dan Remenyi, Brian Williams, Arthur Money and Ethne Swartz, 1998). Secondary data comprise of both data which is raw and published summaries. Both qualitative and quantitative data are part of secondary data (Mark Saunders, Philip Lewis and Adrian Thornhill, 2007).

Primary data gathering techniques are the means of generating secondary data. One person’s primary data become another’s secondary data. Secondary data are not only beneficial to discover information to solve one’s research problem, but also helpful in terms of source of better understanding and explaining one’s research problem. The major advantage of using secondary data is the huge saving in terms of money and time. One of the leading difficulties is that such data are gathered for another study with different objectives and they may not fit properly in one’s problem. The several kinds of secondary data are available and they are books and articles, industry statistics, general statistics, and research report, etc. Pervez Ghauri and Kjell GrOnhaug, 2010). In this research, researcher will use books, journals, and internet as a source of collecting secondary data. When secondary data are not available or cannot answer research questions, one have to gather the data which is relevant to one’s research. These kinds of data are known as primary data. There are numerous of options available for collecting primary data, like surveys (questionnaires), observations, experiments, and interviews. The key benefit of primary data is that they are collected for the specific research. That means data are more consistent with that particular research questions and objectives.

The leading disadvantage of primary data is that it takes lots of time and cost to collect primary data. One other major disadvantage is that the quality and scope of information collected from primary sources is big question for researcher because he or she is completely dependent on ability and willingness of respondents (Pervez Ghauri and Kjell GrOnhaug, 2010). Survey (questionnaire) method has been selected as the most suitable tool for gathering primary data in a research project of this nature. Since, survey strategy has been chosen for this research, we would be using the primary data as it delivers more specific results than secondary data and moreover, surveys are the most popular way of collecting primary data.

Survey strategy, the tool questionnaire which we are using for the research provides us with the current, present and factual data, hence we are using primary data to conduct this research and know the position and stand of Tesco’s customer satisfaction in the real world. Whereas secondary is the past data or someone else’s primary data which doesn’t give us the actual status of Tesco on customer satisfaction. 3. 4. 3 Types of Questions Various types of question classification in questionnaires available and it is as under. The

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