Customer service: The key to customer satisfaction, customer loyalty, and market share

Journal of Business Logistics, 1994 by Innis, Daniel E, La Londe, Bernard J

Few logistics executives would argue that physical distribution does not enable a firm to compete more effectively in a given market. Most logistics executives recognize that physical distribution is one of the primary means through which customer service is delivered to the final customer. And yet, the importance of customer service, and of the distribution function, has only recently been recognized in either the literature or in practice. If logistics and physical distribution are to continue to improve their positions in the firm, the value of physical distribution to key areas of organizational performance must be demonstrated. This article reports on recent research that explores this issue, building an argument for more integration between physical distribution and other functional areas in the firm, specifically marketing, by examining the impact of physical distribution performance on customer satisfaction, attitudes, and purchase intentions.

The research reported here had three primary goals: (1) to study the influence of customer service on customer attitudes and satisfaction, (2) to study the influence of customer service on market share (as measured by purchase intentions), and (3) to argue, based on a review of the literature and the research results, for more integration of the marketing and logistics functions. The following sections discuss these efforts beginning with a brief literature review. This is followed by a discussion of the major research hypotheses, methods, results, and the major conclusions and implications of the research.

CUSTOMER SATISFACTION

Marketing has been conceptualized and accepted as an activity directed at satisfying needs and wants through exchange processes.(1) The "Marketing Concept" is essentially the satisfaction of customer needs through integrated marketing with the intent to satisfy the customer while earning a profit. The basic idea is that a satisfied customer will be more likely to repurchase, leading to increased sales and market share for the firm. Integrated marketing activities aimed at producing customer satisfaction include what have been referred to as the "four p's" of marketing, namely product, promotion, price, and place. Generally, marketing is considered as the primary functional area in the firm that works to satisfy the firm's customers.(2) However, physical distribution plays a significant role in satisfying the customer; its impact should not be taken for granted.

In spite of the emphasis many firms place on the four p's of marketing, the role of "place" in the marketing mix has been somewhat neglected both in practice and in the literature. In many firms, the "place" function of physical distribution is performed apart from the marketing department for reasons related to the structure of the physical distribution function.(3) However, it is likely that physical distribution, through the provision of customer service, can contribute to the success of the firm and, like marketing, can work to enhance customer satisfaction and repurchase intentions. While it is true that customer satisfaction is the result of the total marketing effort, industry has generally failed to recognize the importance of customer service as provided by physical distribution to customer satisfaction and has not effectively integrated customer service with the other components of the marketing mix.(4)

CUSTOMER SERVICE: PHYSICAL DISTRIBUTION'S CONTRIBUTION TO THE FIRM

Customer service, as provided by physical distribution, may be the primary means through which physical distribution can contribute to the success of the firm.(5) Customer service, one of the key outputs of the physical distribution function, can influence demand in the market.(6,7,8) Some authors have suggested that customer service is often one of the most important considerations when a supplier is evaluated.(9,10,11) However, in many organizations, the marketing function takes physical distribution for granted, and if customer service is at a desirable level, marketing is concerned with physical distribution only from a cost standpoint. Marketing and physical distribution are linked through customer service, and when customer service is included in the marketing mix, physical distribution becomes concerned with securing and maintaining customer loyalty--one of the primary goals of the marketing function and of the firm.(12)

Customer service, the output of the physical distribution function, may in fact be the best method for many firms to gain competitive advantage. Lambert and Zemke suggest that "place" is the overlap of marketing and distribution and that customer service is the critical variable in this area.(13) As Lynaugh and Poist point out, it is essential to recognize the fact that physical distribution can contribute to marketing's success, and vice-versa.(14) Both marketing and physical distribution are important contributors to the overall success of the firm. Customer service is a "pervasive, boundary-spanning activity that takes place from within and beyond the firm."(15) Thus, consideration of physical distribution activities as affecting only the "place" component of the marketing mix appears to be inappropriate.