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Neha Jain
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ABSTRACT
Technology has expanded so that business transactions can happen in the click of a mouse or a
swipe of your card at the pump, never involving any human interaction. This dehumanizing
process encourages a fair market, better prices for goods, and convenience, but cripples the
customers ability to resolve any issues with ease or satisfaction. Many businesses now
incorporate satisfaction programs into their business model, understanding that consumerism is
not driven by customer satisfaction as much as before a boom in Internet sales.
The internet has created tremendous opportunities for businesses and customers alike.
Distribution channel members can extend their reach and visibility to partners beyond
geographical boundaries. Although many businesses are acknowledging the importance of the
internet and online retail activities, little academic attention is given to the communitys
perception of this medium.
Customers appreciate it when sales associates take the time to find out their specific needs -- to
treat them as individuals. Customers look to a companys sales staff, its product literature and
even its website to obtain the information they require to make an informed purchase decision.
They need information that helps them compare the companys products or services with
alternatives offered by competitors.

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BUSINESS ETHICS & CUSTOMER SATISFACTION ISSUES AND CHALLENGES

Business Ethics
The study of proper business policies and practices regarding potentially controversial issues,
such as corporate governance, insider trading, bribery, discrimination, corporate social
responsibility and fiduciary responsibilities. Business ethics are often guided by law, while other
times provide a basic framework that businesses may choose to follow in order to gain public
acceptance.
Organizational business ethics is the application of these morality related choices as influenced
and guided by values, standards, rules, principles, and strategies associated with organizational
activities and business situations.
Business ethics deals with choices about what laws should be and whether to follow them,
about economics and social issues outside the law, and about the priority of self-interests over
the companys interests.
-Laura Nash, Ph.D.
Harvard University
Customer satisfaction is a term frequently used in marketing. It is a measure of how products
and services supplied by a company meet or surpass customer expectation. Customer satisfaction
is defined as "the number of customers, or percentage of total customers, whose reported
experience with a firm, its products, or its services (ratings) exceeds
specified satisfaction goals." In a survey of nearly 200 senior marketing managers, 71 percent
responded that they found a customer satisfaction metric very useful in managing and monitoring
their businesses.
Six reasons why customer satisfaction is so important:

Its a leading indicator of consumer repurchase intentions and loyalty

Its a point of differentiation

It reduces customer churn

It increases customer lifetime value

It reduces negative word of mouth

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Its cheaper to retain customers than acquire new ones

Customer satisfaction is a well researched area within the marketing literature. Often viewed as
an evaluation or judgment of the consumption experience, much of the interest in the satisfaction
concept stems from the notion that customer satisfaction positively impacts customer retention
and future behavioural intentions. In this manner, Oliver (1997) argues that satisfaction is
essential for a company to be continuously profitable. This notion of satisfaction as a
fundamental source of profitability has also been documented as researchers have found a link
between satisfaction and shareholder value. One of the most fundamental predictors of customer
satisfaction used in the marketing literature is that of quality. In this body of research, quality is
often considered to have a direct impact on customer satisfaction 3. Although there are several
ways in which service quality has been conceptualized, a frequently used conceptualization is to
view quality as consisting of two aspects technical and functional. In this framework, the
technical quality of a service offering is the outcome or result of the service while functional
quality refers to how the service is delivered to the customer. In this way, the perceived quality of
a service is not only the actual result or outcome of the service, but also the manner in which it is
delivered to the customer. By utilizing this conceptualization of quality the researcher can
specify the determinants included in the different quality dimensions depending on the specific
service and context. For this study it means that it is possible to test customer evaluations of SEE
quality specifically. Another advantage of using the technical and functional quality distinction is
that it has been proven to predict customer satisfaction to a high degree. Thus, in the following
we turn to the specifics of technical and functional quality in the SRI context. First we highlight
the technical quality of SRI where we develop hypotheses for the influence of financial and SEE
quality on satisfaction. Thereafter, we address the functional quality of SRI in terms of service
personnel, provider accessibility, and physical environment as they relate to overall customer
satisfaction. To conclude we introduce involvement as a moderating variable between the quality
dimensions and customer satisfaction.

Relationship of Business Ethics to Performance

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Customers, employees, and investors are major concerns for firms that want to develop
loyalty and competitive advantage

Goal is to increase customer dependence on the company & to provide products

in an environment of mutual respect & perceived fairness

Create satisfying relationships with employees

support relationships with investors based on trust, dependability, & commitment

Trust as a Component of Business Ethics

Trust is defined as a virtue that creates a predisposition to place confidence in the

behavior of others while taking the risk that the expected behavior will be performed

Employees must share a common vision of trust

Trust is the glue that holds organizations together

Trust is essential for maintaining long term relationships between business & consumers

Ethics Contributes to Organizational Quality

An organizational commitment to quality causes employees to be more willing to support

quality initiatives & discuss ethical issues

Employees commitment to quality has a positive effect on a firms competitive position,

an ethical work climate should have a positive effect on the financial bottom line

Ethics Contributes to Employee Commitment

Employee commitment comes from employees who believe their future is tied to that of
the organization & their willingness to make personal sacrifices for the organization

The more dedication on the part of the company, the greater the employee

Concerns include a safe work environment, competitive salaries & benefit packages, &
fulfillment of contractual obligations

dedication

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Ethics Contributes to Profits

Corporate concern for ethical conduct is increasingly being integrated with strategic
planning to maximize profitability

Corporate citizenship is positively associated with:

Return on investment & assets

Sales growth

Many studies have found a positive relationship between citizenship & performance

The Role of Ethics in the Economic Performance of Nations

Societal institutions that promote trust are important for the economic well-being of
society

Trust is the extent to which individuals identify with or have a sense of community

Conducting business in an ethical & responsible manner generates trust & promotes
productivity & innovation

Reputation matters greatly in business

Ethics Contribute to Customer Satisfaction?

Selecting the Right Products

Reliable Source of Information

Not Overselling

Standing by Products and Services

Good Corporate Citizenship

ISSUES

1. Employee Behavior
From large corporations to small businesses, individuals involved in all types of business often
face ethical issues stemming from employee behavior. Small business owners can help to prevent

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ethical problems stemming from employee behavior by drafting a clear, attorney-reviewed set of
standards that dictate behavior policies for employees at all levels.
2. Employee Working Conditions
In addition to employee behavior, there are a number of ethical issues business people must
consider about employee working conditions. For example, employers must be aware of the
safety of their work environment and if they have compensated employees for all the time they
have worked. They must also consider if they have required an employee to work an
unreasonably long period of time or if they have him doing an unusually difficult task. Just like
there are legal consequences for some unethical issues regarding employee behavior, there are
also legal consequences for unethical working conditions. For example, an employer who
requires an employee to work without pay or who creates an unsafe working environment can
face legal action.
3. Supplier/Customer Relations
In addition employees and business owners must consider the ethical issues involved with their
relationships between suppliers and customers. Business owners in particular must consider
whether it is ethical to do business with suppliers who have unethical practices. When dealing
with customers or clients, business people must ensure that they use their information correctly,
do not falsely advertise a product or service, and do not intentionally do sub-standard work.
4. Small Business Ethics
Although there are ethical issues like discrimination that apply to all areas of business, each
business area has its own ethical concerns. For example, business people who act as consultants
must ensure they are giving sound advice. In the area of small business, some major ethical
issues result from hiring, firing and dealing with employees. For example, conflicts of interest
may cause ethical issues in small businesses, especially if they are family run. When personal
family issues interfere with business decisions, this is a conflict of interest and an ethical
concern.
CHALLENGES
1. Business Formation
Even before the business reaches the stage where the company's principals pitch the business
plan to potential investors, there could be issues concerning the company's ethics as the original
founders envisioned them. All of the founders must share the same business values, principles
and ethics. If they have conflicting principles, they will have a difficult time securing funding or
even getting the business through the start-up process. Typically, partners or a group of business
founders come together because they have the same vision. However, once they start to explore
organizational purpose and structure, differences can arise.

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2. Employment
Developing a recruitment and selection process that screens candidates who seem likely to
embrace the company's ethics can be a challenge. Through reviewing applications, resumes and
work history, and interviewing candidates, recruiters can determine whether candidates are
qualified for certain jobs based on their functional skills and core competencies. Nonetheless, it's
difficult to discern whether a candidate's business ethics are consistent with the company's ethics
until he's actually on-board.

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3. Corporate Governance
One aspect of corporate governance refers to the business relationship between a board of
directors and the company's executive officers. Generally speaking, the CEO of a corporation is
accountable to the board of directors and provides leadership and guidance to a team of
executives that includes the chief operating officer, chief financial officer, and the chief
executives of human resources, information technology and marketing. Although the structure
might vary slightly from one company to another, top-level executives -- also called C-level
officers -- have a duty to run the organization in a highly principled manner. They represent the
company's ethics and are, therefore, responsible for modeling behavior and practices for the
company's management and staff to emulate. When C-level executives engage in unethical or
questionable business practices, they risk losing the trust and confidence of their employees,
clients and other members of the business community.
4. Compliance
Many companies mistakenly consider ethics and compliance intertwined. They are not.
Combining ethics with compliance removes checks and balances, making objectivity of any kind
virtually impossible. Ethics refers to the manner in which you do business and whether your
company, its management and staff conduct business in a manner that conforms to certain
business standards and principles. Compliance, on the other hand, has to do with oversight
regarding certain rules and regulations, written laws or common law. If unethical business
practices underlie your company's operations and the executives responsible for evaluating
compliance are the same ones who engage in unethical business practices, that arrangement itself
could be determined an unethical practice. For example, your chief financial officer who
oversees the company's revenue, assets and liabilities should not also be the officer responsible
for auditing financial operations.
Why is Business Ethics important?

Employee commitment

Investor and customer loyalty and confidence

Legal problems and penalties

Customer satisfaction

The ability to build relationships with stakeholders

Cost control

Performance, revenue, and profits

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Reputation and image

One of an organizations most prized assets is its reputation.

-S. Waddock, Ph.D.

THE ETHICAL DILEMMA

Individual morality and integrity

Daily choices by every organizational participant

The use of power and authority

Interpretations of rules and standards from one individual to the next

Anything from inconsequential to organizationally and socially significant scenarios

Social influences

Free market and regulated market mechanisms dont describe how to respond to complex
issues that have far reaching ethical consequences

Complex problems often require an intuitive or learned understanding and concern for
fairness, justice, due process to people, groups, and communities.

To companies and employers, acting legally and ethically means saving billions of dollars
each year in lawsuits, settlements, and theft.
-David Callahan, Ph.D.
THE ROLE OF LEADERS

Provide rationale for ethical behavior

Help associates make sense of abstract ethical priorities (policies, procedures, ethical
performance standards)

Provide intellectual weapons to support ethical standards

Enable associates to recognize issues that may result in ethical dilemmas

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Sharpen sensitivity and conscientiousness of moral issues and moral solutions

Strengthen moral courage

Improve the moral climate of the organization

Strengthens the pursuit of better ways to guide employee decisions and behavior

Increases awareness and sensitivity to ethical differences across cultures

Coincides with legal and social pressures

Ensures that all organizational participants understand and are in close touch with
organizational/ethical value

Influences the personality, reputation, and image of the organization

MAXIMIZING CUSTOMER SATISFACTION MAXIMIZES PROFITABILITY:

Maximizing customer satisfaction makes an important contribution to maximizing profitability,
although other factors such as cost control, productivity and marketing strategy also impact the
bottom line. By maximizing customer satisfaction, you can increase the opportunity for repeat
sales to customers, while reducing the cost of sales and marketing. Customer satisfaction helps to
increase customer loyalty, reducing the need to allocate marketing budget to acquire new
customers. Satisfied customers may also recommend your products or services to other potential
customers, increasing the potential for additional revenue and profit.
Retention
Your business risks losing customers through the effects of competitive activity and natural
wastage. An average business loses 10 percent of its customers each year, according to
DestinationCRM.com, an online site dedicated to discussion of customer relationship
management, while cutting customer losses by 5 percent can boost profits by 25 to 125 percent.
By maximizing customer satisfaction, you can retain customers for longer so that they continue
to make a contribution to revenue and profitability. This has a further effect on profitability
because the cost of acquiring new customers is much higher than the cost of increasing sales to
existing customers.

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Value
In sectors such as financial services, the top 25 percent of customers account for the majority of a
companys profits, according to Pitney Bowes. Focusing on customer satisfaction and loyalty is
therefore essential to maintaining profitability. You can maximize customer satisfaction by
delivering what is valuable to your customers so that they continue to come back to you to buy
more of the products and services that meet their needs.
Lifetime Customer Value
The longer customers remain loyal to you, the more valuable they are to your business. You can
use a metric such as lifetime customer value to measure the impact of customer satisfaction on
long-term profitability. Lifetime customer value represents the total profits a customer generates
while they continue to do business with you, according to the software and analytics company
SPSS.
Recommendation
Satisfied customers have an indirect impact on profitability when they share their opinions with
other consumers. Social networking sites play an important part in shaping attitudes towards a
company and its products. By maximizing customer satisfaction and encouraging customers to
post their views on a forum or product review site, you can attract new customers who use the
reviews to make their purchasing decisions.

REFERENCES

Inc.: Business Ethics

Academy of Management Executive: Business Ethics and Customer Stakeholders

Inc.: Communicating Your Ethics Philosophy

www.yourbusiness.azcentral.com

www.investopedia.com

www.en.wikipedia.org

http://blog.clientheartbeat.com/

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http://smallbusiness.chron.com

http://papers.ssrn.com/

lindaferrell.com

wweb.uta.edu/

http://smallbusiness.chron.com/