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Marketing Project Brand Loyalty Customer Behavior

How Does Brand Loyalty Influence Customer Behavior?

The rise in living standards, ease of accessibility to finance coupled with a wide variety to choose from has made consumer durable market to grow with a rapid rate. Many players are getting into the market. With the advances in communication and technology, new lifestyles and the quest to appear young and beautiful, the demand for quality beauty products has increased significantly. Consumer quality sector is characterized by the emergence of exchange offers, discounts and intensive competition. People nowadays want to imitate in regards to dressing, language, and politics among other lifestyle aspects. The increasing population is bombarded with information about maintaining a youthful look, making women seek for cosmetics that suit them.  With this knowledge in mind, beauty manufacturing product companies make every effort to brand them to capture the booming market. Companies are competing on the basis of firm grasp of the local and international market, their well acknowledged brands and hold over wide distribution network. The penetration level of consumer products remains high.

This research is scoped down to understand the relationship between consumer behavior and brand loyalty, factors affecting consumer decision making, the role of brand loyalty in consumer durables and the position of the individual consumer in the segment. The path forward will be to study the secondary data for industry overview, collect primary data for more insight and  derive conclusions based on primary and secondary data. The research findings will be addressed based on the theories of consumer buying behavior and brand loyalty.

Organizations must engage in making strategic decisions that are capable of improving the firms’ image so that they can have an advantage over competitors. To be specific, these image enhancing strategies ensure that the organization increase the loyalty of the current customers. In addition, the image enhancing strategies should help in the attraction of new customers to the organization. Strategic decisions that can bring enhanced image to the organization have included the selection of target markets, and modification of products to suit the demands of the customers. Other strategic decisions on prices, location of products and services, promotional efforts, and operating policies help in improving the organizations’ image.

The implementation of these strategies ensures that there is a solid background for effective image in the organization. An organization’s image ensures that if there is something about it that is not known, the knowledge the customers have on the organization fills the void. The main concern of this research is to determine whether the perception about the brand image affects customer behavior.

Research objectives

The interest of the research is to determine if brand loyalty influences consumer behavior. This study would be of value to those organizations concerned about the society and those concerned with the attaining off the highest possible profit. Further, the study aims to find if consumers have positive attitudes for those organizations that improve their brand loyalty and social responsibility.

Specific research objectives include:

  1. To find the relationship between consumer behavior and brand loyalty.
  2. To find out whether consumer behavior leads to change in the brand image quality, for instance, product quality or service quality.
  3. The influence of customer satisfaction on the brand’s image
  4. Does consumer behavior affect brand image?
  5. Does consumer behavior lead to change in the brand image quality?
  6. Does customer satisfaction affect brand image?

Research questions

Literature Review

The main focus of this study is to measure the attitudes of customers in relation to brand loyalty and to ascertain its influence of this attitude on brand loyalty. Study of attitudes enables organization managers to answer questions as to why a consumer purchased one product over another. The understanding of the consumer attitude towards particular products ensures that they come up with strategies and decisions on major products and market decisions.

The image associated with a particular product or service ensures that it has a competitive advantage over other products and services. A company’s brand is valuable strategic asset in achieving goals and objectives. Brand loyalty can be referred to as the consumer decision; whether conscious or unconscious concerning the use of a product or service. It may also refer to the intention to buy or use a particular product for a long duration of time. Brand loyalty is achieved due to the right features, and the quality of the brand. Quality of the product must be at the right price for the consumer to perceive the brand as being loyal to their needs. Organizations can change consumer behavior concerning a particular product or service through advertising. Advertising ensures that consumers acquire new habits, and instill those habits by telling the consumers how the product is of value to their money. Consumers should also be encouraged to continue using the products and services in the future (Hoyer and Maclnnis, 2008, p. 27).

According to Pride and Ferrel (2008, p.123), the main reason why organizations do not have strong brand loyalty is because they are not familiar with various ways of disseminating a strong and clear message that distinguishes their product with that of the competitor. In addition, the message should distinguish the product in a positive and memorable manner. The major challenge of organizations is to avoid the disadvantages of portraying a particular product or service as having negative image. An organization’s image should not be viewed in terms of the product and service attributes; the organization’s philosophies concerning environmental management, philanthropy, and ethical considerations are critical in influencing consumer behavior.

Societal Conscious Marketing

Most organizations have adopted marketing strategies that focus on societal needs. Each of these strategies is philosophical or operational concepts used by organizational leaders to enhance the objectives of their businesses. The following are some of the concepts widely used in organizations (Phillips, 2010, p. 45).

  1. Product concept: products should be produced in large volumes since all of it can be sold to the consumers
  2. Selling concept; products can only be consumed if they are heavily promoted
  3. Product concept; consumers will buy high quality products that are within their price range
  4. Marketing concept: specific customer demands can only be met if organization produces products that are equal or better than those of the competitor. In addition, the products should be priced lower than the competitor.
  5. Societal marketing concept: This term involves marketing in a manner that does not harm the society, people, and the environment. Societal marketing concept is motivated by the need to satisfy direct customers and other constituents in the market.

Brand loyalty can be exercised in several ways. The main activities that organizations can do to improve brand loyalty include environmental friendly activities, philanthropy, ethical activities with local, national, and international communities, customers, and employees. Environmentally friendly activities can include recycling, waste reduction, and other strategies aimed at minimizing the organization’s impact on the environment. Philanthropic activities include engaging donations of money, food, facilities, and time. These activities are classified under the title known as cause related marketing (Kahren, 2009, p.36).

According to Dutton (1997), organizations have been turning philanthropy activities inward towards their employees. This is done through paying them in order to volunteer for their favorite charities. She asserts that words like “ethics’, honesty, truth and trust are good sentiments. She, however, notes that they mean nothing if they are not adopted by organizations. Ethical activities include using different hiring practices and employee relations such as high moral values, fair pay, equal treatment, and equal opportunity for all workers. Organizations that do not treat workers fairly have the risk of lowering their brand image. Brand image should start with internal operations; there is no point of trying to show the external clients that business ethics are good while simultaneously engaging in unethical activities towards the employees. Employees play an important role in advertising the organization to outside clients more than any other marketing strategy.

Marketing Dissertations 300x225 Marketing Project Brand Loyalty Customer Behavior


The question of how brand loyalty affects product evaluation was examined by Brown and Dacin (1997). Their study looked into the differences between the impact of organization brand loyalty which include the organization’s ability to produce and deliver quality products and services and the corporate social responsibility’s impacts on consumers. In their first research, students analyzed their hypothetical scenarios. The outcome was that brand loyalty had a significant effect on the way consumers evaluated the product attributes and the overall image of the organization. Further, the authors found out that social responsibility had no direct impact on the organization’s image. Their second study found out that social responsibility became significant predictor of product loyalty in the consumers and its evaluation.

According to Kim (1996) product demand is determined by non-product factors such as cleanliness, public relations, atmosphere, advertising and the convenience of the brands’ locations. In any organization, quality of products can be determined according to the consumer attitude towards the product with other products available to the consumer in the market.

“Perceived quality is different from objective or actual quality, a higher level abstraction rather than a specific attribute of a product, a global assessment that in some case resembles attitude, and a judgment usually made within a consumer’s evoked set” (Zeithaml, 1988, p.4).

Zeitmal further assert that few consumers are able to analyze and measure the objective properties of a product. This is because the objective assessment depends on the verifiable standards, the objective measurement can be questioned because it depends on who set the standards.

Theoretical framework

The A Priori Approach

According to Lunn (2011), the theory introduces theories and concepts from other disciplines including behavioral sciences. The value of behavioral sciences has been used in consumer knowing what the consumer wants. Well known examples are included in the manifestations of motivational research and such attitude theories as those of Festinger and Fishbein. The A Priori approach involves giving the consumer an all embracing label such as “economic man”, “problem solver”, “learner”, and “existentialist”. The strength of the a priori lies in the organization and the systematic basis of knowledge provided about certain aspects of the consumer.

Brand Loyalty Theory

According to Katz (1960), Brand loyalty theory has three distinct dimensions. The first dimension is referred to as emotive tendency towards products and services. The emotive tendency refers to the consumer likes and dislikes which is manifested on how they purchase a particular brand in the market. The second dimension is known as evaluative tendency towards products and services. Katz refers to this tendency as positively biased evaluation of a product or service. Organizations use positive characteristics to define brand utili6ty to the customers. The evaluative tendency of the product or service can also be determined from past experience in using the brand.

Behavioral tendency towards the brand is the next dimension. Katz (1960) refers to the behavior tendency as the biased responses consumers have towards a particular product or service regarding its procurement, purchase and consumption characteristics. Consumer characteristics such as shopping, paying for the product, as well as its consumption determine the behavior tendency. Behavior tendency is developed after using the product for a long period of time. In addition, behavior tendency can be developed from good or bad tendencies toward other brands.

Black Box Theory of Behaviorism

Sandhusen (2000) assert that the black box model is an interaction of several perspectives concerning a specific brand. The perspectives include the stimuli, consumer characteristics, choice patterns and consumer responses. The focus of the organization is not in the internal processes within the customer: the organization focuses on the relation between stimuli and response of the customer. Stimuli are related to the marketing characteristics developed by an organization in order to lure the customer in purchasing of the brand. The environmental stimuli are determined by social factors such as politics, economy and the culture in which the brand is to be used. The black box symbolizes the buyer characteristics and their choice patterns, which determine their response towards a particular brand.


This research focuses on the various factors that influence consumers’ brand loyalty towards a given brand. From the various factors that influence brand loyalty, below are the hypothesis derived.

H1: There is a positive correlation between brand loyalty product and brand name

H2: There is a positive correlation between brand loyalty and product quality.

H3: There is a positive significant relationship between brand loyalty and product design

H4: There is a positive significant relationship between brand loyalty and product price.

H5: There is a positive correlation between brand loyalty and promotion.

H6: There is a significant correlation between service quality and brand loyalty.

H7: There is a positive significant relationship between store environment and brand loyalty.

Research Methodology

The main objective of this research was to establish how brand loyalty influences cosmetics buying behavior of UK female consumers. This section also highlights the various processes undertaken in obtaining and analyzing the information gathered for this research. This includes a description of the research design and methods used in collecting the data that were analyzed to arrive at a conclusion in the study.

Research philosophy

Based on the nature and the topic to be studied, this research will be conducted on positivist philosophy. It will be based on this philosophy because the research will involve testing of hypothesis developed from deductive theory, involving measurement of observable social realities.


This research will be conducted on deductive approach based on hypothesis testing from the data collected. Data will then be analyzed to either confirm or disapprove the hypothesis.

Data Collection Methods

Data collection will consist of surveys, filling in questionnaires and conducting interviews with cosmetic consumers and dealers in London, UK. Qualitative evaluation shall be employed in this research besides using subjective techniques such as interviews and observations to gather relevant and substantive data. Quantitative approach is preferred for this research due to the varying experiences of the consumers of these products. Upon collecting data using interviews and questionnaires, the data will then be carefully analyzed. This shall be carried out using both the One-way ANOVA and the Pearson’s guideline to establish how brand loyalty influences consumer behavior with respect to cosmetic consumption in UK.

Questionnaire Design

In this research, a questionnaire was developed, and pilot tested through personal interviews with seven senior-most managers at Superdrug, which is the second largest health and beauty retail shop in UK. The questionnaire used for collecting data was divided into two segments: the first section concerns the demographics of consumers and the second were about brand loyalty factors. This research involved sampling randomly 400 female cosmetic consumer of between 18 to 42 years of age. In order to obtain a reliable data, the survey was distributed in London City at five major cosmetic shops. The malls included L’Occitane, Jo Malone, Floris London, Boots and Screenface, in addition to Superdrug retail shop.  A total of 400 usable questionnaires were then returned and collected 60% response rate.

Table 1 reveals that age composition of those aged between 18-25 years were 25% of the respondents. Yet again, the table reveals that close to half of the respondents ages varied between 27-35 years. About 26% of the respondents were between the ages of 36-42. The sample survey was almost balanced at 51% for the married and 49% for the unmarried. With regard to education level, the surveyed respondent revealed that 72% of the respondent had at least a degree and 18% having completed high school. This implies that only 10% of the respondents had postgraduate degrees.

Data Analysis

This research used the One-way ANOVA to establish whether there is any significant correlation between independent variables (product quality, brand name, design, price, service quality, promotion, and store environment) and age and income the consumers interviewed. The main reason for adopting the One-way ANOVA as the most appropriate tool is that it was found to be the best for testing the hypothesis when at least two groups are measured on an interval scale. The purpose of the One-way ANOVA is to show the degree of variability of the sample values taken by considering to what extent the observation within each group differs and how much the group means differ.  Apart from the One –Way ANOVA, the researchers also found it appropriate to use the Pearson Correlation for purposes of analyzing the relationship between the two variables, which are both ratio and interval-scaled. This is based on the fact that the correlation coefficients determined using the Pearson’s guideline is used to establish the degree and direction of the correlation, which is suitable for hypothesis testing. In this regard, the research used Pearson correlation principle to test the independent variables (product quality, brand name, price, promotion, design, store environment and service quality) that influenced consumer brand loyalty and to establish if there is any correlation between the variables.


Table 2 below shows the Cronbach’s Alpha (coefficient alpha) of each of the variables tested.  The findings reveal that all the variables have a high degree of reliability. Table 3, on the other hand, shows the seven autonomous variable factors of brand loyalty that were experimented during the research through questionnaires given out to the respondents. The results were also ranked using the Likert scale in the questionnaire: strongly disagree, disagree, neutral, agree and strongly agree. The result is then gotten from the uppermost average score of brand loyalty factors based on the answers provident by the respondents. In overall, the result reveals that product quality is the most vital factor. In UK environment, most respondents choose product quality as the core aspect that influences their brand loyalty.

The One-way ANOVA scrutiny of the factors of income level and brand loyalty was conducted. This was meant to establish if there could be any significant relationship between the two variables. Here, there are four variables that are most significant according to the study, which include brand name (0.000) promotion (0.004), product quality (0.009) and service quality (0.038). In overall, the result shows that, in UK, majority of the consumers prefer brand name, promotion, and product and service quality as factors of brand loyalty. According to table five below, only two variables that are significant. These are price (0.014) and the brand name (0.050). An analysis of this data reveals that, among the age groups surveyed, female consumers aged between 36-42 prefer brand names more compare to other age groups.

Test of Hypothesis

As revealed in Table 4 below, brand name was found to have considerable positive relationship with brand loyalty. The results of this research revealed that consumers preferred brand image only when they foresee positive functions or benefits from the product in question. It is then that they will recommend the brand, react positively to the price premium and accept brand extension to other categories of products within the same brand.

The quality of the products was shown to have a positive correlation with brand loyalty. This kind of correlation is demonstrated based on Cohen’s (1988) principle, in which a correlation of (r=0.0302) is considered moderate. Therefore, based on these statistics, the finding showed that product quality has a lot of significance with regard to consumer decision-making process. The findings of this research revealed that brand loyalty and price had a positive relationship. In this case, price was found to be more important for any average consumer in the market. Nevertheless, those consumers with high brand loyalty were not very much sensitive to prices. The research showed that as long as these consumers were satisfied with a given brand, they would continue buying the product with the same brand irrespective of the price increase.  On the other hand, the findings did not show any correlation between product design and brand loyalty. Out of all the seven variables tested, many consumers did not consider product design as an important factor for UK consumers to become loyal to a given cosmetic brand.

According to the findings, promotion and brand loyalty were found to have a positive relationship. Product promotion was considered as one of the most valuable factor in determining a consumer’s brand loyalty. This includes the use of sales promotions, commercial adverts, personal and public selling. In fact, the research revealed that many female consumers spent considerable time reading product labels before purchasing the product. The research also revealed that brand loyalty and service quality had a positive relationship. Findings showed that service quality encouraged many consumers to prioritize a store. The result indicated that salesperson consumer relationship results in long-term orientation of customers towards a given store. Similarly, trust developed in the salesperson seems to relate to the overall discernment of the store’s service quality, which leads to customer’s total satisfaction with the store.

The findings also showed that the environment of the store is also positively related to brand loyalty. The store environment is seen as major factors that influence consumer brand loyalty. This research revealed that many consumers were much sensitive to attributes of the store such as a variety of selection, merchandise displays, packing space, and ease of accessibility to vehicles and the overall goodwill of the store in buying products.

Table 1. Demographic Sample Description



Percentage (%)










Marital status










High School











Table 2. Reliability Analysis of Brand Loyalty factors



Product Quality

Brand name




Service Quality

Store Environment

Brand Loyalty









Table 3. Brand Loyalty factor Ranking

Factor of Brand Loyalty Ranking


Product Quality 1 3.68
Q1. The brand is durable than others   3.69
Q2. The materials used by the brand are natural   4.11
Q3. The brand has sufficient color   3.65
Q4. The brand has good functional quality   3.77
    Mean Average     3.80
Design   2  
Q1. The brand provides wide variety of designs   3.72
Q2. Designs of the brand are suitable for me   3.79
Q3. Designs of the brand have distinctive features   3.73
Q4. Designs of the brand are trendy and fashionable   3.85
    Mean Average     3.77


Brand Name                                                          3  
Q1. The brand is trustworthy   3.70
Q2. Brand image and name attract me to buy   3.82
Q3. Brand Name is selected irrespective of price   3.41
Q4. Brand reveals my individual personality   3.96
    Mean Average     3.72
Promotion               4  
Q1 Ads of the brand is attractive   3.64
Q2. Ads of the brand attract me towards purchasing the product   3.44
Q3. Product displays are entrancing   3.62
    Mean Average      3.56


Store Environment                                                   5  
Q1. The brand has good store location   3.64
Q2. There are adequate outlets for the brand   3.76
Q3. The interior show is gorgeous   3.50
Q4. Music and color inside the store are beautiful   3.36
    Mean Average     3.57


Price       6  
Q1. Increases of price not hinder me to purchase   2.99
Q2. The brand provides goods value for money   3.52
    Average Mean 3.56
Service Quality 7  
Q1The salesmen in the store are knowledgeable   3.21
Q2. The salesmen in the store are willing to help   3.39
Q3. Vendor of the store is and courteous and friendly   3.18
Q4Vendors in the store have neat appearance   3.33
    Mean Average     3.28


Table 4. Significance of Brand Loyalty factors with brand loyalty

Variables Pearson Correlation Sig. (2-tailed)a
Product Quality

Brand name




Service Quality

Store Environment

Brand Loyalty
















Conclusions and Findings

Various studies have focused on understanding the concept of brand loyalty and the factors influencing it. Product attributes, after sale service, marketing capabilities, perceived quality or aesthetics, depth of product line as the key differencing factors influencing the behavior of purchasers. Brand commitment is also a necessary condition for true brand loyalty to occur.  Packaging, new product trial, price, store location corporate social responsibility and advertisements influence consumer behavior. While several factors influencing brand loyalty have been studied in the extant literature, this research has revealed that brand loyalty influences consumer behavior. Consumers may also compel entrepreneurs to change the brand image in terms of product or service quality. Similarly, the brand image has been proven to satisfy the consumer expectations.

The dimensions of brand loyalty theory clearly depict how consumer’s tastes and preferences influence their buying power. This is followed by an assessment of the product to decide if they will buy it or not. The assessment also referred to as evaluative tendency compels organizations to brand their products to attract customers, an aspect of competition. Product branding can be enhanced by advertising, changing the brand name and promoting it to improve recognition.  The behavioral tendency proposed by Katz is creations of a bandwagon effect among consumers to enable them continue buying the product. The initial products are branded in a way of attracting customers though subsequent ones show depreciation, a strategy used by marketers.  Branding through advertisement show some favor of the product while despising others, thus discouraging customers from using those other products whether related or not. The black box model looks into the customers willingness created by the company’s emphasis of the product. The characteristics of the buyer determine their choice of product.

marketing strategy dissertations 300x200 Marketing Project Brand Loyalty Customer Behavior


From this research, the brand name and image has a significant impact on customer choice with all factors kept constant. As part of consumer behavior, every brand has some features which consumers always associate the brand with. They consume a given brand on the basis of its features. Again, the consumers take into account the quality, and price while making buying decisions. The point of purchase is another factor that comes to a buyer’s mind. Being a highly demanded product by women, they want to buy cosmetics from a good reputed and trustworthy purchase point. Exhibition malls serves as favorite consumer purchase point.

Other factors like age, occupation and education of consumers will influence buying decisions following the way each group has been exposed about the product. Young people will have more taste of cosmetics because they want to look good while old ones are slightly less concerned with beauty. Exposure and knowledge of a product affects its demand. The raw materials making the brand also play a vital role of its choice. If a sample cosmetic is known to contain harmful chemicals, it loses its market. An organization will get to know what factors influence the purchase decision of a consumer before branding the product. Accordingly, it will direct its marketing effort so that it can get potential customers to purchase the products.

Subject Issues Learnt

Brand loyalty is the consumer’s conscious or unconscious choice that is expressed intentionally or a behavioral pattern to repurchase a brand again. This happens following the perception of the consumer that the brand provides the right image, characteristics or quality based on reasonable price. Hence, consumer behavior is habitual. Beginning from product design to creation of a mature brand, good marketing strategies, which depend on a clear understanding of the memory, motivation, learning and decision processes, influence the consumer’s choice. Launching of new products, market segmentation, timing market entry and brand management are all related to the theoretical framework employed in the research.  Branding is by far and large the most important factor influencing the product’s success or failure in the market place. It can also greatly impact the company’s perception by the buying public. Brand is not only a company’s product but also a representation of the individual company and that is where the core of brand loyalty falls.

Brand loyalty is simply more than the consumer’s commitment to repurchase a product. It incorporates the high attitude towards the product demonstrated by repeated buying.  This loyalty is a business investment because of the high prices being paid by the customers.  Depending upon the nature of the product versus basic necessities or luxuries, consumers a single or brand loyalty. This brand loyalty is affected by their brand choice as well as by their store loyalty behavior. The bondage of brand loyalty is strong especially through repeated advertising and promotional schemes. The main factors that influence brand loyalty are the quality of product, habit of use and regular availability of the product. Searching for a product means mental and physical information about products, prices and shops. Consumer information is thus a marketing tool that can be used to understand the interactions between a specific target segment and marketplace so as to meet the consumers’ needs and wants.

Brand image or the good reputation of a particular service ensures that it maintains a competitive advantage over other products and services. An organization’s brand is valuable strategic asset in achieving goals and objectives. Brand loyalty can be referred to as the consumer decision; whether conscious or unconscious concerning the use of a product or service. It may also refer to the intention to buy or use a particular product for a long duration of time. Brand loyalty is achieved due to the right features, and the quality of the brand. Quality of the product must be at the right price for the consumer to perceive the brand as being loyal to their needs. Organizations can change consumer behavior concerning a particular product or service through advertising.

The reasons why people become brand loyal are because the favored brand satisfies the consumer needs and wants than the competitors do. Again, there is a reduction of perceived risk, sticking with a favorite brand improves certainty. Brand loyalty helps maintain self image in reinforcing the customer’s self concept and confidence. It is also the path to least resistance. Marketers use strategies like in-store and o-location impulse triggers, notably point-of purchase displays.  Consumer innovativeness is the predisposition to buy new and different products rather than remain with the previous choices and consumption patterns.

Consumer behavior is influenced by social, cultural, Psychological and personal factors. Culture influences buying behavior depending on the country, geographical region, religion, nationality and racial groups. The societal classes such as wealth distribution, education and occupation impact the behavior of consumers towards a product. Social factors like family, reference groups, roles and statuses influence buyer behavior. Personal factors include lifestyle, economic situations, age, occupation, personality and self concept. Perception, motivation, learning, beliefs and attitudes are psychological factors affecting consumer behavior. Marketers should, therefore, look into these factors in branding particular products.


Brown, T. and Dacin, P., 1997. The Company And The Product: Corporate Associations And Consumer Product Responses. Journal Of Marketing, 61 (1), pp.68-84.

Dutton, G., 1997. Warming The Cold Heart Of Business, Management Review 86 (6), pp.17-20.

Hoyer, W. and Maclnnis, D., 2008. Consumer Behavior. New York: Cengage Learning.

Kahren, F., 2009. Brand Loyalty. Washington D. C: Whimsical Publications.

Katz, D.,1960. The Functional Approach To The Study Of Attitudes. New York; Public Opinion Quarterly.

Kim, H., 1996. Perceptual Mapping of Attributes and Preferences: An Empirical Examination of Hotel FandB Products in Korea. International Journal of Hospitality Management 15 (4), pp.373-391.

Lunn, J., 2011. Models Of Buyer Behavior: Consumer Decision Process Models. New York: Marketing Classics Press.

Phillips, C., 2010. Brand Loyalty. New York: Youwriteon.

Pride, W., and Ferrell, C., 2008. Marketing. New York: Cengage Learning.

Sandhusen, R., 2000. Marketing. London: Routledge.

Zeithmal, V.,  1988. Consumer Perceptions Of Price, Quality, And Value: A Means-End Model And Synthesis Of Evidence, Journal Of Marketing, July, pp2-22.

Did you find any useful knowledge relating to brand loyalty and customer behavior in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.

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MBA Dissertation – Service Quality in the Hotel Industry: Fair Behaviour and Long-Term Profits

MBA Dissertation – Service Quality in the Hotel Industry. Fair Behaviour and Long-Term Profits

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Customers are the heart of an organization. The profitability and the goal of an organization depend on the quality of the services that are provided to the customers. Delivering value the customers is considered as the major and most important factor in any business. Regarding the fair behavior there may be many queries where service provider talks about long-term profit of the organizations. There the researcher tries to evaluate the need and importance of taking such a research to judge the importance and necessity of fair behavior in the service organizations to have long-term sustainable profit. The main goal of this research is giving idea about maintaining good customer relationships, fair-behaviour, determinants of Service Quality, and techniques by London hotels to have competitive advantage over their competitors through delivering effective service and with a fair deal. This study indicates how customer service and fair behavior contributes to the long term benefits of the company. As hotel industry is very competitive in nature hotel organizations always try to provide best services to their customers. Customer’s loyalty and retention is very important for a hotel organization. Regarding these issues hotel organizations always try to provide true services to their customers. So it can be concluded the greed of the service providers increase fair behaviour and ensures fair behaviour within the organization. Hotel organizations can have lots of benefits by successfully implementing CRM with their most loyal and satisfied customers. These benefits can be explained as increase in the retention rate, increment in the revenue of the organization, increment in the profitability, reducing internal costs, reducing marketing related costs, customer service improvement. From the study it is clear that customer service depends mostly on the staffs and employees of a hotel. So, proper selection and training of the employee can improve customer service in the hotel industry. Gaining competitive advantage is very important for hotel organizations because hotel industry is very competitive in nature. Some sources of gaining competitive advantage are reservation management, it-induced competitive advantage, technology sophistication, management skills, critical resources and marketing strategy. The focal aim of the proposed researcher is to investigate into various determinants of service quality in general and the hotel industry in particular with emphasis being laid on the importance of fair-behaviour for customer satisfaction and long-term profits.

Research Objectives

  • To investigate into various determinants of Service Quality that impacts customer satisfaction
  • To assess how effective service delivery with fair deal can facilitate the hotel industry to satisfy the customers
  • To evaluate how and to what extent the service gaps can be filled with fair behaviour for long term benefits

Essay Software Procurement

Software Procurement


Software procurement is the practice of hiring subcontracting programming firms which specialize in writing code to order. The reason it works is that there are two parts to creating software: the planning and design and the actual coding. The most important part of creating software is the planning, and it is here where the creativity is needed. The actual coding of many portions of software is somewhat repetitive and mundane. Also, with the advent of object oriented programming (OOP) many smaller parts of programs can be done separately and assembled later, since this kind of programming need not be sequential.

In addition to the change in programming practices, programs became much larger with each increase in computing power. Larger programs could do more, and compact code was no longer required. More businesses began using software, and very quickly it became quite rare to see a business without some proprietary software for its every day functioning, like HR functions, accounting and documentation. Now these gigantic programs may require thousands of lines of code for the major functions and thousands more for all the little things that make the overall program work.  Companies are more often contracting with specialized coding firms for this kind of work.

In more developed areas, companies find it difficult to retain coders for repetitive and mundane coding, and the pay structure for talented programmers makes the cost of in house support code development prohibitive by comparison to outsourcing. In effect, development has become two tiered, with one kind of firm doing the design architecture and major creations and other firms doing the necessary , but rather unimaginative small function coding. So it is cheaper and more efficient to contract one of the specialty firms to fulfill the nuts and bolts of the major programs. Some of these large programs take many months to complete and cost hundreds of thousands of dollars. The cost saved by sub-contracting the less critical and less difficult programming can be substantial. In addition, the need for this kind of programming is not constant, and so keeping full time programmers for this kind of work is not cost effective.

So it is clear why firms which develop large projects want to outsource, but why is outsourcing so available? This is because the start up costs are small, and the rewards relatively large for the firms which do this. In places like India, the Philippines and China, labor costs are extremely low, yet the money that these coders can make is much higher than they could earn on other jobs, so it is easy to find talented and willing workers to subcontract. In addition, there are no barriers, because it is essentially an intangible product, so trade barriers and bureaucratic interference is ineffectual.

The world once divided along industrial lines, with the industrial revolution bringing wealth and prosperity to the industrialized countries. Then these now wealthier countries suffered inflation, and wages rose as a result, making manufacturing less and less profitable. Companies began to “outsource” their manufacturing to countries where labor costs were lower. When software development took off nearly twenty years ago, companies in developed countries sprung up to meet this need. As the programs got larger and wages rose again, ordinary coding became too expensive, so companies began “outsourcing” this also, and now it is a thriving industry, and most major software development involves some outsourcing of the small function coding.

Overview of current outsourcing practices

In a recent survey companies in Hong Kong were asked about their outsourcing practices in order to assess the current state of outsourcing in Hong Kong. The following sections describe the respondents and their answers.

Definition of Respondents

Most firms who responded produce ERP or CRM packages, as these are the most popular and profitable programs for development. This kind of program often requires reams of coding, much of which is quite simple and tedious. The majority of these firms outsourced to Mainland China. There are a number of reasons they cited from the proximity and ease of payment to the language being less of a barrier than elsewhere. Hong Kong firms often have someone who can speak Mandarin, and even if they don’t, most of the time the written language carries the same meaning in both languages, so they can still communicate. India was the usual second choice for the efficiency, and the shared English language. According to business reports, India has become the foremost choice of North American companies for software outsourcing, because other outsourcing countries, including mainland China, simply cannot communicate adequately in English. Singapore was the third choice for outsourcing for the majority of these firms, about 25% of the value of their work was outsourced based upon the entire value of their projects. This amounts to a substantial portion, and it begs the question what the cost would be for these projects if the work was done in house instead. Compared with in-house development a 20% cost savings was realized, on the entire project. So doing the math, we can estimate that software development and the ultimate price to the end user would rise by 30%. Most of the firms stated lower costs as the main reason for outsourcing, citing lower labor costs and lower employment costs for benefits and other extras. Other reasons cited included lack of enough full time personnel with the right skill sets and that outsourcing the small parts then allowed developers to concentrate their focus upon the core development and not worry if the coders were keeping up with the chores. Among all these form, however, only 1.8 vendors were used. It seems that respondents were loathing trying new vendors if current vendors were at least satisfactory.

Respondent Hong Kong firms were cautious in their selection of vendors, valuing a  long term relationship over other criteria. It has been hard for new providers to make inroads into this market for that reason. Even if there had been problems in the past they were not likely to change providers if work was eventually satisfactory. The past problems were seen as something that could be prevented from recurring due to advance knowledge. It is supposed that it is easier to deal with vendors you know than to worry about creating a relationship with a new unknown vendor.

Some companies responded that they usually depended upon themselves, because it is difficult to trust outside sources. The management style which prevails in Hong Kong is, perhaps, responsible, as local managers are often not used to delegating, and so have great difficulty with outsourcing concept. The Hong Kong corporate environment is so centered on the strong work ethic and collected responsibility being vested in one or two people that people are simply used to doing everything themselves or closely overseeing what work is delegated. Another reason that companies don’t do more outsourcing is they have a need for proving their overall robustness. There is an attitude that they needs to show that they have enough workers that they can afford to hire more workers if needed. There is an attitude that they must keep all work in house, because it proves their workers are better.

Overall satisfaction with outsourcing ranked average

It was found that overall satisfaction with outsourcing was only ranked as average, so questions were asked aimed at uncovering the reasons for the rather low satisfaction rate in order to improve situation. Cost satisfaction ranked the highest among things the companies rated about their outsourcing experiences. Mainland coders work cheaply, which is where most respondents contracted for outsourcing, so they were actually quite satisfied with the prices.

IPR ranked the lowest

The issues concerning intellectual property rights were rank as the area in which there is the lowest satisfaction among the respondents. Intellectual property rights are not truly respected in China yet, and the scope of this issue is not truly understood. Even when it is included in the contract, the cultural attitudes on the mainland are so focused upon profit above all else that ethics are simply different. When a company writes a support program on contract, they consider it quite all right to resell that program to another company in the future. The exact points concerning who owns what have to be spelled out in great detail in order to make it clear that every line of code that was contracted and for which the company paid became the property of the contracting software development company. Even then respondents has difficulty monitoring.

Advantages of Outsourcing to the Responding Companies

Low cost was seen as the main advantage for outsourcing. Cost Considerations included the cost of wages and the attending benefits. They also considered that in house development would require more machines and more work space for the extra coders. They would incur higher utility costs and the extra management required would also raise costs. Outsourcing also allowed them to focus on core development rather than split their attention and resources to oversee routine coding. The core development is the framework, and its development is essentially what they sell, requiring creative management and attention to the overall project. Outsourcing frees up the time of managers and lead programmers needed for the major tasks.

Action: Self Evaluation

When respondents evaluated their successes and failures they spoke mostly about how better planning, better definitions and better tracking would improve their outcomes. They mentioned that better definitions in needs analyses and cost analysis would improve the suitability of the final deliverable and also eliminate some time consuming explanation and discussion during the process. When deliverables did not suit the need, it could often be tracked to misunderstandings, possibly partly based on needs analyses with too little detail, even in the original RFP. They stated that some time could, at least, have been saved with better definition and more detail. Problems could more easily have been solved if the needs were more completely stated. More complete cost analysis might also have made the project budgeting process flow more smoothly. Better planning and more defined deadlines could also have improved the timing of deliverables.

Project managers sometimes keep too much in their heads, and should define all aspects of a project, including outsourcing as either part of the overall project or a sub-project of its own, in as much detail as possible, so that everyone on both sides of the outsourcing channel would know what was expected. Some mentioned that they might use a flow chart in the future to insure that all steps were included and to plot the timing properly.

Need for Well Defined Deliverables

Another area where the respondents cited a need for improvement was in defining the deliverable in more detail. Certain kinds of unsuitable deliverables could be avoided if the expectations were completely defined. The things they said should be defined were not just functional, but smaller things like: coding language, object needs, the hierarchical structure of parent objects under which deliverables will inherit, inheritance needs of deliverables. These are all examples of exact programming needs in order to insure that the deliverables will integrate properly and smoothly into the overall project. It also makes them easier to test. Even sequencing sometimes needs to be defined so that code runs when it should.

Another area where managers said caused problems was documentation need. If deliverables are not well and completely documented, they are difficult to use, cannot be as easily tested and required more man hours in order to document the overall function for which they were created. Documenting after the fact requires more time and is not always as accurate as ongoing program development documentation. In the days of smaller applications which were all done in one location by a static group of programmers, this was ok, but with pieces of the project being developed in many different locations by many different people, the documentation became a key issue as the program was assembled and as its final documentation was developed for the end user.

Bonuses/ Incentives

In the area of bonuses and incentives many problems were found. Managers didn’t really understand the concept of diminishing returns. Offering too much incentive for early delivery can be counterproductive as contractors race to beat the deadline. This can lead to sloppy or incomplete work and incomplete testing. They found it difficult to know just what sorts of bonuses and incentives would work best, and also to find the level at which such mechanisms become counter-productive. It was mentioned that, perhaps incremental bonuses and other types of non-monetary incentives, such as preference in future projects or early warning of RFPs, might work better than straight completion bonuses, and that not all should be tied to time, but that quality bonuses might be useful.

Factors Leading To Failure

The following were cited as factors leading to the failure of outsourcing projects by the various respondents.

Infringement of IPR

This was cited most often as a reason for assessing their outsourcing as a failure. It was not just the distinct possibility that intellectual property right would be infringed upon, possibly giving competitors and advantage, but also the high costs of monitoring IPR. One can never be quite certain that all deliverables and development materials have been wiped from the contractors’ computers. If they are not, then the temptation is always there to save time on future projects by using part or all of a previous project’s materials. The profit in this is so high that unless steps are taken to insure against infringement, one can assume it will happen. Long term relationships become more valuable when viewed in this light.

High Costs of Project Monitoring

Respondents said that the high costs of monitoring an outsourced project were implicated in certain types of failures.  If not enough monitoring was done because of its high cost, this sometimes led to poor quality or missed deadlines. It was assumed that closer monitoring would have avoided these problems or, as least, allowed an earlier response, resulting in better overall performance on the project. Most of this high cost involves the extra manpower to follow up and communicate often with the contractor. It also includes writing extra testing procedures to be used during the development process in order to monitor quality on a continuous basis, and avoid nasty surprises at the end. Another cost involved documenting the testing of deliverables both during and at the final phase of an outsourcing project. The documentation requires more man hours, and so was sometimes a cause for skipping this. However, lacking the documentation of the testing sometimes resulted in incomplete testing and problems in interacting with the contractors in case of problems later.

High set-up costs

Outsourcing often appeared less attractive because of the high cost of setting it up. Of course, this cost was also a factor leading to some unsatisfactory results, due to poor planning and incomplete preparation for outsourcing. Just the man hours required for defining the project scope and the deliverables is considerable. So it can happen that too much stress is placed upon speedy starts and steps are missed. The cost of man hours in planning has such a time-deferred benefit that it is tempting to try to compress this process. However, that time should probably be spent even if work is to be done in-house. That time spent in planning will result in time saves in fixing.

Contract Administration

Another area which has rather high cost is contract administration. This involves having someone highly skilled to draft the original and then handle subsequent negotiations. Legal counsel is not cheap, so it is tempting to use it only for contract drafting. However, negotiation and mediation by someone less skilled and knowledgeable can result in very unsatisfactory handling of contracts and trouble-shooting. Contracts that are incomplete or not detailed enough are unenforceable. Contracts that do not include consequences for various actions leave too much to be negotiated after the fact. Using highly skilled professionals at the outset can save time and much trouble later. Most respondents said they would take more time on this and expend more money in future to insure that there were very clearly defined objectives, time limits, quality definitions, defined expectations and mechanisms of recourse for problems.

Costs of settling accounts low

The cots of settling accounts were seen as the lowest part of the cost and also the least problematic. Once the contracting entity decided that the it had received acceptable work the agreed upon sum was simply paid. The only real cost of settling account is in the book-keeping. Even the cost of incremental payments on timed delivery dates was still the lowest of all the costs of outsourcing. The payment mechanism might be a lump-sum at completion, progressive payment or advance payment. Each of these has its own inherent problems, but they are still fairly straightforward and cause few problems.

Procurement Planning

In procurement, planning is everything. While planning may be very important in most things, when you have someone else do any portion of the work for which your company is ultimately responsible, planning is everything. You are essentially giving up control of part of your livelihood, and this must be carefully planned, tracked and documented. The planning is rather like trying to arrive at an unfamiliar destination by using a map. A good accurate map is essential, and the more detail, the better. You might even mark things on your map before you depart, such as mileposts, service areas, place to obtain food and lodging and landmarks. You should do the same thing with your project planning, especially where it concerns outsourcing any part of your software production. Without a road map to travel, you could wind up lost. Without the roadmap for outsourcing you could wind up the loser.

Tracking your project is obviously important, and tracking any outsourced portion is doubly so. If it is not on your site under your control, you must keep abreast of the development process and progress.  Imagine again your trip, and think about times when gas stations are open, motel rooms are available and restaurants are open. If you leave at the wrong time and don’t track your progress, you could find yourself inconvenienced and without services or with poor services. When handling any software project, the outsourced portion must be closely tracked so that the various parts that you need will be ready when you need them. It also impresses the vendor when you show interest in their progress.

Not the least of your needs is good documentation. You must document everything from needs to negotiations, contracts, agreements, changes, stakeholders and responsible parties, criteria, deadlines, inspection and testing, troubleshooting, communications and final deliver and acceptance. If something is needed, it should be documented. If something is done it should be documented. Every step from planning through execution and final outcomes and assessments must be documented. This is to protect all stakeholders and insure that everyone is in agreement, and also it provides your road map for future projects.

Outsourcing is just not a simple matter of advertising and selecting a vendor, making an agreement and hoping that it fills your company’s needs. It is a very complex process that must be planned carefully. Yes, you are going to outsource the less critical portions, and yes it will probably be simpler work than your programmers will be doing, but the time you spend planning will save time and money in the execution, and more importantly, it may save your project.

Project Planning

Project planning has become such a recognized and important phase of business that it has its own certification. It is a complex and multifaceted function that demands the focus of the entire team at the beginning and the constant vigilance of the person charged with monitoring the project’s progress. It begins with the initiation of discussion between the company and the client’s project architect. Those two people (or small groups) will identify the needs of the client and define the project. In the beginning, the client is the company to which the software developer will supply the large software package (usually HRM or CRM for ERP in Hong Kong). Then the architect will form a team to fill the needs of the client. It is critical that all the needs of the ultimate end user be identified at this point in order for the outsourcing planning to be included from the inception of the project.

Identify outsourcing needs during the project planning stage if possible

The architect of the overall project should take into account the needs for outsourcing when discussing the project with the end client. It is not necessary to inform the client if or that any part of the project will be outsourced. It is enough that the architect simply knows which portions might be eligible for outsourcing. For example, controls that mate the overall ERP program to the CRM package and make it available to the entire enterprise might be a specialty that could easily and very successfully be outsourced. The architect must be thinking about this when setting tentative timetables with the client.

Identify Stakeholders

From the inception of any project, the various stakeholders must be identified. Their particular needs must be taken into account in project planning and the responsibilities of each stakeholder should be identified and agreed upon (preferably documented) from the start. These usually include:

  • Client: the company for which this software package is being developed. Their responsibilities usually include defining their needs thoroughly. staying in touch with the developer company to keep them apprised of any changes or additions and  administering and ultimately paying the contract. This client may be a real outside client or an internal department of a large organization.
  • The first individually identifiable stakeholders will be architects and project managers from both the external company or department and the project manager for the developer. IN some companies the architect and the project manager will be two different people, or they may be the same person in a smaller company. It is the architect’s job to co-ordinate all the various elements of a project from start to finish. This person sees that all needs are defined, all stakeholders are identified and a team is formed. He or she will also be involved in the design process which precedes development.
  • The team may include an actual project manager who will manage the actual development process, or the architect may also fill this function. In either case, the architects and project managers are major stakeholders and their needs must be well defined before a team is formed. The project manager will from the development team and be responsible for coordinating the functions and working of all the various teams and departments involved.
  • In any project, the lead programmers or department managers will be minor stakeholders. They will have only the responsibility for their own portion of the development project. However, it is prudent to include them in the overall design process so that they know how their portions must fit into the overall structure, and also in order to have their possibly valuable input. The additional positive emotional impact of including them is a bonus.
  • The programmers who must integrate outsourced works into the final deliverable are also minor stakeholders, and should be included in the initial design stage. They need to know how the overall program is expected to perform and what all its functions will be in order to know best how and when to integrate the outsourced portions into the large deliverable. These programmers may also be the managers of the outsourcing, responsible for managing the outsourced sub-projects, tracking and reporting progress to the project manager and finally integrating the outsourced portions into the main deliverable.
  • Though they are often overlooked, documentation specialists are also stakeholders, as they are responsible for documenting everything concerning any project. They must document the initial agreements among stakeholders and their individual responsibilities, the actual development process and coding and the overall and specific functioning of the deliverable. Projects without proper documentation can become less than useless, since it may become easier to create something new than to decipher the old one and modify it without knowing how it was done.
  • Finally, technical support must be included, as it will be their responsibility to support the client. If it is an internal project, these technical support people may be external to the department, but they must be included as stakeholders from the beginning phase. They can also be valuable contributors in that they know the other software to which this project may be attached, and all its quirks. They should be consulted concerning possible problems that could be avoided with proper program planning. They will know of past and present problems with ERP software.

Once the various stakeholders are identified, the needs and responsibilities of each should be defined, documented and agreed upon. In this way, each one will know exactly what is expected and when, and be much more able to function well. The architect and the program manager can easily stay abreast of developments by staying in close communication with these stakeholders.

Make or Buy

Once the stakeholders are identified and their need and responsibilities documented, and the overall project design has begun the possibility of outsourcing must be seriously considered. It should not wait until the project is actually underway, because the planning of the development phase of the project must include any portion that may be outsourced in order to do that with the highest probability of total satisfaction and success. The first thing that must be considered after the rough design of functions has been done is the question of whether the company will make or buy the smaller functioning portions, and, if so, from whom. The main issues to consider when planning for outsourcing are quality, feasibility and cost.

Quality is always the first concern, and most companies rightfully think that quality can be assured as long as they are in control of all phases of development. It is also understandable that any company is proud of its team, but realistically, there is some programming that is only rarely used, and some that is just plain tedious. There are many reasons why a manager may not want to use company programmers for certain portions of the program. The major reason may have to do with company retention of talented programmers. If you give them too much boring work, job satisfaction goes down. IN addition, the company programmers may be highly trained and highly paid, so it isn’t cost effective to use them for mundane repetitive work. The final reason may be that certain skills rarely used may not be equal to the task of specialty programming.

By outsourcing you can take advantage of a huge pool of expert programmers who are not on the company payroll, and do not require company benefits. The cost of keeping full time programmers for these types of programming can be prohibitive and is seldom cost effective. The key question to answer is: are they needed all the time? At times it may work to hire local contractors for extra work, but that can become quite expensive and local contractors not always readily available.

Outsourcing can be timed parallel to core development and, coupled with the fixed price, can help to keep the project on time and under budget. The budget planning for the entire project will be less problematic and the end price can be more easily set.

Planning the Management of the Procurement Process

Depending upon the size and business processes or company culture of your company, you may or may not have a full time manager for handling the procurement process. Even very large companies often prefer to allow each architect the freedom to either appoint a procurement manager, allow his project manager to appoint one or to handle it himself. Any of these will work nicely as long as the person so charged has sufficient time and resources. Somebody must be named to take this responsibility or there is too much room for miscommunication, tracking mistakes and the ultimate problems or failure that will impact the entire project.

Once it is decided how procurement will be handled and the person responsible knows where everything fits and knows the exact needs for time and deliverables, he can focus on controlling the whole scope of the outsourcing. He can research and assess possible sources, and can seek whatever approval and budgeting as may be necessary.  He can plan testing procedures and see that testing scripts are created and ready. If needed, he can set up and manage the testing team. They should be prepared to test the deliverables at regular intervals during the development process. In all, the job of overseeing outsourcing is key to its success.

Solicitation Planning

Just as the enterprise for which the major development is being done solicited the services of suppliers, you must be prepared to solicit the cooperation of specialized outsourcing companies. The method should be planned to blend well with the company’s normal mode of operations. If the company normally selects using RFPs followed by RFBs, then these must be prepared with care to be used to streamline the process of outsourcing.  Internal documentation should be begun at this stage in order to avoid overlooking anything, and also to help work out who will do what and when.

You have already identified the needs of the overall project. At that point you picked out various portions of the overall projects that would be eligible for outsourcing. Next you must identify and document the needs of these individual portions. Identify each stake holder’s needs for each specific portion to be outsourced. You should be specific for each stakeholder, and specific for each portion or code subset that will be outsourced. You cannot use overall project needs definition here, but must define the exact needs for each stake holder for each outsourced portion. All of this should be documented and signed on by the stake holders.

Consider Budgeting Needs

One of the aforementioned stake holders is the finance person at whatever level controls the money for the project. It is imperative that this person understands both the needs and the costs very thoroughly. It is better to involve them from the outset and make them a part of the planning that to have to waste time explaining the expenditures. They can be measurably helpful in making the project come in under budget if they understand the development process. Uninformed finance people may balk at the cost of outsourcing if they do not understand the overall savings such measures create. Paying some other firm to program portions of the project may look like waste or even laziness unless they understand how the creative development team works, and the momentum needed to push through creative solutions. If they see that process at work in the early planning and brainstorming sessions, they will want to foster the synergy required to put together innovative development projects that will set your company apart from competitors.

Therefore, after the brainstorming and overall planning is complete, a project budget should be created and segmented as much as possible, with outsourcing funds set aside. The budget needs to be tracked through every level of the development process. At each stage, the financial stake holder should know the current status of every part of the project, be able to foresee  possible extra costs and have solutions ready for any unforeseen expenses. The costs of development can usually be divided into several segments:

  1. planning costs, which include research costs, marketing costs incurred before the deal was sealed, and the salaries of all stake holders within the company;
  2. testing costs, which are ongoing throughout the project and should be budgeted separately to insure that sufficient testing is done, but that it is following a planned pattern;
  3. actual in house development costs, including salaries of programmers, cost of space and equipment, resources and documentation;
  4. outsourcing costs;
  5. and, finally, administration  costs, including contract administration and project tracking.

In smaller firms these may not be separated out in this great detail, but larger corporations often prefer this kind of penny counting and accountability, because they are very aware of the total cost of miniscule waste over a large operation and over time.

Consider Quality Issues

Perhaps the most important part of the planning stage is the issue of quality, especially where it concerns outsourcing. For internal work, these issues can be addressed any time that quality is in question. However, for outsourced work, quality MUST be planned in. The exact quality expected must be discussed by the internal stake holders and a set of criteria agreed upon. Then tracking and testing must be planned. It must be in the contract what will be tracked, the method of tracking and what and what will be tested and when. If the suppliers know exactly what quality you will accept and how and when it will be tested, they are much less likely to fudge on their own testing, thereby saving considerable time and trouble that would be wasted in fixing problems. They will know that they must adhere to whatever is in the contract, so exact specifications and testing times and methods must be in the contract.

Identifying Potential Sources

The next step in outsourcing is the identification of potential sources for this service. If all projects are well documented, that provides a wealth of information about companies which have fulfilled this service in the past. It should be well documented what they did for which project and what kind of results were obtained. Documentation should include a copy of the original RFP and RFB plus the various proposals and bids that had been considered along with reasons for rejection or acceptance. Your documentation specialist or the program manager should have tracked the progress and copies of the reports should be available. Records should include the time frame required for completion, problems and resolutions, final results and a copy of the sign-off sheet where all stake holders sighed off the outsourcing portion of the project after their needs were met. Use these records to look for successful collaborations and also to qualify or disqualify proposals and bids, according to past experience.

In addition, you will likely find that other companies will openly solicit your attention, and you can include them on your corporate issue list for RFPs. Finally, an RFP can be posted in several; places to attract potential suppliers, including trade journals, on line specialty sites, your company website and major newspapers in various locations where such service organizations are found. There are generally special places for these in both magazines and newspapers.

Requests for Proposals

This subject rather overlaps both planning and action. However, in the planning stage the actual contents of the RFP need to be carefully considered. The actual issuing of the RFP is fairly straightforward. The handling of the RFP process is also something that needs to be planned. By definition, and RFP is an invitation to present a proposal for consideration. The more defined and detailed the RFP is, the more likely it is that you will receive a good number of well done proposals from which to choose. Generally this process is designed for two purposes: to let possible suppliers know what you need and when, and to streamline the process of selection. It is important, therefore, to be certain the right person writes them.

If you have a technical writer, then that person is usually the obvious choice. Otherwise it falls to the program or project manager or the manager assigned with the outsourcing, or even the person responsible for the documentation. I any case, one person is responsible for writing up the RFP according to all the things discussed by the stake holders in the planning sessions. The RFP should then be distributed to those same stake holders for signing off.

It was decided in the planning stage which portions of the project would be outsourced and why. The actual details of the needs should then have been discussed. All of this should be in the RFP in great detail. IN addition, it is recommended that you include your expectation is the greatest detail possible for both the proposal and the deliverable (s). If potential suppliers know what you want to know about them, it will make your decision much easier. If, at this early stage, a company cannot comply with the details of the RFP, then you cannot logically expect them to do any better for the actual project. So including the details of what you expect to see in a proposal will make it simple to sort through potential suppliers. You should have decided as a group in the planning sessions exactly what other criteria to use to sort through all the proposals.

Requests for Bids

Once the proposals have been sorted, most companies have a form letter for rejection and a prepared RFB. The difference between a proposal and a bid is the level of detail, including dates, prices, exact specifications of deliverables, problem solving methods, communications conduits and responsible people. The bids, if accepted, will form the basis of the contract. In the planning stages it must be decided if bids will be open or closed, and negotiable or not. This usually depends mostly on time factors. Closed and non-negotiable are much faster.

Documentation procedures

All through the previous sections the subject of documentation has been a recurring theme.  Documentation must be planned if it is to be assured that it will be useful and factually correct and complete. For outsourcing, you must first decide what kind of documentation the deliverable will need and who is to provide it. Sometimes a company will send its own documentation specialist to the supplier to insure the quality of the documentation. The usability of any deliverables may depend upon very good documentation. In a perfect world, the supplier would have an excellent documentation specialist, but the truth is that it is often not economically feasible for the suppliers to keep such a wizard, who can manage to document many quite different projects at once. It is even sometimes impossible, considering the cost of outsourcing and the linguistic shortcomings of many areas where outsourcing is done.

Documenting Planning

One thing that must be documented in house is the plan for outsourcing. Everything we have already discussed about planning must be documented and much of it should be signed on and signed off upon completion by the various stake holders. Included in the documentation of planning is the level of documentation required for outsourced materials. This should be decided and recorded in detail. This plan for documentation of planning should be much the same for every project.

Documenting agreements must also be planned. Is it enough to have a copy of the actual contract, or what other documentation might be desirable?  A flow chart of the overall program into which the outsourced code will be integrated is also quite useful. Anything that is done for a project is subject to documentation, from the needs assessment of the first planning stages to the final agreed upon needs, the modification and troubleshooting procedures, the deadlines and the list of stake holders and their areas of responsibility.

Documenting Progress Tracking

Even if the actual documentation of the deliverables is assigned to the outsourcing supplier, the tracking of progress and periodic QA testing must be documented. It should be decided early who will be responsible for that. Then methods for documentation should be clearly laid out, including the types of documents, the program used to do it and the final storage media and location. Finally all financial transactions and receipts must be recorded in the program documentation, separate from the finance department, for use in future outsourcing.

Evaluation Criteria

Evaluation criteria and methods should be planned and standardized across all projects in the broad sense. The criteria for each outsourced project should be the same in order to assure quality and accountability. It is best if this is agreed upon in the early planning meetings and signed by all stake holders. This will avoid any misunderstandings about who needed what and when at a later time. Even the procedure for modifying or accepting the criteria should be documented and signed.

Each stake holder should complete a needs assessment that when combined will completely define all deliverables. The needs assessment can be standardized on a form to facilitate communication and to streamline the process. It should be clearly stated in the needs assessment if the final acceptance criteria will be based on function, form or any combination of these with other aspects of the deliverable(s). Some things may change from project to project as certain aspects, according to the needs of the main program. These include:

  1. Portability
  2. Replicability
  3. Object package
  4. Compactness of code
  5. Fitting of  inheritance standards
  6. Documentation

Another factor that is always of prime importance in outsourcing is deadlines. These must be clearly defined, and the consequences or missing one should be clearly stated and standard. If these are always there, suppliers will get used to them. Deadlines should be part of company policy so that no supplier will feel either privileged or discriminated against.

Criteria for Short-Listing

Since short-listing is done at two stages, there should be a standard set for accomplishing it. The first will be to short-list proposal providers, and the second will be to sort among the bids tendered. It might be prudent to set up a point system on a chart and simply use this to winnow out the ones to be considered further. Some points to consider when creating this list are:


  1. Industrial knowledge: Does the vendor have any special industrial knowledge that will add to the value and reliability for the project?
  2. Expert programmers: does the vendor have a large pool of talent, expert programmers and specialists in esoteric code?
  3. Knowledge of end user industry: does the vendor have specialized knowledge of the end user industry. That could make them a valuable asset to your team. This would include, but not be limited to: electronics manufacturing or other real businesses who will be end users.
  4. Similar projects: Has the vendor proof of similar projects in the recent past. Do you respect the referents?
  5. Track record with industry: proven success can weigh heavily in a vendor’s favor, especially in light of recent successes. Recent successes may even overcome a problematic past if it can be shown that there has been significant change in problem areas.
  6. References: These can swing a borderline vote, but may be otherwise useless. It is extremely important that you also assess the value of the referents. If they are companies you know and respect, then they may be a valid consideration. It is even better if there is an actual person in the referent’s company with whom you have a relationship. However, competitors are not always motivated to share the truth.
  7. Sample work is probably a good indication of the supplier’s capability. At least it can be seen if they can produce the type of work you need, and you are seeing what they consider to be their best work. Keep this in mind as you assess the samples and be extremely critical.
  8. A company’s visibility may be an indication of their success, but it depends upon how that visibility was accomplished. A plethora of advertisements does not indicate anything more than that they have the resources, somehow, to pay for ads. Likewise, press releases should be seen with a critical eye, as publications are content hungry these days. If you judge the publication to be a respected source and know that they check their facts, then you can give more credence to press releases. What is seen in the regular media, whether complementary or not, is often more trustworthy than either ads or press releases, but you still have to consider the source. What is published in the trade press may have more information, but the caution about press releases holds especially true for this genre, as their scope is more narrow for content, meaning theyhave less from which to choose to fill their pages.

The decision concerning who will select short listed candidates should be made early in the planning stages. Will it be a person or a committee? What will be the procedures for a committee? Care must be taken to avoid slowing this process, as it is only preliminary, and not the final decision. If you have a documented list of criteria and a a procedure for selecting short listed proposals it will be much easier to get this done quickly.

Weighting system

The easiest way to make everyone happy is to create a weighting system for different kinds of deliverables. The needs of all stake holders should be included, among the different sort of things that can be outsourced. There is enough variance to differentiate each type of project. The weighting system should be based upon the overall needs of the program and not the whims of different stake holders. A repetitive visual basic script may not need more than simple documentation, while a new Java object may need quite a bit ore to be useful to the programmers. So the first might be weighted for speed of execution, ease of integration etc., while the second will lean more heavily on documentation and inheritance attributes.

Mostly, the evaluation criteria must adhere to the needs of the project. A screening system can be established to set the criteria for known types of outsourced projects and new types can be added as needed. Establishing criteria for advancing to each level of acceptance must also be done in the planning stages. This will include all the various steps of outsourcing from the evaluation of RFPs and RFBs to the evaluation of the final agreements and the deliverables.

These must be written in concert with all the stake holders and it should be decided as a policy what RFPs and RFBs will included. Much of the material is the same across all projects. The methods and criteria for the evaluation of providers should be another constants across all projects, even though each project will have different demands. Though Company A may not be able to meet the level set by the evaluation criteria for Visual Basic coding, this does not affect the criteria, but only the final outcome. Therefore the criteria can be standardized for the various projects, and include a section of exact skills evaluation.

Not only must you decide what criteria will be used, but also how to weight each area assessed. This will depend largely upon company policy and culture. In some companies, past experience is far more important than future potential or work samples. Other companies prefer to go by a case by case basis. The vendor’s reputation in the industry may be important to one set of executives and totally irrelevant to a certain point with others.

Perhaps the most important thing to assess among providers are the differences in quality. In addition to previous experience and industry reputation, the samples can be assessed and certifications checked. The value of certifications is questionable at best for some. In order to evaluate if any particular certification is valuable enough to weigh you must know what they test, how they test and what they certify. This sounds easy, but in practice, there are only three ways to judge certifications:

  1. Research by some person of firm in whom you have confidence
  2. Personal experience by a responsible member of your staff (preferable with all the different certifications, though this is rare
  3. Documented experience with a group of employees who cover the range of available certifications (This must be done by assigning the same variety of tasks to each in order for it to be valuable)

You can find out what each certification certifies by reading the extensive documentation for the product exam. research in the industry will also yield considerable information. It is easy to find out which are desirable and which are somewhat impugned. How they test may be of equal importance to what they test. Cicso tests with hands-on examination and simulations, making it the most desirable certification in the industry as it actually tests ability to perform tasks and not just memorized data. It is for your group, especially the lead programmers and program managers, to decide which certifications will be required.

Evaluation of Product

The terms and criteria for evaluation should be included in all documents when planning for outsourcing. There should be a standard for the selection of vendors in both process and criteria. There should even be a set of criteria defined for short-listing. Then in the final contract, all criteria for deliverables must be detailed and all stake holders should sign off on this document before it is tendered for agreement. That is, all stake holders should agree upon the contents of the contract, so that the needs of each are included within.

Key Concerns before Outsourcing

Quality is usually the primary concern before outsourcing. Someone must look at the overall project and select the portions that can be outsourced. A policy concerning the quality of deliverables should be established from the beginning, before even considering possible suppliers. Issues of quality are sometimes vague ideas in some manager’s or lead programmer’s head. This needs to be detailed on paper for each type of programming that has the potential to be outsourced.

It should be decided well in advance of any one project what criteria will be used to asses different types of work. Then, during the planning stage of the particular project, these criteria can be discussed and even modified if needed while selecting portions of the project for possible outsourcing. Planning ahead what standards will be used and how can these be satisfied is key to a smooth process for outsourcing over time and many projects. Procedures for quality assurance should be thoroughly discussed separate from any project and documented. Then in the planning stages of the project, these can be reviewed and modified to suit the current needs.

Control is key to successful outsourcing. Since we are the producers for the end user, it is our responsibility to check everything before delivery. How that will be done should take the form of a Standard Operating Procedure. Included in this should be a complete delineation for how to test specifics in order to keep errors from the customer (end user). How to test the outsourced deliverables for specific results needs to be set as the selection of what will be outsourced is done. However, the process for selecting specifics things to test and the method for testing for specific results can be included in the company Standard Operating Procedure for Outsourcing. In this way, it assures a kind of continuity across all projects and eliminates considerable duplication of effort on the part of the planners.

One very important consideration is how to handle the special needs of projects which may be outside usual needs and not within skill set of current personnel. If the outsourced work is not within the expertise of current personnel, how will it be tested for quality? It may be enough to test certain aspects and outcomes without any particular knowledge of the native code or function. However, it may sometimes be prudent to hire a local contractor for this special purpose, who will be responsible for both the QA testing and the documentation of that testing.


Personnel Skills

In general, the first reasons to seek to outsource parts of a project are usually a staff shortage, or the high cost of in house development for repetitive functions. So personnel skills have already been seriously assessed and either found wanting, or considered too expensive to be spent on this type of work.

Project Administration

Planning the administration of the project is almost as important as the administration itself, as well planned administration usually flows much more smoothly as everyone knows exactly what to do and when. It is first decided who the administrators will be, and what they will do is planned. Often the program manager for the outsourcing will do the administration work also. Progress tracking is a large part of the administrator’s job. However, many larger global companies have actually created this job title as the duties of the project manager grew in number and scope. The job status and pay scale falls between Contract Administrator and Program Manager with a pretty reasonable pay scale.

Contract Administration

The handling of Procurement Contracts is often done by a special contract administrator. This can be one person who handles all contracts for the firm, a person named for this particular outsourcing project, one of the managers already discussed or even an outside law firm.

Contract administration that is well planned will leave no loopholes in the process. It will include handling of requests, changes and additions & omissions, and list completely who can make such requests and under what circumstances. This should cover every imagined possibility, and can be a template for company policy. Such things might be due to a change in client needs, basic project plan, vendor or client cancellation. All of these should be covered.

Handling Problems with Products

Quality assurance must be planned and provisions for dealing with quality problems should be well thought out. The issues of deadlines must be completely spelled out with conditions for change and consequences for delays spelled out completely. Timing issues should be made completely clear to the administrator who must track progress. The overall project should be segmented and the outsourced portion identified as to where in the overall timing of the project it fits. Then allowances should be made to cover possible delays.It is most important to answer the key questions about outsourcing timing: how will missed deadlines affect overall project, and can work continue in spite of delays with the outsourced portions? These will figure largely in the decisions for how to handle the problems.