Clone of Implement Developed Operational Strategies and Procedures

KPIs are not limited to sales. It also spans WHS, customer satisfaction and retention.

Business performance and customer satisfaction can be evaluated with the use of implemented KPIs and targets. It ensures that a business can continue to thrive. Business performance evaluations tell Persons Conducting a Business or Undertaking (PCBU)s the following:

• What operational strategies need improvement
• What operational strategies should be retained

On the other hand, customer satisfaction evaluation tells PCBUs the following:

• Which products or services make customers satisfied
• Which products or services retain customers
• Which products or services need improvement to maintain customers.

Before proceeding, you must first understand KPIs and targets. These two relate to each other but are different. The KPI is the metric that tells you about the performance of your operations. For example, the number of sales and employee satisfaction. Meanwhile, the target refers to your set benchmark for KPIs. For example, $25,000 monthly sales for the business. In a sense, you can say that KPI is the category, and the target is the specific number you aim for that category.

Most often, the KPIs and targets that you will develop, or encounter will focus on the following:

• Improving revenue and profit
• Reducing production or manufacturing costs
• Increasing work efficiency
• Improving customer satisfaction

The first three fall under the evaluation of business performance. The last bullet falls under the evaluation of customer satisfaction. You will learn about these in the succeeding sections.

Evaluate business performance using KPIs and targets

KPI is a good tool for evaluating your business operation and performance. However, not all KPIs are equal. A KPI should have the following characteristics:

• Clear objectives
• Align with business strategies and plans.

Keep these two in mind when formulating and using KPIs to evaluate your business performance.

Businesses use different KPIs in evaluating their performance. It is also important to note that using the right KPI matters. Wrongful use or application of KPIs can lead to misinterpretations of your business performance.

Examples of business performance KPIs are the following.

Number of sales

The number of sales is one of the most common indicators used by businesses. It directly tells you if your business is doing well. For this KPI, ensure to indicate the timeframe for the sales. Many small companies set their timeframe for months. In comparison, many large companies set quarterly or semi-annual as their timeframe. For example, your KPI for sales can tell you your performance on the following:

• Number of monthly sales
• percentage growth of your sales per month (or whichever timeframe you use)
• number of new customers that purchased your products

Profit and loss

Profit is what PCBUs expect when venturing into businesses. That is one of the main aims of entering a business venture. Losses are part of the risks of starting a business. Analysing your business’s profit and loss can give you insights into where your money goes. The result of the analysis can help you address issues like overspending or selling at a loss.

Consider the following KPIs to evaluate your business’s profit and loss:

• Profits per quarter: You may also use monthly, semi-annually or annually.
• Costs of running the business: Ensure using the same timeline as above
• Profit and losses per month: For this area, do not include unrelated expenses. (e.g legal penalties, insurances, etc.)

Inventory

Inventory refers to the items or assets held by a business. In this context, the items refer to products that you are selling. Analysing your inventory tells you which products sell the most and least. Some businesses sell items at a discount or package them in deals to liquidate their inventory.

Consider the KPIs that can be used for your inventory's performance:

• Stocks to sales ratio: Refers to the rate at which you can liquidate your stocks. Liquidation refers to converting inventory to cash.
• Stocking rate for in demand products: Refers to how fast you can restock products that sell well.

Sales growth

Sales growth defines how much your business can increase its revenue over time. The number of sales and sales growth relate to each other. Most companies track their sales growth annually. PCBUs call this the annual sales growth.

The annual sales growth can reveal months wherein your business flourishes. This information is essential, especially for seasonal businesses.

To use this KPI, you can compare your sales growth with historical data. You can choose per month, quarter, season, or year.

Accounts payable rate

Accounts payable rate tells you how much you transact with your supplier. It presents the number of transactions you have made and how much you have spent. Monitoring this is an integral part of planning your budget and expenditures.

Consider how you can track your accounts payable rate:

• Quantify the overhead costs: Overhead costs refer to the ongoing expenses of the business. For this, you must include supplier and staff costs.
• Monthly transaction costs: Make sure to record how much you spend monthly on supplies.

Market share

This is one of the most used indicators for operation and business success. This indicator tells how much of the percentage of sales in the industry you own. Calculation of market share is as follows:

Business or company sales ÷ total sales in the industry x 100 = market shares

Both should use the same timeframe. For example, if you plan to get the annual market share, use yearly sales for both items.

Now that you know which KPIs to use, you can proceed with how to set targets. Recall that targets are the specific figures for your KPIs. These are the figures that you want to achieve. You can set targets using the following steps.

Review your business objectives

Look back on your business goals and objectives. This will help you determine and select the appropriate KPI for the specific performance.

Select the appropriate KPI and check current performance

Evaluate your business’s current performance using the selected KPI. Compare historical data to gain a good insight into your business performance.

Select the target and review it with your team

When selecting the target, ensure that it is specific and realistic. It would make no sense to plot an unachievable target. You can consult your team, compare historical data, and check your competitor's performance. Insights from these perspectives can help you formulate an achievable target. Ensure reviewing the target with your team.

Evaluate customer satisfaction using KPIs and targets

Aside from business performance, you should also pay attention to customer satisfaction. Customers provide money to the business through purchases. Without customers, your business will not exist. Your business is not the only of its kind in the market. You have competition in the market. Thus, customer satisfaction with your product or services is fundamental.

There are several points that you should note about customer satisfaction these include the following:

Making customers loyal is easier than attracting new customers

Getting new customers to try your product requires a great deal of effort and cost. This includes marketing and campaigning for your product. This is not to say that you should not chase after new customers; instead, before doing that, you should focus on what you have. A loyal customer brings more value to the business rather than those who test the waters.

An unhappy customer is a financial risk

Purchases from customers serve as the lifeline of the business. If your customers are unhappy, then they may patronise your competitors. This will lead to losses in sales. Thus, it is crucial to keep your customers satisfied with your services or products.

Unhappy customers tend to affect the image of your brand

Happy customers will recommend brands to their peers or people they know. Unhappy customers do the same, only that they tell people to stay away from your brand. Not only do you lose them, but they have also driven away potential customers for your business.

Involve customers through feedback

Make your customers feel valued and wanted through feedback. You may ask them to send suggestions to your business email. You may also utilise online feedback forms to get their thoughts. Not only do they feel heard, but you might also get valuable suggestions.

Effective dispute resolution

Disputes and complaints can happen at any workplace and context. A dispute exists when one or more people disagree about something, and the matter remains unresolved. Often disputes can be settled quickly and informally in the course of everyday work. However, if people can’t agree on a way forward or if the dispute is about a serious matter, you might need a more formal approach.

Dispute resolution is how disputes are brought to an end. This can occur through:

• a negotiated outcome, where the parties concerned to resolve the issue themselves
• a mediated outcome, where an independent mediator helps the parties arrive at their own agreement, or
• an arbitrated or adjudicated outcome, where an independent arbitrator or court decides how the dispute should be resolved and makes a binding decision or order to that effect.

Many problems can be solved simply and quickly by considering the other person’s point of view and giving them time to consider your point of view. Efficient and clear communication often helps with resolving disputes caused by misunderstanding.⁷

The KPIs used to evaluate customer satisfaction include the following:

Customer satisfaction score (CSAT)

This indicator is the most commonly used and straightforward KPI for customer satisfaction. If you have received a customer survey that rates one to five or similar, then this was a CSAT survey.

CSAT measures customer satisfaction through a scale. The scale can vary but they are usually either of the following:

• very unsatisfied, unsatisfied, neutral, satisfied, very satisfied
• 1, 2, 3, 4, 5

CSAT score computation is straightforward. Get the number of satisfied responses (4 -5 rating), divide by the total number of responses, and then multiply by 100. This formula yields the percentage of your happy customers.

Customer retention rate

As discussed earlier, it is easier to retain customers than to gain new ones. Calculation of this KPI can be on different timeframes (e.g. monthly, quarterly, annual).

You can calculate your customer retention rate using this formula:

CE – CN ÷ CS x 100 = Customer retention rate

Where:

• CE refers to the number of customers at the end of the period
• CN refers to the number of new customers acquired during the period
• CS refers to the number of customers at the start of the period
• All of the items used here should use the same timeframe.

Net promoter score (NPS)

NPS focuses on how likely your customers will recommend your brand to others. Recall that happy customers are more likely to recommend your brand to other people. This metric comes in the form of a survey that asks the following questions:

• How likely are you to recommend our brand to your family?
• How likely are you to recommend our brand to your peers?

Customer effort score

This KPI lets you know how much the customer thinks it is easy to transact with your business. Factors that affect this score are:

• accessibility for payments (cash or online payments)
• ease of getting assistance.

Businesses consider this KPI a strong measure of brand loyalty. This is because customers tend to prefer easy and convenient transactions with companies. 

You can use the steps discussed in the previous section to set your targets for customer satisfaction. However, it is vital to concentrate on the customer perspective. You can do this by:

• Check the latest consumer trend- consumers tend to flock to updated products or services.
• Consider the existing and potential customer base- Ensure that you take steps to keep the existing consumers while attracting potential customers.
• Interact with your customers regularly- You can roll out customer surveys to gauge their sentiments about your business.

Customer satisfaction is not limited to products. The following case study presents such a situation:

As you can see, Jo used this CSAT survey to know how the customers felt about the café’s customer service. This even led to identifying a problem with the lack of a cash register. This is why knowing your customer’s sentiments matters. They can point you to aspects that you can improve in your business.

Can you recall the resources component of the business plan? Resources include money, staff, and inventory or materials. Managing resources can be challenging work, especially for expanding businesses. You can increase your effectiveness and efficiency in managing resources through systems. Examples of these systems are staffing, inventory, and customer management systems. These should be used to control stock inventory, expenditure, wastage and risk to health and safety. Controlling these aspects without following the business plan increases your risk of losses. If threats are met on these items, ensure to follow your risk management plan.

Some of the common benefits for a small business to implement operation and revenue control systems include:

1. They help align the objectives of the business
2. They safeguard assets
3. They prevent and detect fraud and error
4. They encourage good management
5. They allow action to be taken against undesirable performance
6. They reduce exposure to risks
7. They ensure proper financial reporting

The systems here refer to accounting software and customer relationship management systems (CRMs). Accounting systems include Xero and MYOB, while CRMs include Salesforce. You can use your preferred software but ensure they have the features that you need.

Systems to control stock

Businesses use systems to control their stock. There are six principles of small business stock control:⁸

Systems help manage the business's inventory through valuable features. Let’s take a look at each of the features.

Perpetual inventory system

Accounting systems like MYOB and Xero have a feature called perpetual inventory system. This system tracks your inventory real-time. It also automates some accounting functions and reports. Important parts of this system include the following:

• Automation of tracking and inventory records
• Automation of goods received, and COGS cost of goods sold
• Automation accounting records.

Disposal of stock

In businesses, disposal refers to the selling or removal of an asset or inventory. An example of asset disposal is the liquidation of inventory. Recall that this is one of the KPIs that tell you about your business performance.

Xero is accounting software that you can use to track your assets or inventory. It has a feature called Disposal Schedule. This feature generates a report of the disposed stock or items in your business. The report contains the following details:

• Asset Type refers to kind or type of item disposed
• Asset Value presents the book value of the asset at disposal time
• Capital Gain shows how much the sale price exceeded the cost price
• Cost presents the original cost of the item
• Disposed shows the date and time when the inventory was sold or disposed
• Loss shows how much less the sale price is than the cost of the item
• Purchased presents the date of purchase for the item
• Sale Price refers to the amount the item was sold for.

The listed above are the most relevant features for managing the disposal of stock. Check with the system you use for other helpful information about the disposal of stock.  

Obsolete stock

Obsolete stock refers to inventory or items that are at the end of their lifecycle. These are either not sold for a long time or are not expected to be sold in the future. Businesses need to do the following for obsolete stock:

• Write-down- Reduce the value of an asset or inventory for accounting purposes
• Write-off – Reduce the value of the inventory to zero

Both options will incur losses for the company, with the latter incurring the most losses.

Xero has an inventory system that allows you to write off obsolete stock. You will have to input the following information into the system:

• Adjustment type - Refers to the type of adjustment you will do. (i.e., reduce the quantity for writing off inventory).
• Date - Refers to the date when the adjustment occurs
• Number of written-off items - Refers to the number of stock that you will write off.

Stock rotation

This method of inventory organisation reduces the number of stocks that become obsolete. There are three ways to implement this:

First in, first out

This method refers to liquidating or selling inventory acquired first. For example, there are two soda boxes you need to sell. The acquisition dates for these items are January and February. In this approach, you will sell soda boxes purchased on January first.

The FIFO method is not just about liquidating first purchased items. It is also about the changing costs of the products in the market.

The following 8-minute video discusses how it applies to different products.

Last in, first out

This method is the exact opposite of first-in-first-out. Recently purchased items get sold first. Businesses use this method to reduce their tax burden. How?

For example, a company purchased a stock of toilet paper at 8$ /24-pack a few months earlier. However, due to demand, the price rose to 10$/24-pack. The business will sell the 10$/24-pack first. This results in reporting of their profits, resulting in a reduced tax burden. Thus, usage of this method is prohibited in financial reporting.

First expired, first out

As its name suggests, it aims to dispose of inventory that expires first. Perishable goods like food and medicine get sorted using this method. This method is most effective in reducing the wastage of products in the business.

As mentioned earlier, systems like Xero and MYOB have inventory tracking systems. This is the reason why correct input of the following information is crucial in stock rotation:

• Date of purchase
• expiry date
• cost
• sale price

Right first time

Recall this principle? This quality assurance principle ensures consistent and correct implementation of operations. But this system is not limited to production. This principle also applies to the management of inventory or stock.

When managing your stock, ensure that you:

• know what your inventory is
• train or hire personnel to manage inventory.

When using systems like Xero or MYOB, ensure that tracking of inventory is correct. You can check the following information for proper stock management:

• Date of purchase
• Type of item
• Number of stocks
• Cost of item
• Sale price
• Disposal date.

Systems to control expenditure

A business’s capital or funding is finite. So, efficient and effective management of funds is crucial. A small business should set up a bookkeeping system and prepare a budget to forecast income and expenses to manage its cash flow and this way, to control its expenses.⁹

Let’s look at some of the common features companies use to control expenditures Just-in-time

Just-in-time is a system that shrinks the inventory size while increasing the efficiency of production. Raw materials arrive on schedules when the business requires them for production. This system can also help reduce waste supplies. For example, a printing business has a scheduled printing on November 25th. The materials that the business needs will arrive shortly before the printing date.

This system is not without its drawbacks. If there is a surge in demand for the materials, the business is at risk of not receiving the supplies they ordered.

Accounting software like Xero can help you track the number of supplies you need and when you need them. However, you still need to order them yourself from your suppliers.

Expense tracker

The expense tracker feature enables you to review and evaluate your expenditures. Managing your expenses is easier if you have an organised log. Expenditures may come from employee reimbursements or payments to suppliers.

MYOB and Xero have features that help in expenditures. They automate everyday finance tasks for a business. They have parts that relate to expenditure. These are:

Systems to control wastage

Wastage is common in businesses that sell perishable goods. These include food and beverage shops and supermarkets. These businesses need to manage their stock to prevent wastage. The systems that these businesses use have features to control wastage.

Obsolete stock

As mentioned earlier, obsolete stock refers to products that are at the end of their lifecycle. In this context, this can refer to the following two things:

• Near-expiry goods

  You can list these goods in the write-down section of the accounting system. This means reducing the value of these goods. You can offer these goods in bundles or at discounted prices to liquidate them.

• Expired goods

  You should list these goods in the write-off section of the accounting system. These items no longer have value and cannot be sold off to the market. Selling expired goods will incur penalties or, worse, revocation of the permit.

Stock rotation

The use of this feature in this context revolves around first-in-first-out and first-expired-first-out. You are dealing with perishable goods here. Typically, the first ones to arrive are also the first ones to expire. But this is not usually the case, especially in some fruits or vegetables. However, these two features are still the most relevant in this context.

Xero's inventory can be used to track your inventory and help you arrange your shelves if needed.

Systems to control risks to health and safety

Managing your employees' health and safety is part of your responsibility as a PCBU. Thus, you should have a system that can help you monitor the WHS of your employees. This system refers to customer relationship management (CRM) systems.

CRMs are not exclusive to your customers. They allow you to monitor the health, shift, and other employee-related matters. Salesforce's Work.com is an example of a CRM that can help you track your employee's health and well-being.

Let’s look at the two (2) critical features in monitoring the health and risk of employees:

Fly-in fly-out (FIFO)

Fly-in fly-out refers to deploying people to remote areas to work. The workers are temporarily flown to remote areas to work. They will stay there until the project gets done. This employment method is standard in mining regions in Australia.

Businesses do this type of employment method to save up on costs. Relocating the worker permanently together with their family is expensive. Thus, companies deploy only the worker. Also, the company only needs to spend money to set up a residence with basic amenities for the worker.

One of the adverse effects of FIFO is psychological stress on the employee. They will be far away from their families and have less time for leisure.

Team management system (TMS)

Team management systems allow you to check on your team’s projects and well-being. CRMs like Salesforce and Zoho also have these features in them. Parts of a TMS include the following:

• Real-time collaboration features such as chats, notifications
• Resource management tools
• Project scheduling and budgeting
• Time tracking
• Reporting
• Task automation
• Staff health records and well-being.

Human resource is a vital part of a business. Hiring and training the right people can have a significant impact on your business performance. If you have tried applying for jobs, you have undergone the process of staffing. Staffing refers to the recruitment, screening, and selection of employees. The human resources or staffing department handles this process.

If you are starting a business, how would you acquire your staff? You need to be mindful of the following things:

• Kind or type of job or position
• Number of staff you need
• Skill gaps
• Budgetary constraints.

These things are collectively called staffing requirements. These requirements will help you acquire effective and appropriate staff for your business. To identify these requirements, you may need to do the following:

• Review operational plan
• Consult managers or team members.

Staffing requirements

Staffing requirements consist around both legislative and staff work arrangements. Let’s take a look at each of these.

Legislative requirements for staff

The following are legislative requirements related to staffing. Pay as you go (PAYG) withholding

Businesses, including small businesses, must register for PAYG withholding if they pay employees, contractors they have voluntary agreements with or businesses that don't quote their ABN. This is done by collecting PAYG withholding and sending the withheld amounts to the Australian Taxation Office (ATO) at regular intervals. By withholding amounts from payments a business makes, it helps payees meet their tax liabilities at the end of the financial year.¹⁰

National employment standards (NES)

The National Employment Standards are minimum standards for all employees. They can be extended by conditions outlined by an award or (registered) agreement. The NES outlines an employee’s minimum rights during an employment, such as leave entitlement, right to request flexible working arrangements, maximum hours of work, notice of termination, redundancy pay.

Work arrangements

A job position and work arrangements will depend on your business operations. For example, if you are looking for a person to proofread your web magazine, you will need a proofreader.

You will also need to be clear about the arrangements for the job. Work arrangements include the following:

Permanent work arrangements

This refers to workers who are in full and part-time employment. This work arrangement includes an agreement to work on a schedule on an ongoing basis. This continues until the employee leaves the company or gets terminated.

Full-time

Full-time workers in Australia are employees who work 38 hours/week or more. While there may be some arrangements less than that, the reference time is 38 hours/week.

Entitlements of full-time workers include annual, sick, and carer's leave. When their employment ends, the company provides them with written notice or payment.

Part-time

Part-time workers in Australia are employees who work less than 38 hours a week. Their work hours are regular per week but may still vary depending on the agreement.

They get the same entitlements (e.g. leaves) as full-time employees. But awarding these entitlements is on a proportionate or pro-rata basis.

The following table shows how the pro-rata basis works for the leave benefits of part-time employees:

Flexible work arrangements

Employees who worked for at least a year in the same employer may request this work arrangement. The flexible work arrangement offers changes in hours or location of work.

Flexible work arrangements provide the following for the employee:

• Employees can change the start and end of their shifts.
• Employees can split their shifts or jobs.
• Employees can work from a remote location.

Fly-in fly-out

As mentioned in the previous section, this is a type of remote work arrangement. Employees only stay at the worksite until the project gets completed. This is most common in mining operations in Australia. FIFO work arrangement entails a huge responsibility for PCBUs. They need to provide living quarters, supplies, and travelling expenses to the site.

Number of staff you need

You should base the number of staff you need on a rational basis rather than cost-reduction. Remember, without your staff, you will not have products or services to offer.

You need to watch out for signs to see if your staff is inadequate or lacking. These include:

• Failure to complete or late completion of important tasks
• increased backlog in operations
• increased number of customer complaints
• absenteeism among staff due to stress

Ensure that you monitor the results of your operations and the staff who work on them. Provide support to your team in areas that they may need. Acquire more staff if needed.

Skill gaps

Skill gaps refer to the gap between the required skill and the current skills set of the personnel. Ensure addressing skill gaps in your business operations. You can do the following to address them:

• Consultations

  You can consult with supervisors or team members about the skill gaps in your operations. Working directly on the tasks gives them an idea about the skill gaps in the operations. They can also tell you if they need more workers to join the operations team.

• Operations review

  You can do this alongside the consultation. This gives you an idea of which parts of the operations require specialists. You may also conduct regular staff performance appraisals. This helps you check the current performance and skills of your staff.

• Training

  Aside from acquiring staff, you can also train your staff. Training can be internal or external, depending on the skill gap.

• Budgetary constraints

  Budgetary constraints refer to the limits of opportunity due to a limited budget. In this context, it refers to the personnel that the business can afford to pay. This is one of the limits of companies when it comes to acquiring personnel. Aside from salary, PCBUs also have to think about the benefits they will pay to the employees. The budget for payroll ranges from 15% to 50% of the business's gross revenue. This depends on the industry to which the company belongs.

Manage staffing according to requirements and constraints

Now that you know about the requirements, you can proceed with managing them. Staffing is not as simple as posting a job ad on websites or bulletin boards. There needs to be a plan for this one. PCBUs refer to this as a staffing plan.

A staffing plan is a strategic process that fills the personnel demands of a business. As mentioned earlier, this includes recruitment, screening, and selection of employees.

Preparation of staffing plans may vary per business. The following are the typical steps found in staffing plans:

Emphasise business goals

Recall that business goals or objectives are the core of a business plan and operations. Abiding by these goals will help you hire the appropriate people for your operations.

Review the staffing roster

Ensure reviewing your staff roster. This prevents hiring people that will perform the same function. Reviewing the staff roster also helps you address the skill gaps that your staff may have.

A direct result of reviewing the staff roster is the prevention of skill or post redundancy. For example, you do not need two managers working on the same tasks (unless shifting arrangements are in place).

Make forecasts of your future staffing needs

After reviewing the staffing roster, you can forecast your staffing needs. There are a lot of things you should consider at this stage. Click on the headings to find out more on what areas need to be considered to forecast your future staffing needs.

To help identify these staffing requirements, you must first evaluate, consult, be open to feedback and determine benchmarks. Let’s learn more about these approaches.

Evaluate operations

This means checking the performance of your operations. Investigate the aspects of your operations that need staff support.

Consult managers or supervisors

Managers or supervisors oversee the operations of your business. They can help point out what your operations team need. These needs may refer to training or human resource.

Listen to customers

Customer feedback can sometimes tell you areas where you lack staff. Ensure reviewing customer surveys to figure out what your customers tell you.

Use the industry or competitors as your benchmark

You can refer to the industry or your competitors for your staffing requirements. You can check the new standards or job postings in the industry. It can help you figure out the skills or kinds of employees that are valuable for your business.

The following case study shows how you can develop a staffing plan based on the contents of this section:

Products are tangible items that you purchase. These items can be used or consumed after purchase. On the other hand, services are intangible. Services are the results of the outputs of individuals.

The following table shows the difference between the two:

Remember the distinction between the two. Their differences have enough effect on how you can address their requirements.

Running a business is not just about providing products or services. The customers, the industry, and the government expect you to follow several standards. These are the following:

These standards ensure that your products or services are:

• safe to use or consume
• abide by the laws
• do not offend any person or culture.

Legal standards

Legal standards are standards set by the law. These are laws related to operating a business or providing services. They aim to protect both consumers and businesses in Australia.

The following laws generally cover businesses in Australia:

Competition laws

These laws ensure fair trade and competition among businesses in Australia. The Australian Competition and Consumer Commission (ACCC) administers and enforces competition laws.

The law covers how companies must deal with customers, competitors, and suppliers and regulates mandatory industry codes that are prescribed under the Competition and Consumer Act 2010.

Industry codes of practices regulate how a business within an industry operates, outline best practices and provide guidance specific to the industry.

The following are 15 industries covered by regulations, such as:

1. Accommodation and food industry
2. Administrative services
3. Agriculture
4. Arts and recreational services
5. Building and construction
6. Financial and insurance services
7. Fisheries industry
8. Forestry industry
9. Information and media
10. Manufacturing industry
11. Professional, scientific and technical services industry
12. Rental hiring and real estate services
13. Wholesale and retail
14. Tourism
15. Transport, postal and warehousing.¹¹

The Competition and Consumer Act 2010 includes provisions for the following:

• Product safety and labelling
• Unfair market practices
• Price monitoring
• Industry codes
• Industry regulations (e.g. airport, electricity, gas, telecommunications)
• Mergers and acquisitions

Each state in Australia has a fair-trading law. Ensure checking for the appropriate fair-trading laws in your state when venturing into business.

Consumer laws

Consumer laws in Australia protect consumers from unsafe products or services. The lead consumer protection law is the Australian Consumer Law (ACL). Click on the following headings that explain how legislation provides provisions on the following:

• Unfair contract terms: Refer to contracts that have massive impacts
• Consumer right guarantees: Refer to the right of consumers to seek replacement, repair, or warranty on a product
• Product safety: Refer to the ability of the product to be safe for intended use
• Unsolicited consumer agreements: Refer to unwanted sales or unfair selling practices
• Lay-by agreements and penalties: May refer to overcharged or unfair penalties on lay-by purchases of products

There are several things to consider and follow for products in ACL. Examples of these are the following: 

• Product labels - Product labels must contain appropriate warnings and instructions for use.
• Product recall - Order for product recalls occur if the product:
  • may injure a person when used in a reasonably foreseeable way (may include misuse)
  • fails to comply with safety standards set by the law and industry
  • product is subject to a ban.

Services are not exempt from ACL. These are the general provisions for services in ACL:

• A business should provide services with due care and skill
• Services should be fit for any specified purpose
• Services should be provided within a reasonable time (when no time is agreed upon)

The ACCC and state and territory consumer protection agencies administer and enforce ACL. So, ACL regulations may vary per state. Ensure to contact your state's consumer protection agency for more specific regulations.

Environmental legislation

Environmental legislations aim to minimise the negative impacts of businesses on the environment. The Australian Government handles the national environmental concerns. The state and territory environmental legislations apply to specific business operations.

The environmental legislation of Australia outlines steps to manage the environmental impact of businesses. These steps are as follows:

Acquire environmental audit

Environmental audits assess your business’s impact on the environment. This audit can help you work on your environmental management activities.

Develop and set up an environmental management system (EMS)

Step 1 helped you gain an understanding of your business’s impact on the environment. This step allows you to address any adverse impacts on your business.

The Australian Government recommends accreditation of your EMS (e.g. ISO 14001 standard).

Report business impacts

Ensure reporting your business’s contribution of:

• Greenhouse gas and energy reporting
• Corporate sustainability
• Natural resource management monitoring.

Check government requirements

The environmental laws that apply to businesses vary depending on the business type. Ensure checking with the Australian or state and territory government for guidance. It is your responsibility as a PCBU to abide by the requirements set by the government.¹²

Product liability regulation

As stated earlier, safety is one of the critical requirements for products. All businesses should abide by product safety rules. These rules include product bans and recalls, as mentioned earlier in ACL. Failure to follow these laws will result in penalties and consequences.

There are two types of mandatory product standards set by the Australian government:

1. Safety standards rules for product processing and packaging – Refer to performance, composition, contents, manufacture, design, construction, finish or packaging regulations​​​​
2. Information standards – Refer to rules about information provided to customers upon purchase of goods. These include labels for cosmetics, tobacco, and care labelling for clothes and textiles.

The Australian Government recommends the following actions to ensure the safety of your business products:

• Include understandable instructions on the product
• Provide warnings against possible misuse
• Meet the industry and mandatory standards
• Develop product recall plans and procedures
• Integrate or incorporate safety in your products
• Ensure quality assurance processes in product development
• Respond to safety concerns that arise.

Following these guidelines ensure that your products are safe for the consumers. These also help you avoid product recalls and penalties from the government. You may refer to your state laws for specific product standards in your state.

Privacy laws

Some businesses require getting information from their customers. Examples of these are banks, hospitals, and schools. Privacy laws of Australia protect the confidentiality of the personal data of customers.

The Privacy Act 1988 allows people to know the following:

• How and why their information is being collected, how it will be used, and who it will be disclosed to
• Allow the person to be unidentified or use a pseudonym in certain circumstances
• Ask access for personal information (e.g. health information)
• Stop receiving unwanted direct marketing (e.g. emails, brochures)
• Ask to correct the incorrect personal information
• Complain about the mishandling of personal information (if covered by the Privacy Act).

Ensure following the Privacy Act if your business collects personal information from customers. It is best to review your business operations if you are unsure of the specific rules you will follow.

Ethical standards

Exemplary ethical standards of businesses allow them to connect with customers more. Companies may have different ethical standards. This may depend on the vision and mission of the company. But there are a lot of common ethical standards for businesses. The following table displays some of these ethical standards.¹³

Cultural standards

Businesses should be mindful of their products and services in terms of culture. Respect for other people's cultures is a fundamental ethic. If your business discriminates based on culture, then you will not thrive in the market.

Let’s have a look at the most common aspects of a product or service that may offend:

Language

Avoid using language that implies racism or discrimination in cultures. These are not acceptable in society. Ensure reviewing your product labels, instructions, and advertisements.

Australia does not have an official language. But English is the de facto language, and general Australian is the standard dialect.

Images used or portrayed

Ensure that your photos do not portray discrimination against a culture or race. If possible, use inclusive images for your products or services.

Religious implications

Ensure providing appropriate service to customers depending on their religion. Some religions have taboos or prohibited items or services. If you are unsure, it is best to ask customers about it.

Technical standards

Technical standards refer to Australian packaging rules and requirements. The ACL has several prohibitions in labelling the products, including misleading, deceptive, or false claims on products.

There are also industry-specific laws about labelling. For example, the food and cosmetic industry have their standards. Food labelling should follow the food standards code. On the other hand, cosmetics should follow consumer product information standards (CPIS).

Food

It is the right of customers to know more about the food that they consume. The ACL protects the consumers by setting requirements for food labels. The law requires food items in Australia to have this information on their labels:

• name or description of food
• name and Australian address of the supplier
• list of ingredients and nutrition label
• manufacturing and expiry dates
• country of origin (for imported products)
• warning labels (e.g. allergy, intolerances)

Cosmetics

The law requires businesses to inform consumers of the contents of their cosmetic products. Cosmetics are directly applied to the body. Lack of information may cause health hazards to the consumer.

The following details are required for cosmetic products:

• Ingredients' list on the product container
• Ingredients' list on the product if it does not have a container

For cosmetics, you can use pamphlets to list the ingredients used. But ensure that it is visible at the point of sale or purchase. This is a strict requirement of CPIS on cosmetics. There are also specific cosmetics that have different regulatory requirements. Ensure to check them out if you are in the cosmetic industry.

There are three specifications that you need to be wary of. Product specifications provide essential information on the product. Remember, these specifications are closely tied to customer requirements. These specifications are time, cost, and quality.

Time

Some industries refer to this as customer lead time. This refers to the time consumed from order to delivery of service or product. Examples of these are:

• shipping time
• product release time.

Customers expect businesses to deliver their products and services on time. Product or service delays put you at risk of losing customers. Thus, your product or services need to be on time.

You can utilise these strategies to ensure the punctuality of your product or service:

Time management

Manage the timeline of your operations. Proper time management ensures the prevention of delays in the delivery of the product and services.

Sufficient workforce

An inadequate workforce can cause delays in the development of products. Ensure adequacy of resources to maintain quality and punctuality of products and services.

Logistics

Software that can help you track your inventory. Effective management of inventory ensures you can manufacture the product. If product development is on track, logistics will most likely be on track, too.

Cost

Costs refer to the amount spent on developing a product or service. Typically, costs involve the following information:

Labour cost

This cost refers to the amount spent for employees or workers that develop or work on the product or service. Different industries have different labour costs. Ensure checking in on your industry about the reasonable labour costs for products and services.

Raw material cost

This refers to the cost associated with raw materials in developing the product or service. This is paid to suppliers of the raw materials.

Packaging cost

This refers to the costs associated with packaging the product. The packaging material used for the product varies per industry. The most commonly used include plastic and cardboard paper.

Logistics cost

This refers to costs associated with transporting a product from one area to another. Products that require transport to and from a very distant place can have high logistics costs. This also applies to services if the service provider needs to travel to provide the service.

Quality

Customers want to get their money’s worth when they purchase your products. Thus, quality assurance should be part of your core business operations.

To produce quality products, you can do the following: Ensure quality assurance processes in your operations Quality assurance boosts customer confidence in your product and services. Follow standards (legal, ethical, cultural, and technical) when providing products or services These standards ensure that your products are safe, legal, and do not offend people.

Now that you know about specifications, you can proceed to customer requirements. Customer requirements are characteristics of the product that customers deem necessary. These requirements meet their demands and needs for the product. For example, a smartphone should have the capability to connect to a wireless network.

There are numerous client requirements, however, the following are a few of the most common categories.

Price

Products should not be too expensive for customers but not too cheap to sell at a loss. Pricing is a huge factor for customers. If you overprice your products, you might end up having them on shelves for a long.

Business owners employ different strategies for pricing. These include the following:

• Competitive pricing

  This means checking the competitors' price on a product or service you deliver. This pricing strategy is helpful in saturated markets.

• Bundling strategy

  This strategy bundles up products and sells them less than individual purchases. This attracts more customers because they can save up some money. But the reality is, the company still has profits in the bundles. This is also effective in selling inventory that is weak in the market.

• Cost-plus pricing

  This strategy is simply taking the production costs and adding a mark-up to get the sales price. For example, if you produce a pair of jeans for $30, you can sell them for $45.

• 'Freemium' strategy

  This is a combination of the words free and premium. This strategy allows the customer to use a limited version of the product or service for free. This strategy aims to attract customers into purchasing the product or service. This strategy is common in software and games with microtransactions.

Reliability

This refers to the product or service’s ability to perform or complete its function. Customers expect products or services to last the intended lifespan. An excellent QA procedure can ensure that the products or services are reliable.

Efficiency

This requirement refers to how the product or service can streamline processes. For example, supermarkets can separate small checkout counters from bulk checkout counters. This reduces the time spent by customers waiting to pay for small purchases. Addressing this requirement involves studying the processes involved in your products or services.

Safety

This requirement refers to your customer's safety when using the product or service. Following the legal standards and an excellent QA process can address this requirement. An example of a safety requirement for products is airbags in a car. For services, establishments can put safety signs like wet floors to ensure customers' safety in the premises.

Compatibility

This requirement refers to how the product or services can work with one another. Most customers desire products or services that are compatible with what they have. An excellent example of this is headphones. The wireless or wired connection of this product should match with their smartphones. To address this requirement, you can check the industry standards. They provide the conventional specifications for compatibility among products and services.

Accessibility

This requirement refers to the ease of access to a product or service. Customers want their products or services that they can use easily. This is most relevant to differently-abled persons. An example of this is the inclusion of closed captions in video streaming services. To address this requirement, you may consult experts or use customer survey forms. These can help you figure out how you can make your products more accessible to customers.

Privacy

This requirement refers to the safety and security of the customer's data. The customer's personal information is covered by the Privacy Act 1988. You may address this by providing terms and services to which the customer must agree. However, ensure that your terms abide by the law. You can also offer additional privacy settings to accommodate customer demands.

Incorporate digital technology in products and services

Have you ever tried using your computer or smartphone to book a train or bus ticket? This is an example of incorporating digital technology in businesses. Digital technology refers to devices or systems that generate, process, and store data. Examples of these are smartphones, computers, and software.

Xero and MYOB are examples of digital technology integration. But these are on the business operations side. You can incorporate digital technology in your products and services through:

• setting up online payment
• using a website or an e-commerce platform for your products and services.

Let’s take a look at how digital technology can be used to meet customer requirements.

Payments

Customers prefer accessible businesses. Today is the era of mobile technology and the internet. Many people prefer payments through their smartphones and the internet. Examples of these are:

• QR code for payments
• payments on website
• e-commerce (e.g. Alibaba, Amazon).

More market reach

Rapid technological advances led to more people using smartphones and computers. This means more access to markets that are even far away from your business. For example, people from another state can order your products through the internet.

Communication

Businesses can post information about the products that they offer on their website. They can also provide tracking for shipped products to customers. This can put the customer at ease when they order a product. Businesses can also get customer responses through automated survey forms. This strategy eases the collection of customer satisfaction data for KPIs.

Information technology

Businesses can use information technology to enhance services they provide. This is also known as Information Technology Infrastructure Library (ITIL). This technology can help businesses manage their services through the following:

• Service strategy- refers to how a business will conduct and maintain its services.
• Service design- refers to how the business will conduct its services. This includes management of issues with the capacity of the services or business.
• Service transition- refers to the changes in the services. This includes reviews, evaluations and changes in assets.
• Service operations- refers to activities and how to address operations. This includes problem management, control of operations, and similar tasks.
• Continual service improvement- refers to how a business plans to improve its services. This may include roadmaps and process evaluations.

The following diagram addresses how to meet requirements for customers, products and/or services:

The steps for both may overlap with each other. Let’s look into each separately.

Product and/or service requirements

A product and/or service has three main aspects that help provide information that may meet the requirements. Before these aspects are the purpose, the features and the safety of a product/service.

Purpose

The purpose of the product and/or service presents the context of its usage. For instance, what is the reason for the product and/or service? The following table shows examples of products and their purposes.

Features

Features refer to functionalities that are often tied to benefits for the user or customer. The following table gives examples of how features of products/services and demonstrate their tie in with the benefits.

Safety

Safety refers to how safe the product or service is for the customer.

The following steps outline how to meet these requirements for a product or service.

Identify the product or service’s purpose

You need to identify your product or service's purpose. This information tells you in which context the customer will use it. If you do not know the purpose, then you will have trouble developing the product or service.

Convert the product or service’s purpose into functionality or features

Recall the bicycle example. Its purpose is for transport. Therefore, the bicycle should be able to move fast and transport people or goods. So, the features can include shifting gears for faster movement. It may also have a basket to carry goods.

As for the accounting software, its purpose is inventory and sales tracking. So, its features include automated report generation for inventory which covers its purpose.

Lay down objectives for product or service release

Objectives for products should align with specifications. Examples of these objectives include:

• Punctuality for release
• Affordability
• Accessibility.

Set timeline for manufacturing and release

Timelines are critical in developing products and services. Ensure that these are definite schedules. If there are changes, inform stakeholders or relevant personnel.

Let stakeholders review the product or service

Stakeholders or team members should review the product before release. This ensures spotting errors or getting insights for improvement.

Customer requirements

Customer requirements are features of a product or service that customers deem essential and impact the customer experience. Customers that have positive experiences with a product or service tend to be loyal to the brand. Remember that customer retention is one of the main KPIs for businesses.

There are two types of customer requirements. These are the following:

1. Tangible requirements

Tangible requirements refer to the expectations of customers fulfilled by the product or service. These are direct results or effects of a product or service. For example:

• Shampoos should smell good and wash the hair and scalp effectively.
• Fitness training should enhance the fitness and physical well-being of a person.

2. Intangible requirements

Intangible requirements refer to the expectations of the customer in the purchase phase. These are not direct results of the product or service itself. For example:

• Delivery phase or time of a product after purchase from an e-commerce website.
• Download and installation phase of a paid update for a software service.

The following are the five basic steps that aid in meeting customer requirements:

Identify customer needs

You can do this by doing market research or even from the customer feedback you receive. Ensure reviewing feedbacks to get valuable ideas.

Delegate tasks to plan for the product or service

The staff that you have obtained or trained will be the best people for this task. They have enough skills and knowledge in planning for the product or service.

Create or develop the product or service

After planning, assemble the team that will develop the product or service. This may take time, so provide support for your team if needed. Ensure implementation of quality assurance and alignment to business goals for this phase.

Deliver the product or service

Deliver the product or service. As mentioned previously, you can use digital technology for this phase. Ensure that you can meet the tangible and intangible requirements of the customers.

Get feedback for improvement of product or service

Ensure getting feedback from customers. Getting feedback provides insight into what your customers think. It also gives you a chance to improve your products and services.

The following case study shows the impact of customer requirements on customer experience:

What kind of customer requirement was not met by Jo? It is an intangible requirement. These problems were the website and delivery time of the products.

Another takeaway from the case study is reviewing your customer feedback. Customer feedback backed by data from sales shows that the input is not an outlier. When your business comes to face similar problems, ensure to compare feedback to data. Neglecting to review these two may lead to dire consequences for your business.

Use the following questions to check your knowledge:

1. Complete the following sentence: The fly-in-fly-out approach leaves workers at risk of physiological stress due to…

2. Complete the following sentence: Customer satisfaction is one of the KPIs that businesses should watch out for because…

3. What is inventory?

4. Who administers and enforces competition laws?

5. What does the ACL provide provisions on?