Customer Loyalty

Description of Customer Loyalty. Explanation.

Definition Customer Loyalty. Description.

Customer Loyalty in general is the behavior which clients exhibit when they make frequent repeat purchases of a brand.

In strategic marketing, customer loyalty is a business model in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed. A typical example of this type of model is: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability.

A fundamental assumption of loyalty models is that keeping existing customers is less expensive than acquiring new ones. According to Buchanan and Gilles (1990), the increased profitability associated with customer retention efforts occurs because:

The cost of acquisition occurs only at the beginning of a relationship: the longer the relationship, the lower the amortized cost.
Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).
Long term customers tend to be less inclined to switch and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume.
Long term customers may initiate free Word of Mouth promotions and referrals.
Long term customers are more likely to purchase ancillary products and high-margin supplemental products.
Long term customers tend to be satisfied with their relationship with the company and are less likely to switch to competitors, making market entry or competitors' market share gains difficult.
Regular customers tend to be less expensive to service because they are familiar with the processes involved, require less "education," and are consistent in their order placement.
Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into higher customer satisfaction in a virtuous circle.

Customer Loyalty Forum (24)

How can Employee Retention Help to Build Customer Loyalty?
"Hi, I'm wondering in what ways retaining employees may help to build customer loyalty? Thanks for your ideas... Any journals for more info?"

Customer Loyalty in Consumer Durable Products
"Being an MBA student, I'm doing a project on "customer loyalty related to consumer durable products".
So I want to ask you which parameters I should focus on and other tips? Plz suggest me.. Thanks.."

Marketing and Customer Loyality
"What kind of relationship exist between marketing and customer loyality?"

When to Establish a Business Relationship?
"Under what conditions is it even appropriate for a company to consider establishing relationships with customers? What are the characteristics of situations which might be suitable for the establishment of relationships?"

Customer Loyalty is Created via Total Value Chain
"Customer loyalty is not only related to the service offered. It starts with the process of manufacturing the product to distribution to after services to delivery on time. The value added on each and every stage when recognised by the customer that brings him again to the store."

Customer Loyalty is Individual
"Customer loyalty is all about individual feelings. One person may feel good about a product or service, another may be offended by the attitude of the front desk personnel. Some other persons may prefer a product or service due to advertisement luring while others may not. So, customer loyalty to me is an individual thing. I may be loyal to a brand or service due to the feelings and sentiments I attached to it or as a result of the high quality of service or product."

Customer Loyalty in a Monopoly
"In monopoly, there is no true customer loyalty. This is because the customer has no alternative even if the customer is not satisfied with the service/product. What may be termed loyalty because of repeat purchases is best a false loyalty."

Attitudinal and Behavioral Loyalty
"Customer loyalty can be classified into attitudinal and behavioral loyalty. Have changes (advancement) in technology changed attitudes and behaviors? What of the increased competition in the economy? Customers are now well informed about the attributes of the goods and services. All these factors will impact customer loyalty."

Service Loyalty Versus Product Loyalty
"Can we differentiate loyalty for services and loyalty for products? Has there been any research to differentiate them?"

Customer Loyalty in Monopoly
"The issues raised are quite relevant for present day businesses in a perfect/competitive market setting. What about if a business is a sort of monopoly?"

Customer Loyalty is the Life Blood of Organization
"Customer loyalty should be a factor every firm out there is striving to achieve. Customer loyalty is what blood is to humans. It is the primary objective of every business to satisfy its customers by providing them with quality products and services that will satisfy / provide utility for the consumer of such products.
In return the customers will pay back the satisfactions derived via the payment, but also via referrals, advertisements of the product and so on which in turns leads to high demand, high turn over, increase production, profit maximization, more investment and also creates a good public image of that firm to the society where they operate."

Keep Customer Loyalty During a Long Period
"When a company offers a good product adapted to customer needs and with a better quality/ price ratio, I think the company will be able to satisfy its customer for a long time."

Paradigm Shift - Consumers
"Customers are increasingly demanding, less loyal and ephemeral. I am convinced that the speed and mass of information also generated the speed with which consumers began to change habits, brands and preferences, in turn directly related to the emergence of numerous management techniques in place, whatever the field of knowledge, all at the bottom looking for the most appropriate means to gain or keep market.
Even the core competences of a firm will not be able to keep it in business for long. Maybe the best positions in the future market will be occupied by those companies that best relate to the consumer. Then we will need to study behavior and changes in consumer motivation, when goods and services will be more and more customised. My thought is that increasingly companies must be capable to quickly adapt, not to customers' intrinsic preferences, but to their temporary motivations."

CLV - Customer Lifetime Value
"Does anyone know a reference to the fist (or seminal) paper where CLV was defined - (MBA dissertation!). Also if anyone has a list of the main academics in this area it would help my literature review. Thanks."

Customer Satisfaction = Customer Loyalty?
"Having been on the "front lines" of customer service/management for many years, it has been my experience that although a satisfied customer can become a loyal customer, many times that situation has more to do with how happy the customer is with the service given rather than the product that is being sold. In effect, a customer may stay with you even if the product is not up to par simply because they were extremely happy with the service they received. How can that be translated and measured as customer retention?"

Customer Loyalty is Hard to Earn
"I reckon the best thing you can hope for is a regular refresh of your product/ services, and repeat purchase because of good customer satisfaction... Loyalty must be earned."

Don't Assume your Customers are Loyal
"For customer loyalty to be successful, there is need for marketing/customer oriented executives who knows what customer retention is all about. From my current study, very few research papers have been done on customer retention and most business tend to ignore it while they assume that their customers will automatically be loyal. Not in the competitive world we leave in."

What is Customer Loyalty?
"Customer loyalty is when a customer can ignore competition because of his trust and belief in your products/services."

Customer Loyalty = Customer Retention
"Most firms believe that customer satisfaction is customer loyalty. Customer loyalty helps a firm to retain its customers. The cost of a retained customer is less than the cost of attracting a new one. I believe that any firm should have more retained customers than new customers to be profitable. This is so because the cost of gaining new ones is normally higher than the profits of the retained customers."

Loyalty Situation May Change Quickly!
"Sometimes a change of purchasing manager can change the scenario drastically, so the seller should keep transversal contact in the company to always keep a feeling of the situation."

Customer Loyalty by Providing a Complete Integrated Solution
"I work in a support organization of a well-known IT company. We believe customer loyalty is created by providing what the customer needs and that also should be a complete package. Customers will stick with a company which provides a complete integrated solution for any business need they want to resolve. One big challenge for the company is to be number 1 in relevant field to get enough customer confidence to justify buying the total solution from a single vendor. If your customer doesn't have this confidence in you, this method might not work."

No Idea What is Meant by Customer Loyalty
"In recent months I have had several experiences when dealing with businesses, in particular financial institutions, where I am beginning to question whether senior management has any idea what is meant by customer loyalty and how it is fostered by those at the bottom of the organisation. If senior managers cannot communicate properly about how customers are to be dealt with then they should not be surprised if the organisation loses customers. It doesn't help to get rid of the individual on the switchboard of telesales as the root problem with upper management is still in place."

Calculating the Benefits of Keeping Customers
"Hello all, I have a question which repeatedly pops up: where to invest your money: keeping customers or buying customers.
Measuring buying customer is easy. But how do we measure the benefit of customer retention (not just the save desk)? How to measure the lesser churn because of an activity on (part of) the customer base?
My feeling is that because keeping is difficult to measure (how can you proof that x customers stayed with your company rather than leaving as a result of your action) that most of funds typically, depending on markets, is spend on new sales.
Any help please?"

Customer Retention Profile and Skill Set
"Do you have any ideas on recruitment and selection of the correct profile for retention in a Call Centre? What set of skills or training programs should one be looking at? Do you have a set of KPIs to measure the individual Call Centre Retentions Team members? Thank you.."

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