1) Customer loyalty is linked to a company’s profitability. Explain with examples, the main reasons to support customer retention and repertoire buying.
Customer loyalty is the result of relationship marketing which is the process of creating, maintaining and enhancing strong, valued-laden relationships with customers and other stakeholders. Beyond designing strategies to attract new customers and create transactions with them, companies are going all out to retain current customers and build profitable, long term relationship with them. The new view is that marketing is the science and art of finding, retaining and growing profitable customers.
Companies also realized that losing a customer is more than losing a single sale because of customer life time value, the amount by which revenues from a given customer over time will exceed the company’s costs of attracting, selling and servicing the customer. Therefore it is very important for the companies to deliver value to the customers to send satisfaction to the customers. Customers buy from the firm that they believe offers the highest customer delivered value, for the consumers, the differences between total customer value and total customer cost of a marketing offer is profit.
Total customer cost= Monetary cost+ Time cost+ Energy cost Psychic cost
Total customer value= Product value+ Services value+ Personnel value+ Image value
Total customer value- Total customer cost= Customer delivered value
Customer satisfaction is also one of the main factors for customer loyalty and retention. Customer satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectation. Highly satisfied customer produces several benefits for the company. Satisfied customers are less price sensitive, talk favorable to others about the company and its products and remain loyal for a longer period. However the relationship between customer satisfaction and loyalty varies greatly across industries and competitive situation. Anyway, in all case, as satisfaction increase, so does loyalty. When the loyalty increases, the sales will also increase and also the profit.
To build a lasting customer relationship, each company department can be thought of as a link in the company’s value chain which is a major tool for identifying ways to create more customer value. That’s each department carries out value-creating activities to design, produce, market, deliver and support firm’s products. Beyond the value chain, the network made up of the company, suppliers, distributors and ultimately customers who partner with each other to improve the performance of the entire system called value-delivery network is also a powerful tools to strengthen the customer relationship.
As customer relationships and company profitability are linked closely to product and service quality, higher levels of quality result in greater customer satisfaction, while at the same time supporting higher prices and often lower costs. Therefore, quality improvement programs normally increase profitability.
