Customer Loyalty Attributes: A Perspective

Abstract

Many academicians have accepted the significance of loyalty in service industries (Bloemer et al., 1999; Caruana, 2002; Asuncion et al., 2004) and its potential impact on the development of sustainable competitive edge (Keaveney, 1995; Gremler and Brown, 1996) for the service firms. This may be attributed to the unique nature of services, increased dependency on technology and greater customer involvement in service delivery. A base of loyal customers can do wonder in terms of economic rewards and new business prospects as winning anewcustomer can cost asmuchas 6 times more than the cost of retaining an old one (Rosenberg and Czepiel, 1984) whereas profits can be increased from 25% to 125% if the potential migration is decreased by 5% depending upon the particular industry (Reichheld and Sasser, 1990). Customer loyalty clearly brings in significant benefits to the business and calls for a deeper investigation into the factors that act as its originator and contribute in its enhancement since, as mentioned by Johnson, Herrmann, and Huber (2006), the antecedents of customer loyalty are convoluted and dynamic, changing and evolving over time.

The purpose of this paper is to discuss customer loyalty and its significance in the modern business arena through a comprehensive survey of literature. Further, it seeks to explore various factors that serve as antecedents to customer loyalty development. In other words, investigating the customers’ checklist that they refer before deciding to sustain and develop their relationship with the company and its offerings is the key issue that this paper aims to address. The study intends to provide a framework for development of a scale for assessing customer loyalty and identifying what a particular class of loyaltywould result into in terms of its contribution to the organization.Theabove identified framework would prove to be of great significance for service organizations in appraising different loyalty programs and also in segmenting customers dependinguponorganizational requirements.

Introduction

Globalized markets and borderless flow of information have resulted in intense competitive pressures and increased customer expectations. Productivity, quality, customer satisfaction are the buzz-words in today’s business scenario that demand considerable efforts on the part of the company. Further, to attain the basic business goals of survival and growth, businesses are looking for ways to attract and retain customers in the long run. It is established now that every business needs to understand and meet customers’ expectations in order to strive and thrive in the market. Customers have become the focal point of almost all the businesses now and thus, deserve all the attention and importance. However, due to heightened expectations, escalated competition and rapid ingress of new business concepts and formats, companies are finding it increasingly difficult to retain their customers along with managing to be profitable. Instability of the economic environment in recent times has also contributed to the loyalty issues in businesses.

In order to develop and sustain loyalty among the customers, it is important to find out what drives loyalty in a particular market. The factors which lead to loyalty need to be uncoveredand understood before designing and implementing the strategies for customer retention and loyalty. Literature proposes relationships between customer loyalty and various other business constructs such as quality, satisfaction, trust and so on. These relationships need to be investigated and understanding the effect of these constructs on loyalty will surely provide an insight into customer loyalty formation.

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