Loyal customers are more likely to recommend you to other businesses because they have a good relationship with you. Free and unbiased, these word-of-mouth referrals are a valuable form of lead generation, especially because other companies know that your customers have no motivation to recommend you unless they are really happy with you.
Finally, long-standing customers are comfortable and confident that you will deliver for them, whereas new customers often need to be enticed with discounts, free trials and special offers. Long-term customers trust you, so they typically are willing buy more from you and pay higher prices the longer you retain them. Recent research has also proposed relationship age as a moderator of the relationship between satisfaction and purchase intentions. For instance the premise behind relationship marketing assumes that satisfied customers, in the long term, start displaying increasing loyalty behaviours.
If so, it is hypothesised that: H 3 :: Duration of stay will have a positive reinforcing effect on the relationship between satisfaction and spend. At high levels of satisfaction, those who have stayed longer with the same service provider are likely to spend more.
Duration of stay will have a positive attenuating effect on the relationship between satisfaction and price sensitivity. At high levels of satisfaction, those who have stayed longer with the same service provider are more likely to be less price sensitive. Duration of stay will have a positive reinforcing effect on the relationship between satisfaction and positive WOM.
At high levels of satisfaction, those who have stayed longer with the same service provider are more likely to give positive WOM. Duration of stay will have a negative reinforcing effect on the relationship between satisfaction and negative WOM. At low levels of satisfaction, those who have stayed less time with the same service provider are more likely to give negative WOM. The data for this study were obtained through a large-scale survey of 3, fixed line telephone customers in south-eastern England.
The survey achieved a valid response rate of There were no significant 0. While the UK fixed line telecommunication sector is still dominated by a former monopoly in terms of market share, the industry is also characterised by a level of competition that offers customers a clear choice, at least between two major players for both local and long-distance services.
The key measures in the study were conceptualised and operationalised based on previously validated scales, and were found to have high levels of reliability and validity. The latter definition fits the current context of a contractual setting better. Cronin et al. Our three-item, seven-point, Likert-type scale was based on this latter work. Dependent construct : The overall dependent construct in this study was what is often referred to in the literature as customer loyalty.
Customer loyalty is known to be multi-dimensional, 10 and in the current study each of the four dimensions, identified in previous research, 10 was studied as a unique dependent construct.
What follows is a discussion of the extant literature on the operationalisation of each of these constructs. This same two-dimensional typology was used to develop the two-item measure of positive WOM used in the current study. It captured both voluntary recommendation, as well as recommendation to those seeking advice. One of the early and established conceptu-alisations of the construct was by Singh 16 who studied unfavourable behavioural intentions.
He identified three dimensions of negative WOM, consisting of voice responses seeking redress from seller , private responses to friends and family and third-party responses eg legal action. The measure used in the current study consisted of two items, and captured both voice responses and private responses, but not the third-party action, since such action is not typical of the industry studied. This approach was also consistent with the procedure adopted by other well-cited studies.
Price sensitivity : Measures of price sensitivity or, indeed, price tolerance originated in the economics stream and since then have been used in various management disciplines. It measured propensity to switch in the event of 5, 10 and 20 per cent price increases. Level of Spend : Average spending level of customers was captured by a single-item measure split into five equal spending categories.
Moderating variable-duration : Self-reported duration of service patronage was measured in years. Where duration was less than one year, it was measured in months and converted to years. All the reflective-type scales used in the study had high levels of internal consistency demonstrated by Cronbach's alpha values much greater than the minimum values suggested by Nunnally.
Table 1 illustrates the Pearson's correlation coefficients among the key constructs. The effect of satisfaction on spend is, however, opposite to what was hypothesised. The effect of duration of stay on positive WOM is, however, opposite to what was hypothesised. Furthermore, contrary to expectations, duration of stay does not seem to have a significant effect on level of price sensitivity.
To examine the interaction effects, the following graphical and statistical analysis was conducted as per the recommended practice. Then, these scores were plotted against the mean levels of spend, price sensitivity, positive WOM and negative WOM, respectively. Subsequently, tests were undertaken to assess whether there were statistically significant differences between the lowest and highest quartiles. The results of this analysis are as follows. Therefore, there is inadequate support for hypotheses H 3 and H 4.
Thus, while there is evidence to indicate a significant moderating effect, the direction of the relationship is opposite to what was hypothesised in H 5. The results are consistent with existing research in a number of ways.
They also, however, challenge extant research fundamentally. Essentially, every dollar spent with you is a dollar not spent with your competitor. Be sure to keep your loyal customers happy with great customer service and a great loyalty program so they continue to purchase from your business and not your competitors.
Because they like your brand and what you to improve or stay great as you are , loyal customers will not mind taking the time to share valuable feedback that you can then turn into actionable marketing tactics.
Many companies begin their loyalty programs siloed from marketing goals and the customer database. An effective loyalty program connects to current marketing initiatives and has access to the customer database for a true omnichannel approach.
Start small by leveraging email and then build out the rest of your program. Great customer service helps to show customers you care. In return these customers will become loyal and buy from you repeatedly.
Forge a relationship with your current customers. True word-of-mouth marketing and customer loyalty go hand-in-hand. Just know that a loyalty program should enable your brand to increase in value and drive up the LTV of customers.
Not every loyalty program offers discounts. Some companies engage members through exclusive experiences. Find out how to syndicate your content with B2C.
Daniel Hopper is a marketing consultant based in New Zealand. Connect with him on Linkedin. Business owner of BYB Marketing , who specialises in brand management and marketing strategy to help businesses achieve their sales goals. Join over , of your peers and receive our weekly newsletter which features the top trends, news and expert analysis to help keep you ahead of the curve.
The best of B2C in your inbox every Monday Sign up now. Toggle navigation Business 2 Community. Twitter Facebook LinkedIn Flipboard 0. Loyal customers are profitable to a business.
We need to look after them. What is Loyalty? Customer satisfaction Customer satisfaction is one of the most important criteria for customer loyalty. Tools to enhance loyalty The cost of replacing defected customers is significantly higher than the cost of retaining them. Loyalty programs A popular strategy for maintaining customer loyalty is through loyalty programs. Benchmarking performance The second strategy to enhance customer loyalty is by benchmarking service quality.
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