Customer loyalty in Business - Essay Example

Running Head: Customer Loyalty Customer Loyalty Introduction Customer loyalty deals with the behavior, attitudes and perceptions of customers. Customers are considered to be an asset for any business as they can provide good ratings, testimonials and evaluations to different products and services, which are available in the market (Reinchheld, 2006, 56). Customers play an important role in the promotion of products and services by publicizing them by means of positive feedback, informing family and friends, etc. Hence, they become loyal to a particular brand. Customer loyalty is considered to be a procedure which concentrates on customer satisfaction and contentment. This paper seeks to analyze the concept of customer loyalty and customer loyalty programs in the lights of broad and diverse academic resources. Concept of Customer Loyalty Customer loyalty is considered to be the propensity or inclination of the consumer to select a particular product or service, which meets his or her needs. In the business domain, customers are labeled as brand loyal as they are most likely to select a particular brand as compared to the alternatives available. Customer loyalty is the product of well structured, organized and planned programs, which concentrate on the retention of customers (East, Wright & Vanhuele, 2008, 45). Research suggests that customers, who become targets of customer loyalty programs, are most likely to remain loyal to a particular brand. For customer or brand loyalty, habit is considered to an important element. It is considered to be the main element, which can influence the overall progress and development of the organization. It is used by different organizations in order to retain existing customers and to win potential customers. Main Types of Customer Loyalty As mentioned earlier, business is mainly dependent on it customers. Researchers have identified five main types of customer loyalty, which are discussed below. Monopoly Loyalty Monopoly loyalty is considered to be that loyalty in which the choices of customers are restricted. It is rare and extreme case and the loyalty of the customer is away from loyalty and devotion. Research suggests that monopoly loyalty is considered to be resentful. From customer satisfactions surveys conducted, it was concluded that consumers were dissatisfied and discontented when their choices were restricted(Reinchheld, 2006, 103). Cost of change loyalty In theory, each and every supplier is in competition with one another, which indicates that their customers may use substitutes. However, in actual practice, customers are most likely to remain loyal to their existing supplier because of difficulties they experience in switching suppliers. Turning to substitutes only takes place when the customers are dissatisfied with their existing product or service (Reinchheld, 2006, 105) . Incentivised Loyalty Incentivised loyalty is considered to be the result of excessive marketing to promote the product or service in the market. It might influence consumers, who are not using their own financial resources(Reinchheld, 2006, 109). Research suggests that majority of the people in United Kingdom are most likely to have more than one loyalty cards of different competing super markets, petrol stations or airlines. Loyalty points are considered to be discount tools, which would assist in meeting their needs and requirements that wider range. Habitual Loyalty Habitual loyalty is often termed as “everyday form of repeat business” (Reinchheld, 2006, 111). Time is considered to be an asset and therefore, several consumers resort to familiar habits and routines in order to achieve with maximum utilization of time. For instance, a weekly to the same superstore is conducted as it is convenient and habitual. Colleagues meet in the same restaurant for lunch(Reinchheld, 2006, 112). Consumers are most likely to visit the same petrol situation in order to save time. From this perspective, organizations, which have successfully retained their customers, may experience a false sense of confidence and security because the commitment and loyalty in such circumstances are low. Committed Loyalty Committed loyalty is considered to be the actual and real customer loyalty and it goes beyond “ than just making repeat purchases” (Reinchheld, 2006, 115). It demonstrates that customers are committed to the supplier and the degree customer commitment determines the degree of loyalty. Overview of Viability of Different Customer Loyalty Programs in Marketing From the works of Dowling and Uncles (1997, 76) it is evident that brand loyalty stems out from the market, where the company works rather than from the customer loyalty programs. There is an insignificant influence on the amount of loyal customers by customer loyalty programs. From the works of Sharp and Sharp (1997, 483), a large loyalty program was analyzed and evaluated on basis of “repeat-purchase loyalty effectiveness”. A Dirichlet model adopted, which was compatible with the three markets evaluated and studied by Sharp and Sharp, which demonstrated that the market behavior was normal, which was “expected of competitive repeat purchase markets around the world” (Sharp & Sharp, 1997, 485). From their research, it was concluded that loyalty programs are considered to be the only marketing strategies and endeavors, which concentrate on changing and modifying repeat-purchase behavior and pattern. From the work of Shugan (2005, 191), customer loyalty programs are most likely to give rise to liabilities. According to Shugan, loyalty programs concentrate on offering future benefits and advantages to their customers. From the works of Uncles et al (2003) it was concluded that loyalty programs are considered to be tactics and strategies, promise delayed economic advantages and benefits to users purchasing a particular brand. From the research of Oliver (1999, 41), it was demonstrated that customer loyalty programs cannot purchase or buy customer loyalty. Conclusion This paper has presented the concept of customer loyalty and its different types. At the same time, different customer loyalty programs have been reviewed in broad and diverse academic resources. Customer loyalty is considered to be the asset, which allows the business to run and it needs customers for its running. It is defined as the propensity or inclination of the consumer to select a particular product or service, which meets his or her needs. There five main types of customer loyalties namely, monopoly loyalty, cost of change loyalty, loyalty based on incentives, habitual loyalty and committed loyalty. From literature, it is evident that customer loyalty programs only promise to provide future benefits to customers. Bibliography East, R., Wright, M. and Vanhuele, M. Consumer Behaviour: Applications in Marketing (CBAM), 2008 Oliver, Richard. L. (1999). Whence Consumer Loyalty? Journal of Marketing. Vol.63. 33-34. Byron Sharp and Anne Sharp. Loyalty programs and their impact on repeat-purchase loyalty patternsIntern. J. of Research in Marketing 14 (1997) 473-486 Grahame R. Dowling and Mark Uncles. Do Customer Loyalty Programs Really Work? Sloan Management. 1997. Steven M. Shugan Brand Loyalty Programs: Are They Shams? Marketing Science Vol. 24, No. 2, Spring 2005, pp. 185–193 Grahame R. Dowling, Mark Uncles and Kathy Hammond. Customer loyalty and customer loyalty programs. The Journal of Consumer Marketing; 2003. Reichheld, F. F. (2006), The Loyalty Effect: The hidden force behind growth, profits and lasting value, Harvard Business School Press, Boston, Massachusetts. Read More