Frederick Reichheld - The Loyalty Effect (1990s) - Essay Example

 Frederick Reichheld - the loyalty effect (1990s) Ordinarily, for any business to thrive in a proper way, then there must be a degree of loyalty in a business. In the recent past, problems have emanated among business entities due to disloyalty. Most corporate have lost 50% of investors, 50% of employees and 50% of customers in less than 5 years. This has enabled business to have a stunt growth. Frederick concern is to see a business prospering. According to him, a business will only prosper when there is customer retention, customer satisfaction, customer loyalty and the customer value. This various aspects and ideas of Frederick are discussed below.[Rob00] According to Frederick, loyalty is very essential because it creates customer retention which is usually the best way to measure how the company creates value. Loyalty also creates value for customers and builds growths and profits.Loyaty is linked to value creation because it reliably measures superior value delivery. Loyalty also brings economic effects such as; I. Costs are reduced as the expenses of acquiring new customers and replacing new ones are avoided. II. The revenues and market share grow as the best customer retained in the business III. Employee retention will increase because job satisfaction has increased. This will in turn raise reinforce the customer retention. As the cost reduces, the revenues will raise increasing the profits. This will provide resources for investing in business which will bring more profits that will enable the employee to get more compensation and thus they are retained. Increased profits in a company increase the company value and provide incentives for employees, customers and investors so as to remain loyal to the company. Customer retention involves maintaining the previous or the long term customers into their business. Normally, the performance of the business in all areas will play a role in retaining customers. Company that makes profits will enable the business to go large scale taking advantage of the economies of large scale. This will enable the business to offer the goods at a low price. There will be good remuneration towards the employees and therefore they will be retained more. When a customer is retained, their value for the future relationship with the businesses also retained. Therefore, retaining customers means retaining that lifetime value in terms of spending and their influencing power to the other possible customers through referrals.[Mat11] According to the recent studies, it is cheaper to retain the existing customers than to hire new employees.However,the effect of retention on profitability can be huge because rising the customer retention rates by 5% increases the profits from 25% to 95%.This is because the lifetime value of a given customer is realized and the impact of retention goes beyond retaining this lifetime value. Normally, efficient customer retention strategies results in those existing customers to refer to the other customers who will ensure that the business grows in the customer base in also in the profitability. Customer value is essential because it contributes to the customer retention. The customer will buy goods that he/she perceives is the best. Normally, the consumer will receive a gain that is measured against the price that the consumer will pay to acquire that benefit. The value that the personal consumer places on a product always is the customer value for that contribution. The customer value is normally measured against the values of the customer that are assigned for like products that would give a like benefit. Ordinarily, consumers will naturally purchase the item that has the highest customer value among all that are available in the market place. Every consumer will have a distinctive collection of needs and possessions. Therefore, consumers will not place the same value on the same product or service. The products with highest-quality do not always give the highest customer value. This is because the benefit of each individual item is usually measured against its cost. On the other handsome consumers are enthusiastic to pay a high price for a quality product but others are of the idea that the similar benefits are not worth that price. Ordinarily, companies can establish customer value in the following ways:[Chr11] I. Give the consumer the best cost. In order for the company to maintain value it usually focus their hard work on provision of a quality product at an affordable price. The low price helps to raise the value of their offering to the consumers even if it is weighted against a low benefit.The company buys the goods in a large quantity taking advantage of the economies of large scale. This will enable the company to give product with low prices to its customers. II. Give consumers the best product.Ordinarilly, firms that offer quality products increases the customer value of their contributions to their consumers by providing a high benefit, which exceeds the high cost. Quality products will always give the customer value and therefore this leads to the customer’s satisfaction. III. Give the consumer the best service. Companies that provide a high level of service to their consumers increase their value of their services by providing a high benefit, which exceeds the cost for many consumers. Consumers are enthusiastic to pay more to be able to receive the extraordinary service. [Chr11] Customer satisfaction comes when the customers are sure that the product will bring their desired benefit.Normaly, it measures how products and services given by a firm meets customer expectation. Customer’s satisfaction is the key factor that affects the customer’s retention. When the customers are satisfied, they tend to develop loyalty and therefore are retained in the business. The satisfied customers become marketing apostles by referring towards others potential buyers.[Mat11] Loyalty is the trust or that believe that a company or a business is offering the best products or services. The product must excellently fulfill customer’s value proposition. The customers always take the offer of the company with the best price whenever faced with that purchasing decision. Customer loyalty is usually based on the value that the customer receives. When the products are of good quality with affordable price the customers will always develop a perception that the products are always the best. This makes the customers to always come again for the products and also he/she refers to other customers to buy to the company. According to Frederick customer loyalty will become advantageous to the company since the customers will continue to come to the business even if the business is not doing well. Ordinarily, this takes place because of how good the organization has been to the customers in the past by taking care of their issues when they arose. Customer loyalty means that the customers will not seek out competitors and that when they are approached by competitors, they will refuse the offer. The customers also remain in touch with their mother firm and spend the time and effort to commune with the firm so as to build on past successes and overcome any challenge. The customer loyalty can be measured and monitored among the customers. Loyal customers trust the products and services that are purchased from the firm to of high quality and superior to those of the competition. Often, they are customers who view their relations as more than simply transactional. They trust there is a relationship that is bigger than just the products or services they buy. Ordinarily, measuring loyalty can be done through measuring that strength of the association between buyer and seller and among the organization and its customer.[Mat11] The current perspective has emanated from the traditional reasoning. The traditional business thinking has a business strategy of bringing together a well matched set of customers, employees and investors and investors to maximize the profits. The strategy has shifted such that creating customers value becames the centre of business strategy not to maximize profits or shareholders value. My perspective is that only those customer that add value to the company will be retained. I think network marketing will always do instead of depending upon the customers. Normally satisfaction of a customer will always change and vary because that is the nature of human beings. Network marketing will link more customers to the business and that the business will always be sure of the business customers rather than depending on customers who are scavenged by competitors. The Toyota Motor industries have become serious in the measuring the value that they deliver to their customers. The companies aim at producing quality vehicles which are cost effective towards the company and the customers. The customers are able to receive the value through after sale service and a slightly affordable low price compared to other industries.[Pol093] My goal is to become an instrument of help towards the organization which I will be working on. I will strongly remain a marketing apostle of the company. I will be able to do research as a marketer on the needs and demand of the customer and introduce network marketing so as to retain the customers. I will ensure that customers get value and satisfaction towards the products. For the business to be at the competitive advantage I will be able to “walk “with the customers to ensure that they remain upon the business.[Chr11] Works Cited Rob00: , (Markey, 2000), Mat11: , (Matthwew, 2011), Chr11: , (Rowe, 2011), Chr11: , (Rowe, 2011), Pol093: , (Mark, 2009), Read More