Customer Retention and Consumer Behaviour - Term Paper Example

 «Customer Retention and Consumer Behaviour» Consumer behaviour and relationship marketing are two interrelated concepts that determine the extent to which organisations can retain customers through the quality of their relationships with them. There are various factors that affect the relationship between the organisation and its customers. There is need for an organisation to establish a long lasting relationship with its customers so as to ensure its viability. Essentially, business is meant for gaining profits which can only be achieved when an organisation has loyal customers and is able to attract more customers. In order to get a clear understanding of how the organisations can retain the customers, it is important to explain the meaning of key terms such as quality relationship, customer loyalty, customer retention as well as services marketing since they are central to this discussion. Key terms: relationship marketing, segmentation, customer retention and consumer behaviour “The management process responsible for identifying, anticipating and satisfying customer requirements profitably is known as marketing,” (Smith 1999). On the other hand, consumer behaviour in most cases is influenced by various factors which make the people to buy certain products. Cant et al (2006:2) define customer behaviour as “the study of individuals, groups, or organisations and the processes they use to select, secure, use and dispose of products, services, experiences, or ideas to satisfy needs and desires.” From this definition, it can be noted that the consumers are motivated or influenced by various factors to buy certain commodities or products. On the other hand, it can be noted that relationship marketing is concerned with identifying new values for individual customers for a lifetime of association (Berry, 1983, Gordon 1998). It includes trust, loyalty, target segments, databases and customer relationship marketing. During the contemporary period where the markets are characterised by stiff competition, losing customers is very costly to the organisation hence the need to retain them at all costs as a way of gaining a competitive advantage (Athanasopoulou N.D). In most cases, quality relationships need to be built around services of the customer as well as their values. People are the main component in the relationship mix and concerted efforts have to be taken satisfy their needs which is then followed by creation of loyalty among them. Developing a quality relationship strategy can be attributed to value chain. The concept of relationship marketing often involves high customer contact and commitment to service whereby there is every need to share the ideas pertaining to the changes in terms of quality among as far as internal and external factors of an organisation are concerned. Barnes (2001:119) noted that “one of the most interesting features of a relationship is that it is a continuous process. Every interaction has the potential to change it.” It can be noted that research has shown that the concept of relationship marketing evolved from transactional marketing whereby the main purpose was to serve the interests of the customers profitably. However, as far as value chain is concerned, there is need to carefully develop the product such that the organisation will gain a competitive advantage through cost leadership or differentiation. If the consumers perceive a particular product in a positive way, there would be likely chances of creating quality relationship which can be nurtured through continuous engagement of the customers as far as product development will be concerned. The product itself plays a big role in appealing to the customers and it should be unique in some way as a way of attracting customers. By virtue of the product’s uniqueness, customers can develop loyalty which in turn leads to the development of quality relationship with the marketers. During the contemporary period, it can be noted that customers have got changing personal values which should always be taken into consideration by marketers where they should be a step ahead as far as quality and pricing issues are concerned. They ought to take into consideration the social, emotional as well functional value of the product and its impact as far as long term relationship is concerned. According to Wang et al (2004), “In the modern customer-centred era, customer value is a strategic weapon in attracting and retaining customers. Delivering superior customer value has become a matter of ongoing concern in building and sustaining competitive advantage by driving customer-relationship-management (CRM) performance.” Customer value is very significant as far as retention of the customers is concerned. In order for the firms to be better positioned to improve on their CRM performance, there is great need for them to reorient their operations to meet the needs and values of the customer. In business language, it is often said that the customer is king hence his values should be prioritised as a matter of concern. As far as CRM performance is concerned, there is need for the managers to grasp and understand what the customers really value and they should focus their attention on the need to fulfil this as a way of trying to achieve this much needed marketing strategy while at the same time maximising the benefits of CRM. Factors such as demanding customers, competition as well as technological changes make it imperative for organisations to deliver on high customer value as a way of building long term customer relationship for the viability of business. This has a significant impact on the behavioural aspects of the customers. Customer value is mainly derived from customer expectations, pricing as well as the quality of the product offered. This has an inherent bearing on the benefits that are likely to be derived by the customers from consuming a particular product. According to this perspective, there are different values that can be derived from using a particular product. These include the following: “emotional value” refers to the utility derived from the affective states that a product or service generates; “social value” refers to the social utility derived from the product or service, “functional value” refers to the utility derived from the perceived quality and expected performance of the product or service, and “perceived sacrifice” refers to the loss derived from the product or service due to the increment of its perceived short-term and long-term costs (Wang et al 2004). These normally lead to brand loyalty whereby the customers will purchase particular product fully knowing that they will derive some benefits from it. According to this study which is based in China by Wang et al (2004), it has been noted that customers often derive satisfaction from these values which leads to the creation of a relationship between them and the firm involved. According to Ferrazzi (2006), the viability of an organisation in the long run hinges on the strong relationships that exist between it and its customers. Organisations operate in a dynamic environment and the consumer tastes are constantly changing which makes it imperative for the firms to establish a long lasting relationship with its clients. Consumers form relevant attitude to buying behaviour as a result of direct experience with the product. Thus, McCarthy & Perreault (1996) define an attitude as “a learned predisposition to behave in a consistently favourable or unfavourable way towards market related objects or situations.” The products that are developed over a certain period of time often have unique features that are incorporated in them in order to appeal to the consumers. Over time, the consumers will tend to learn about these features and can in turn develop a positive attitude towards them. It can be noted that attitude is a learned process in direct response to what the customers have experienced or consumed from the media in form of advertisements. It is therefore important for the marketers to know the behaviour of the clients in order for them to be better positioned to implement strategies that are likely to appeal to a large number of the customers. It must also be borne in mind that attitudes are not necessarily permanent but they can change at any given time. It is therefore very important for marketers to design their messages targeted at consumers in a fashion that will not cause them to have a negative attitude towards their brand. As noted above, attitudes are primarily influenced by the information the consumers get about a product hence there is need to safeguard the interests of the brand at all costs to avoid the emergence of negative attitude among the consumers which can have a negative impact on the performance of the brand as a result. This in turn will lead to the creation of quality relationship with the customers. It can also be noted that quality relationship can be created between a firm and its customers through product positioning. Basically, product positioning is the way the product is defined by consumers on important attributes with regards to the place the product occupies in consumers’ minds and position in the market relative to the other competing products (Kotler 1999). A product that is correctly positioned can attract many clients and there are likely chances that loyalty will be created in the long run. Customers do not necessarily need to hassle in order to obtain a product but they should access it from a convenient location. The aspect of demographics also plays a significant role as far as loyalty and creation of a relationship are concerned. This can be attributed to market segmentation which can be defined as the grouping of people with similar interests and needs in the market (Patterson N.D.) This can be based on the level of income, education as well as lifestyles. To find a suitable position for the product, the Company needs to make an analysis of the market and target customer groups. There is need to take a holistic approach when targeting a market. In some instances, certain sections of the market are often overlooked especially by bigger companies. However, these often constitute a very important section of the market hence the need to further divide the market into equally smaller segments. This is commonly referred to as niche marketing where smaller markets are targeted and special attention is given to the needs and interests of the people comprising these small markets. Service marketing is specifically tailored in such a way that it is characterised by certain unique features that would have been especially designed in such a way that they would satisfy the needs of the unique needs of the consumers that are often overlooked by other competitors in the industry. This looks specifically at the needs of the sub segments which is why it is advantageous and beneficial to be implemented by organisations which are serious about fulfilling their profitable goals while at the same time creating quality relationship with their customers. The organisation would also able to offer customised services with all the special features that would be attractive to many customers which would mean growth of the organisation’s customer base. In order succeed in retaining the customers, organisations ought to use different strategies and some of the vehicles for relationship marketing include the use of the internet, credit cards, loyalty schemes, sales promotions and call centres. During the contemporary period, it can be noted that the use of new information and communication technology such as the internet plays a very significant role with regards to marketing of different products. Specially designed websites can be used whereby communication is greatly promoted between the two parties concerned. Establishing a relationship as well as retaining the customers is not an event but a process that requires concerted efforts by an organisation that is serious about achieving its goals. For instance, Sainsbury has managed to establish quality relationship with its customers through well designed marketing strategies. According to research entitled ‘Sainsbury’s Marketing communication planning 2008-2009,’ Sainsbury is currently the most trusted ‘own brand’ among supermarkets. It can be noted that almost half of the shoppers have trust in its products and statistics obtained from this research show that 47% of its shoppers have trust in its own products compared to 27% for Tesco, 17% for ASDA and 15% for Morrison’s. This is testimony that shows that there has been a substantial improvement of Sainsbury’s brand following its loss of the number one position to rival Tesco.. A two way communication channel can be created whereby the customers can send their feedback about their perceptions about given products. Open channels of communication play a very significant role in establishing a relationship with the customers. Social sites like face book as well as Twitter can be used to establish channels of communication between the organisation and its clients. Once this relationship has been established, it becomes easier for the organisations to retain these clients. Loyalty schemes can be put in place where frequent buyers are rewarded through discounts or are given other tokens of appreciation. These would continue returning for more purchases which gives the organisation the opportunity to retain such customers. Call centers can as well be established so as to give the customers all the relevant information they may require about a product at any given time. When the customers are assured that they will benefit from purchasing a product, they will continue buying it. This can be aided by continuous talking to the customer informing them about the products and services offered. Another strategy that can be implemented is promotion. It can be noted that in the case of Sainsbury, research has shown that about 30% of shopper’s basket is on promotion compared to 22% of the previous year. The major role of promotion is to give incentives to the customers who will in turn come in large volumes knowing that they will get a reward or a token of appreciation for buying in any one of Sainsbury chain supermarkets. This technique is also meant to establish quality relationship between the supermarket and the customers and this would go a long way in creating loyal customers who will always come back again to shop in any of the chain supermarkets. Over and above, it can be noted that organisations operate in a very dynamic environment during the contemporary period and the customer tastes and interests are also changing. Firms ought to take cognisant of these and put measure in place that are meant to establish a relationship between them and their customers in a bid to retain them. Once loyalty has been created through implementing various factors discussed above, the chances of retaining the customers will be very high. Bibliography Anonymous Tracking customer habits, Nation's Restaurant News; May 21, 2001; 35, 21; Business Module pg. T6 Athanasopoulou P (N.D.) Commentary Relationship quality: a critical literature review and research agenda. University of Peloponnese, Athens, Greece Cant M.C. (2000), Marketing Management, 4th Edition Juta and Co Ltd, SA. Ferrazzi K. Wanted: Intimate Marketing Relationship. Brandweek; Oct 9, 2006; 47, 36; Research Library Core pg. 16 Smith, P.R. (1999), Great Answers to Tough Marketing Questions, Kogan Page, UK. Kotler, P. (1998). Marketing Management: Analysis, Planning, Implementation and control. Prentice Hall, New Jersey. Paul G. Patterson (N.D.) Demographic correlates of loyalty in a service Context. School of Marketing, University of New South Wales, Sydney, Australia. Lancaster G. & Reynolds P. 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