Importance Of Customer Loyalty In Relationship Marketing

1149 Words 5 Pages
1. Introduction

The purpose of this essay is to analyse the marketing issue that have been identified in the chosen article. The article chosen titled “Building True Customer Loyalty, One Customer At A Time” written by Micah Solomon, discusses the importance of customer loyalty to a firm. The article conveys that it is crucial to build long-term relationships with customers because loyal customers will have a positive impact on any firm’s bottom line. In marketing, this concept is known as Relationship Marketing (RM). As such, this essay will explore and critically analyse the aspects of RM mentioned by the writer.

2. Importance of Customer Loyalty in Relationship Marketing

Customers play an integral part in marketing as the concept of marketing
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The changes in the business environment have prompted marketers to find new ways to improve profitability as they realise that the traditional method of Transactional Marketing (TM) is no longer an appropriate strategy. This subsequently leads to a shift from the use of TM practices to RM practices.

Firms practicing RM focus a large amount of effort in fostering customer loyalty as it is believed to be one of the key drivers of profitability (Reichheld, Markey & Hopton, 2000). As relationships with individual customer lengthens, a firm’s profitability is expected to increase. This is because the practice of cultivating loyalty helps to lower customer defection rates. Customers may decide to leave the firm for many reasons, one of which could be due to unsatisfactory level of service provided by the firm to the customer.

Through the implementation of RM, firms will be able to understand the needs and wants of customers better, thus, enabling them to provide customised services to suit the customers’ requirements. Berry, Parasuraman and Zeithaml (1996) have highlighted that lowering customer defection rates by building loyalty has indeed been proven to be a more profitable strategy as compared to a cost reduction
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When customers view the firm’s products to be replaceable, this would mean that other firms’ products offer a higher customer-perceived value. However, through the use of RM, it differentiates the firm’s products from its competitors, hence, placing it in a better position to compete against its competitors.

Apart from that, it is assumed that loyal customers act as advocates for the firm. By consistently working on developing customer loyalty, firms are indirectly creating net promoters that may even be more effective than the rest of their marketing efforts. These net promoters who are the satisfied customers will then spread positive word-of-mouth to their acquaintances and are more likely to repurchase from the firm.

Furthermore, retaining customers have been assumed to cost much lesser than acquiring new customers. When a firm acquires customers, there will be costs involved such as the cost of educating the new customer that could be in the form of advertising efforts. Therefore, it is important to cultivate customer loyalty as it will lead to customer retention, subsequently, enabling the firm to achieve a sustainable competitive advantage (Parvatiyar & Sheth,

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