Customer Loyalty

Powerful Essays
Topics: Marketing
The loyalty business model is a business model used in strategic management in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed. A typical example of this type of model is: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability.

Contents [hide]
1 The service quality model
2 Expanded models
3 Data collection
4 See also
5 Notes
6 References
The service quality model[edit]

A model by Kaj Storbacka, Tore Strandvik, and Christian Grönroos (1994), the service quality model, is more detailed than the basic loyalty business model but arrives at the same conclusion.[1] In it, customer satisfaction is first based on a recent experience of the product or service. This assessment depends on prior expectations of overall quality compared to the actual performance received. If the recent experience exceeds prior expectations, customer satisfaction is likely to be high. Customer satisfaction can also be high even with mediocre performance quality if the customer 's expectations are low, or if the performance provides value (that is, it is priced low to reflect the mediocre quality). Likewise, a customer can be dissatisfied with the service encounter and still perceive the overall quality to be good. This occurs when a quality service is priced very high and the transaction provides little value.

This model then looks at the strength of the business relationship; it proposes that this strength is determined by the level of satisfaction with recent experience, overall perceptions of quality, customer commitment to the relationship, and bonds between the parties. Customers are said to have a "zone of tolerance" corresponding to a range of service quality between "barely adequate" and "exceptional." A single disappointing experience may not significantly reduce the strength of



References: Buchanan, R. and Gilles, C. (1990) "Value managed relationship: The key to customer retention and profitability", European Management Journal, vol 8, no 4, 1990. Buckinx W., Geert Verstraeten, and Dirk Van den Poel (2007), "Predicting customer loyalty using the internal transactional database," Expert Systems with Applications, 32 (1). Carrol, P. and Reichheld, F. (1992) "The fallacy of customer retention", Journal of Retail Banking, vol 13, no 4, 1992. Dawkins, P. and Reichheld, F. (1990) "Customer retention as a competitive weapon", Directors and Boards, vol 14, no 4, 1990. Fornell, C. and Wernerfet, B. (1987) "Defensive marketing strategy by customer complaint management : a theoretical analysis", Journal of Marketing Moloney, Chris X Reichheld, F. (1996) The Loyalty Effect, Harvard Business School Press, Boston, 1996. Reichheld, F. and Sasser, W. (1990)"Zero defects: quality comes to services", Harvard Business Review, Sept-Oct, 1990, pp 105–111. Schlesinger, L. and Heskett, J. (1991) "Breaking the cycle of failure in service", Sloan Management Review, spring, 1991, pp. 17–28. Stieb, James A. (2006) "Clearing Up the Egoist Difficulty with Loyalty", Journal of Business Ethics, vol 63, no 1.

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