Understanding the Effect of Customer Relationship Management Efforts on Customer Retention and Customer Share Development

Good Essays
Peter C. Verhoef

Understanding the Effect of Customer Relationship Management Efforts on Customer Retention and Customer Share Development
Scholars have questioned the effectiveness of several customer relationship management strategies. The author investigates the differential effects of customer relationship perceptions and relationship marketing instruments on customer retention and customer share development over time. Customer relationship perceptions are considered evaluations of relationship strength and a supplier’s offerings, and customer share development is the change in customer share between two periods. The results show that affective commitment and loyalty programs that provide economic incentives positively affect both customer retention and customer share development, whereas direct mailings influence customer share development. However, the effect of these variables is rather small. The results also indicate that firms can use the same strategies to affect both customer retention and customer share development.

ustomer relationships have been increasingly studied in the academic marketing literature (Berry 1995; Dwyer, Schurr, and Oh 1987; Morgan and Hunt 1994; Sheth and Parvatiyar 1995). An intense interest in customer relationships is also apparent in marketing practice and is most evident in firms’ significant investments in customer relationship management (CRM) systems (Kerstetter 2001; Reinartz and Kumar 2002; Winer 2001). Customer retention rates and customer share are important metrics in CRM (Hoekstra, Leeflang, and Wittink 1999; Reichheld 1996). Customer share is defined as the ratio of a customer’s purchases of a particular category of products or services from supplier X to the customer’s total purchases of that category of products or services from all suppliers (Peppers and Rogers 1999). To maximize these metrics, firms use relationship marketing instruments (RMIs), such as loyalty programs and direct mailings (Hart et al.

You May Also Find These Documents Helpful

  • Powerful Essays

    FOUR SQUARE (42) VALUES OF CUSTOMER RETENTION IN EMERGING MARKET SCENARIO: A NEW PARADIGM Mr.Ch.Trinadha Rao, Asst. Professor Miracle School of Management, Miracle Educational Society Group of Institutions (Approved by AICTE, New Delhi & Affiliated to JNT University, Kakinada) Kongavani Palem, Bhogapuram, Vizianagaram (Dist)-535216, Andhra Pradesh, India…

    • 3753 Words
    • 16 Pages
    Powerful Essays
  • Better Essays

    Customer Retention

    • 2107 Words
    • 6 Pages

    name for over a century. There are many different classes developed to cater for the ever demanding customers. Some of the classes are C, D, E, G, K, L, R, S, T class. Also, Mercedes reputation is also build in the Formula One scene. 1. Customer retention Customer retention is an assessment that an organization takes to measure the customer defection. It is important because retained customers tend to spend more, need lesser loyalty cost and they tend to refer someone to your business. Therefore…

    • 2107 Words
    • 6 Pages
    Better Essays
  • Better Essays

    Customer Retention

    • 1365 Words
    • 6 Pages

    Customer Retention Strategies The easiest way to grow your customers is not to lose them The average business loses around 20 percent of its customers annually simply by failing to attend to customer relationships. In some industries this leakage is as high as 80 percent. The cost, in either case, is staggering, but few businesses truly understand the implications. Imagine two businesses, one that retains 90 percent of its customers, the other retaining 80 percent. If both add new customers…

    • 1365 Words
    • 6 Pages
    Better Essays
  • Satisfactory Essays

    Customer retention

    • 442 Words
    • 2 Pages

    Customer Retention Literature Review Customer satisfaction holds considerable significance in corporate sector as with no satisfy and dedicated customers, you don't have a trade. A review conducted on college students in Bahrain indicated that adolescent consumers places more stress on factors like a bank’s repute, openness of bank personnel, suitable locality, 24/7 ATM, and accessibility of parking, in selecting their banks (Almossawi,2001). There is an mounting gratitude that the final purpose…

    • 442 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    “EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PROGRAMME IN STATE BANK OF INDIA” Submitted In The Partial Fulfillment Of Degree Of MBA Batch 2006-08 SUBMITTED TO: - SUBMITTED BY:- Mrs. Riya Sharma Rishi Gupta (Project Guide) Roll no. 0471483906 [pic] MAHARAJA AGRASEN INSTITUE OF TECHNOLOGY PSP AREA, SECTOR-22 ROHINI, DELHI—110085 Ph: 25489493- WHOM…

    • 10192 Words
    • 41 Pages
    Good Essays
  • Good Essays

    2012 What is Customer Relationship Management? “CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high quality customer related data and enabled by information technology.” Type of CRM Strategic ! Dominant characteristic Strategic CRM is a core customer-centric business strategy that aims at winning and keeping profitable customers. Operational…

    • 8020 Words
    • 50 Pages
    Good Essays
  • Better Essays

    expansion, and improving customer value, satisfaction, profitability, and retention. CRM software applications embody best practices and employ advanced technologies to help organizations achieve these goals.( Mc Dougall,2004) CRM focuses on automating and improving the institutional processes associated with managing customer relationships in the areas of recruitment, marketing, communication management, service, and support. CRM takes a very customer-centric view of the entire customer life cycle, which…

    • 3632 Words
    • 15 Pages
    Better Essays
  • Powerful Essays

    CUSTOMER RELATION MANAGEMENT • MODULE CUSTOMER MANAGEMENT • LECTURER DR GEOFF WINTER • TOPIC CUSTOMER RELATION MANAGEMENT. • SUBMITED BY MUHAMMAD AMIR • I.D. 39644 • GROUP D TABLE OF CONTENT 1. EXECUTIVE SUMMARY 2. DEFINITION OF CUSTOMER RELATION MANAGEMENT 3. QCI CUSTOMER MANAGEMENT MODEL 4. DISCUSSION 5. CONCLUSION 6. CITATIONS EXECUTIVE SUMMARY This paper discuss…

    • 1765 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    APPLICATION OF CUSTOMER RELATIONSHIP MANAGEMENT IN INFORMATION TECHNOLOGY INDUSTRY SUBMITTED TO: SUBMITTED BY: Prof. Sanchita Ghosh Shankar Narayan Batabyal Roll no: FT(FS)-11-353…

    • 3184 Words
    • 13 Pages
    Powerful Essays
  • Powerful Essays

    Customer Relationship Management • “The purpose of a business is to create customers” – Peter Drucker • New customers cost you money – money spent on advertising and marketing 1 Company Orientations toward the marketplace 2 CRM Customer Relationship Management (CRM) enables an organization to better management relationships with suppliers, distributors, and dealers, among others 3 CRM • The purpose is to identify, retain, and place the right kind of customer and foster…

    • 6555 Words
    • 27 Pages
    Powerful Essays