What Is the Most Effective Strategy for Building Customer Loyalty?

Topics: Marketing, Customer service, Business Pages: 8 (2712 words) Published: May 5, 2013
What is the most effective strategy for building customer loyalty in business-to-business (B2B) relationships?

In today’s highly competitive business environment, the remarkable increase in the number of companies is becoming a problem. Due to this situation and also diversity in customer demand, business people are required to contemplate how to establish strategies to gain new potential customers or to maintain existing customers. Caceres and Paparoidamis (2007) identify that the cost of acquiring new customers is considerably greater than the cost of retaining existing customers. It could be said that it takes less money to keep your current customers happy than to attract new ones. Therefore, most firms’ programs have heavily focused on customer retention or, in other words, the management of customer loyalty. A significant amount of research asserts that recognition of factors that influence customer loyalty is fundamental for firms. Particular elements proposed in this essay include customer satisfaction, customer service, and word-of-mouth. This essay argues that it is essential for a company to consider how these factors work inter-dependently to create customer loyalty. It will discuss the important elements that influence customer loyalty in business-to-business (B2B) relationships and also look at their relative effectiveness. Finally, it will prove that the individual factors cannot be evaluated in isolation and only operate effectively as a whole.

Firstly, customer satisfaction may appear to be an important and crucial component in maintaining customers over a long period of time. White and Yanamandram (2007) clearly define customer satisfaction as a fulfillment of a customer’s wishes or expectations of a purchase. In other words, the customer will be satisfied when they are able to get what they want. It is likely to be one key factor in measuring customer loyalty. According to Naumann, Williams and Khan (2009), customer satisfaction might be the most significant attribute in measuring the attitude of customers. As a result, there is much research focusing on the relationship between customer satisfaction and customer loyalty. However, it seems that one factor is no longer enough to briefly measure the level of customer loyalty. According to Paulssen and Birk (2007, as cited in Mittal & Kamakura, 2001), a customer still switch to the competitors, even though, they were satisfied with their previous supplier. It proves that even customers who have stated that they are satisfied with a business firm subsequently still switch to others. In other words, these customers do not want to return to the firm. To explain this issue, Naumann, et. al. (2009) identify that customers who did not renew their service contract had completed a satisfaction survey. They clearly report that many business service companies have lost a significant number of customers due to the differences of the quality of customer service compared to the competitor. Therefore, it seems to be clear that customer satisfaction alone could not necessarily be a good predictor to determine whether the customer will keep coming back or not.

Nevertheless, customer satisfaction is usually associated with customer loyalty. It could be said that the relationship between satisfaction and loyalty differs strongly under some different conditions. According to Caceres and Paparoidamis (2007), if a company is able to create a greater stage of customer satisfaction, it is generally believed that it will improve customer loyalty. Satisfied customers are essential to lead the company to a great success. With the intention to create a loyalty base, many companies try to satisfy their customers regularly to develop a long-term relationship. The measure of satisfaction seems to be a measure of how customers might act in the future. The business corporations might achieve total customer satisfaction by understanding what the customer wants and delivering it...

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