Our secondary goal is to develop a set of informal propositions as to how the trust environment affects the satisfaction-loyalty relationship. Before describing the trust environment and its impact on the satisfaction-loyalty relationship, we must understand the nature of the relationship itself. Traditionally, it has been assumed that the effect of satisfaction on loyalty is linear. Reichheld , for example, notes that it is not uncommon for relatively satisfied customers to defect.
We restrict our discussion for the time being to relatively competitive industries where, according to Jones and Sasser , two types customers predominate: Loyalists are very satisfied customers who willingly repurchase, whereas mercenaries are moderately satisfied customers who do not have a long term commitment and are constantly seeking to find a better deal from another firm.
The result should be a particular type of relationship between satisfaction and loyalty. Loyalty should increase marginally over moderate to high levels on the satisfacion continuum where mercenaries are predominant and then increase dramatically at the higher end of the satisfaction continuum where loyalists are created.
Auh and Johnson provide a theoretical explanation for this proposed increase in the effect of satisfaction on loyalty. In problem solving behavior, customers consider a variety of available alternatives.
They use decision strategies and rules to weight the costs and benefits of the alternatives to identify those that best meet their needs. Bettman and Zins refer to these as constructive processes.
As their experience and expertise grow, customers identify a smaller set of preferred alternatives an evoked or consideration set. The result is a discontinuity, or categorical shift, in the amount of external information processed and number of alternatives considered as customers move from problem solving to more routinized behavior.
This prediction is consistent with a growing body of marketing and consumer research studies see, for example, Dickson and Sawyer ; Hoyer ; Hoyer and Brown ; Lehmann, Moore and Elrod ; Leong ; Olshavsky and Granbois Auh and Johnson argue further that the transition from problem solver to routinized or habitual buyer represents movement up the satisfaction continuum.
As experience and expertise grow, customers are better able to identify those products and services that best meet their needs which, in turn, results in an increase in satisfaction. Put differently, moderate to low satisfaction indicates that the customer is not particularly happy with their purchase and consumption decision and should explore more alternatives.
As customer satisfaction increases, the costs of continued search eventually outweigh the benefits. At this point customers shift from problem solving to more routinized behavior where they rely upon a smaller consideration set of stored brand concepts that drive their purchase behavior.
As a result, the effect of satisfaction on loyalty should increase at some point on the satisfaction continuum. Eventually the positive effect of satisfaction on loyalty should level off. For example, Howard reports that evoked or consideration sets within routinized response behavior, albeit small, are generally greater than one.
Customers can think of at least some reason why they would not repurchase from the same firm again, even a firm with which they are completely satisfied. The result is a more complex overall relationship that is best described as either a negative cubic relationship or, as depicted in Figure 1, a piecewise regression relationship from Auh and Johnson Initially, the positive effect of satisfaction on loyalty should increase at a moderate to high level on the satisfaction continuum as customers move from problem solving to more routine purchase behavior.
Second, once their evoked or consideration set is reduced, the effect should level off. Specifically, they find evidence of a significant negative cubic relationship, as well as significantly different slopes using piecewise regression analysis as illustrated in Figure 1.
Friedman finds more general support for a negaive cubic relationship across the more competitive industries in the ACSI. Recall that we define trust as the attainment of a level of satisfaction and resulting loyalty at which customers are comfortable forgoing problem solving behavior. Consider first the influence of the firm or organizational environment. Although a multitude of possible vertical and horizontal relationships exist within organizations, we simplify things here to highlight the relationship between employee and employer.
Organizational research identifies three major factors used to explain the existence or absence of employee-employer trust relationships: Yet employer-employee trust is also a function of the degree to which an employer and employee identify with each other as well as the degree to which each party is inherently predisposed to trust.
There are important implications of firm-level trust, and how it is conceptualized, for customers. We expect that customers are more willing to enter a trust high loyalty relationship with an organization that has itself achieved a trust relationship between employers and employees.
There are at least three possible ways in which employee-employer trust influences customers. The most obvious is that mistrust within the firm results in lower product or service quality, satisfaction, and subsequent loyalty. Second, good poor employer-employee relations should have positive negative signal value to customers over and above the level of quality and satisfaction provided.
Will, for example, a customer trust an automotive company to provide a high quality product and service experience if it continues to be unable to resolve problems with its unions and suppliers? More specifically, we expect the degree to which customers empathize with dissatisfied or mistreated employees to moderate the impact that a low-trust firm environment has on customer loyalty.
As noted, organization-based research identifies two other factors with implications for customer loyalty: We expect, for example, that customers are more willing to enter into a trust relationship at a given level of satisfaction with companies r brands they identify with e. Meanwhile, predisposition to trust likely varies with socioeconomic and demographic groups that vary systematically in customer satisfaction Bryant and Cha The influence that market-level factors have on satisfaction and subsequent loyalty is primarily a function of competition and switching barriers.
Fornell argues that the primary market mechanism for retaining customers other than through customer satisfaction is through switching barriers. Switching barriers prevent customers from switching in the face of low satisfaction.
The implication is that switching barriers change the nature of the satisfaction-loyalty relationship. In contrast to Figure 1 where the impact of satisfaction on loyalty increases at a moderate to high level of satisfaction , high loyalty likely persists at low to moderate levels of satisfaction when switching costs are high. A significant level of dissatisfaction is required to dramatically decrease loyalty in this case. First, create a company culture of mutual respect. When their thoughts turn to moving elsewhere, that positive company culture can go a long way.
Next, hire from within. When you have a position and an employee who clearly fits the bill, you will boost company morale and encourage other employees to stick with their positions by hiring from within.
While you may have times that you need an outside influence, in many instances your employees will be the best hires for an opening you have. This encourages employees to continue working because they have the hope of being promoted, knowing that your company culture emphasizes hiring from within.
Finally, make your branch managers the decision makers for the branch. This gives your local employees some ownership in what happens in their banks.
While you will still need to make some decisions on a corporate level, whenever possible allow the bank managers to make decisions for their branches. Lending authority, for example, can be handed to branch managers.
Extraordinary service builds fortunes in repeat customers, whereas poor service will drive your customers to your competition. A powerful system that improves the interpersonal skills of your team and changes the spirit of your organisation. It involves speaking to colleagues politely and pleasantly, without sarcasm or parody, and treating them at least as well as you would want them to treat your customers.
This will help your team to feel worthwhile and important, which makes for pleasant social contacts at work. It also motivates them to provide extraordinary service, encourages them to be consistently pleasant in all of their dealings and to relate to customers in a warm, human and natural manner.
This results in better, warmer, stronger, more trusting relationships and longer term bonds with your customers. Long-term success and customer retention belongs to those who do not take ethical shortcuts. There must always be total consistency between what you say and do and what your customers experience.
The design, build quality, reliability and serviceability of your product or service must be of the standard your customers want, need and expect. Service integrity is also demonstrated by the way you handle the small things, as well as the large. Robert Clay helps entrepreneurs and business leaders to outsell, outmarket and outperform their toughest competition; turn any good business into a GREAT business; and turn any great business into one of the leaders in its niche.
Why is client servicing so integral to agencies? Slow and Steady Wins the Race? Snail Mail in Business - telegraph 21 telegraph Relationship Automation Relationships Matter: 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.
Expert Lior Arussy explains why customer satisfaction is not necessarily the best indicator of customer retention.
Thriving businesses require two types of customers: first-time clients and returning customers. This lesson discusses how customer satisfaction and.
it explains the difference between retention and satisfaction, and typed of loyal customers, and also discuss reasons behind churn, specially for telecom indus. Impact of Customer Satisfaction on Customer Retention: A Case Study of a Reputable Bank in Oyo, Oyo State. Nigeria International Journal of Managerial Studies and Research (IJMSR) Page |
The purpose of this study was to explore how the employees of a company experience the concepts of customer satisfaction and retention. A phenomenological method was used, allowing the informants’ own interpretations to be discovered. Satisfaction was discussed from three perspectives: definition of the concept, how to recognise when a customer is satisfied, and how to enhance satisfaction. In addition, because the relationship between satisfaction and retention, rij, is a non-linear, individual-level function the effect of an increase in satisfaction on average retention, rj, cannot be computed directly from the logit function, because the average of r,.'s is Customer Satisfaction not necessarily equal to the logit function.