COVER PAGE

INDIVIDUAL ASSIGNMENT ON MARKETING MANAGEMENT

AND STRATEGY SUBMITTED IN PARTIAL FULFILMENT OF
THE REQUIREMENTS FOR THE AWARD OF MASTERS IN
BUSINESS ADMINISTRATION, AHMADU BELLO UNIVERSITY,
ZARIA

COURSE CODE: BUAD 828

NAME: ONWUBUYA, CHUKWUEBUKA PHILIP

REG NO: P19DLBA80076
TUTOR: BOSE OGEDENGBE

DISCUSSION TOPIC: CUSTOMER RETENTION VERSUS CUSTOMER

LOYALTY; WHICH IS KEY TO COMPANY?
INTRODUCTION

Customer retention and customer loyalty are very closely related terms in Customer Relationship
Marketing. They both relate to strategies employed by companies to ensure continuous customer
delight and satisfaction ensuring repeated purchase of same product/service or other
product/service provided by the company.

However, some difference exists between both marketing concepts which will be expatiated
upon shortly.

The customer retention definition in marketing is the process of engaging existing customers to
continue buying products or services from a business. The best customer retention tactics enables
one form lasting relationships with consumers who will become loyal to the brand. They might
even spread the word within their own circles of influence, which can turn them into brand
ambassadors.

it’s easier and less expensive to retain customers than to acquire them. According to Wright and
Nancarrow (1999), at best, your probability of selling to an existing customer is at least 40
percent more likely than converting someone who has never bought from you before.

The concept of loyalty (allegiance to monarchy, causes and people) fits in with the military terms
found in marketing (strategy, targeting, etc.). Interestingly, loyalty is subordinate within the
concept of a relationship, yet brand loyalty was a term commonly used in marketing before the
wide adoption of the principle of relationship marketing. This would suggest in early marketing
circles at least the term may not have had the full metaphorical significance of loyalty as in an
interpersonal relationship. It may instead have been interpreted as a positive disposition to a
brand that transcends transactions and makes repurchase likely in the face of adversity
(competitor brand entreaties).

On occasions the power of such entreaties from competitors may prove too much and disloyal
behaviour may be exhibited. It is, however, possible no unpleasant feelings of disloyalty are
experienced as might be the case of an interpersonal relationship. Of course, in some intense
service categories such feelings may be manifest
BETWEEN CUSTOMER RETENTION AND CUSTOMER LOYALTY, WHICH IS KEY?

Success in business is dependent on clear thinking on the fundamental conceptual issues. If

customer retention is a major focus, then a key question is what exactly is an organisation trying
to retain? The list of possibilities is long:

 Number of active customers

 Frequency of buying
 Recency of buying
 Size of expenditure
 Share of expenditure
 Possibly even extent of cross-sales
 Contract
 Adjust buying/usage procedures to fit supplier
 Routinized re-ordering

Behavioural definitions (such as those listed above) may seem more relevant in some respects
but in other respects may blind marketers to underlying weaknesses in the customer franchise or
disposition. Kangis (2000) posits that some attitudes of customers define or contribute to the
behavioural definitions listed above and are better guarantees of loyalty. Some of these attitudes
are:

 Trust
 Empathy
 Propensity to consider buying/use again/contribute
 resources
 Propensity to pay more/a premium
 Customer satisfaction/delight
 Likelihood to recommend/advocacy
 Salience of brand proposition and its components
 Brand preference
 Psychological commitment/loyalty
Changes in attitudes are more often than not antecedents of changes in behaviour in all but very
low involvement product categories.

In my opinion customer loyalty is key to a company. It is should be the goal of companies to

build customer loyalty. Real customer loyalty is built over time by actions taken by the company.
Customer retention strategies however are the efforts companies take to achieve customer loyalty
over time.

Stratigos (1999) recommends three indices for the assessment of brand loyalty:

o likelihood to use and renew

o likelihood to contribute
o likelihood to recommend.

Thus from the above a loyal customer is more likely to re-use or re-purchase the product or
service, will contribute to the brand, most likely to recommend the brand, all these with little or
no additional or encouragement from the company. It is the dream of any marketer to have loyal
customers.

Apathy may lead some customers to demonstrate apparent ‘loyalty’ or ‘commitment’ based on
behavioural measures. Other customers may resent buying from an organisation but be locked
into the supplier for various reasons. In such cases, the reason for staying ‘loyal’ or ‘committed’
is that the emotional and financial cost of changing supplier at that point in time is too great to
countenance. If, however, a competitor identifies this weakness and makes it not just easy but
rewarding for a customer to switch then apparently loyal customers may do so in droves. There
are also customers who do not buy but feel some ‘loyalty’. Price, access etc. may prevent a
purchase. Once the barriers are removed, however, the loyal customer can demonstrate loyalty or
commitment in behavioural terms.

However, genuinely loyal customers need little or no encouragement to continue patronage of

the company’s products and services. These customers will continue to purchase the product
notwithstanding having to pay a premium to get it. Case in hand is the Toyota Camry in Nigeria.
The Toyota brand has become associated with efficiency, fuel economy and durability in
Nigeria. A foreign used Toyota Camry (2009 model) goes for about N4.2million. In comparison
a Honda Accord of the same engine size, category and year which goes for N2.8million. Sales of
the Toyota Camry far outstrips corresponding sales for Honda Accord even though the customers
have to purchase it at a premium. More, Toyota has no need to reward or advertise before sales
for this car model/make to boost sales as the word of mouth endorsements from users of the
vehicle continues to increases sales by the year.

Another example informing my opinion about brand loyalty being key is the story of Arsenal
football club. In the football industry, winning games and trophies to please the fans is key to
retaining their patronage. However, Arsenal Football club has had an abysmal performance in
the last four years in comparison to their previous exploits, as there have not won any of the
major trophies in England and Europe. That notwithstanding, revenue of the football club has not
dropped significantly as the club has a large base of loyal fans to purchase regular and season
tickets and other promotional materials.

Customer retention strategies involves measures like after sales support and services, customer
opinion surveys about the products purchased, discounts, gift cards/vouchers, efficient customer
service, corporate social responsibility and community outreaches, support of causes,
sponsorship of sporting events, advertisement, etc. Majority of these strategies cost money and
there is no guarantee that there will be commensurate increase in sales as there will be consistent
customer defection in response to the competition or because of personal preferences. A review
of the use of flight miles policy by airline companies as a retention strategy can bring this to
better perspective. Emirates Airlines promises customers that after 30,000miles the next flight is
free to whatever destination. However, from interview of relatives and friends their decision to
fly using this airline was not determined by this sales promotion, but by cost and convenience as
many claimed that the policy of Emirates airlines to always take a stop at Dubai before
continuing the trip adds extra and sometimes unnecessary flying time to their itinerary.
Therefore, informing their decision to use Ethiopian Airlines which could be more expensive
sometimes. More, those who do use Emirates do so to enjoy the promo, and when they get it,
most times do not continue with the company.

Another apt example is the response of Nigerians to price discounts and promotions of
telecommunication companies. Using the Glo network as a Case study: the company offers up to
500% bonus on recharge of credit unit for new customers for the first three months. However, a
number of people exploit this. They purchase the line, use it for three months and discard it once
the promotion period is over and continue use of their old or former lines to which their real
loyalty lies with.

In conclusion, the task of getting loyal customers falls to companies that wish to establish long
term profitability and sales. However, they first have to attract the customers, retain them and
eventually build loyalty from the customers.
REFERENCES

Griffin, J. (1996) ‘The Internet’s expanding role in building customer loyalty’, Direct
Marketing, Vol. 59, No. 7, p. 50.

Kangis, (2000) ‘Measuring end-user loyalty matters’, online mag, Nov–Dec, p. 45

Liddy, A. (2000) ‘Relationship marketing, loyalty programmes and the measurement of loyalty’,
Journal of Targeting, Measurement & Analysis, Vol. 8, No. 4, pp. 351–362.

Margolis, B. (1999) ‘An Amazon.com story: Lessons learned?’, Direct Marketing, Vol. 62, No.3,
p. 57.

Starkey, M., Stone, M. and Woodcock, N. (2000) ‘The customer management scorecard’,
Business Intelligence.

Stone, M. and Woods, A. (2000) ‘Making sense of cross-purchasing: A note’, Journal of

Financial Services Marketing, Vol. 5, No. 2, pp. 129–134.

Stratigos, A. (1999) ‘Measuring end-user loyalty matters’, online mag, Nov–Dec, p. 74.

Wright, L. T. and Nancarrow, C. (1999) ‘Researching international brand equity: A case study’,
International Marketing Review, Vol. 16, No. 4/5, pp. 417–431.