Free Sample   Loyalty And Its Role In Customer Relationship Management

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Loyalty And Its Role In Customer Relationship Management

  16 Downloads   |   14 Pages 3,271 Words   |   Published Date: 26/10/2016

Question:

Describe about the Loyalty And Its Role In Customer Relationship Management?

 

Answer:

Introduction

The concept of Cusatomer Relationship Management is the one focusing on management of interactions taking place between the customers and the company, prospects of sale and clients. There are a number of factors involved along with technology for organizing, automating and synchronizing processes of the business. The objectives of this system is focused on enhancing satisfaction of customers, amount of income and the rate of profitability (JavalgÄ&mn; and Moberg 2007). For attaining successful management of relationships with the customers, a number of organizations have been using several tools, procedures and technologies for supporting the relationship of organizations with customers for the enhancement of sales. There can be no dismissal in the significance for satisfaction of customers, while customers being happy can be related to free advertising for the organizations (Renner 2001).

It is important for putting the customers at the central point for the success of business organization in accordance with their strategies, processes and events. As a matter of fact, it is more profitable and easier for initiating sale to the current customers in comparison with the new customers. Satisfaction of customers is strongly related to the effectiveness of managing relationship with the customers, and this has a close relationship with loyalty of the customers. This is due to the fact that an extremely satisfied customer in general ends up staying loyal for a longer duration of time (Peppard 2000). The choice of customers is mainly based on the perceptions regarding satisfaction and value of the services and products being received by them. Hence, it can be stated that satisfied customers create loyal customers that plays a significant role in the management of relationship with customers.

This essay will be indicating that loyalty of customers plays a significant role in the management of relationship with the customers.

 

Customer Relationship Management

Management of relationship with customers is a process combining technology, processes, and people that seeks on understanding the customers of organization. It is referred to as an integrated approach for the management of relationships by creating a focus on retention of customers and development of relationship (Francis 2007). There has been evolution in the management of relationship with the customers from an advancement in information technology along with changes in the organization with respect to processes centralized to customers. Organization who are successful in the implementation of CRM will result in reaping a number of rewards in loyalty of customer and profitability in the long run. Whether or not business organizations can result in making their present customers highly loyal, is highly dependent on if they can be successful in the management of relationships with their customers (Peppard 2000). As there has been an increase in the consciousness of customers, organizations end up paying a large amount of cost if any faults and errors take place in relationships with the customers. It has been identified by the organizations since a long duration of time that customers should be listened to for having the ability of sustaining their existence within the market. This had been the situation in the years of 1990s. However, by the years of 2000s, with an increase in the utilization and impact of the internet along with these types of platforms as groups for discussion, customers are known to be having the opportunity of being more effective and powerful against the business organizations.

Thus, the organizations started to notice success would knock their doors of there was adoption of marketing based on customers. Followed by the phase of development in the understanding of customers, traditional concepts of marketing ended up retaining their validity to a specific limit, but majority of the concepts on marketing had been questioned (Peppard 2000). The concepts that are had been re- questioned are: 1) Loyal customers or new customers? 2) Share of wallet or share in the market? 3) Customer number, order number, card number or customer number? 4) The population of actual customers or the amount of total bills? 5) Behaviour or questionnaire? 6) Reducing the rate of abundancy or customers from the rival organization? And 7) Profitability out of customers or probability out of products?

By the end of this essay, there can be clarity achieved in answering and understanding these questions. There are certain reasons due to which the management of relationships with the customers have emerged (Renner 2001). One of these reasons is that there has been an increase in the cost of mass marketing. In addition to this, it is important to note that share of customers has been gaining huge importance and not the share of market. Further ahead, it is important to note that the concepts related to customer loyalty and customer satisfaction is being given more importance these days. However, there is no denial in the fact that the value of customers has been gaining huge importance across all organizations and industries across the globe. Further ahead, there has been an increase in the intensity of developments and competition in technologies of communication (Francis 2007). There is acceptance that management of relationship with the customers is a philosophy of management that can be used as a strategy of marketing in a number of organizations all across the globe, while a number of concepts and definitions have been established out of it.

It has been identified by Anton that management of relationship with customers can be considered as a strategy of business focusing on the creation of information technologies with the enterprise that assists the system of management in listening to the base of customer, be based on customer and offering perfect services and products for the customer. It can also be stated that it aims on making the entire staff in the organization having the ability of conducting work of teams based on customers (JavalgÄ&mn; and Moberg 2007). Finally, it can be stated that management of relationship with the customers is referred to as the approach making it compulsory for forming relationships with the customers on long term basis with the main aim to increase the productivity and profitability of the organization, and for making the utilization of technology in order to fulfil this particular purpose.

 

Loyal Customers

Brand equity is referred to as the perception of value or simply the value carried by a name of brand. Brand equity consists of a number of different combination of assets that are related to the symbol and name of brand. The assets of brand equity include awareness of brand name, loyalty towards brand, quality being perceived, associations of brand, and other brand assets related to proprietary (Peppard 2000). Each asset of brand equity contributes in creating value in a number of different ways and contributes in creating value for both, the customers as well as the organization.

It has been identified that the core element for the establishment of brand equity is known to be brand loyalty, and the assets related to equity of brand will result in impacting loyalty towards the brand. It has been discovered that suppliers forming closer relationships at work with their base of customers hold the tendency of having better base of customer (Renner 2001). These close relationships contribute in increasing the loyalty of customers towards the suppliers. In addition to this, often these customers provide the suppliers with higher share in the organization of business.

Establishing the loyalty of customers by marketing of loyalty is a strategy of business and not simply a program of marketing. All of the business organization must seek on increasing and maximizing their share of the customers. Persuading loyalty amongst the customers is known to be continuous, and it can be considered more as a journey rather than the destination. It has been stated by Aaker (1996) that focusing on the segmentation of loyalty contributes in providing tactical and strategic insight that helps in the establishment of strong brands (Francis 2007).

CRM in Banking Sector

Organization are able to produce a number of benefits with respect to property, place, time and form that will be satisfying the demands of customers, and all of the credit goes to services and goods. Marketing and forming the services and goods that contribute in satisfying the demands of customers is considered as the base for benefits of production. If there is satisfaction amongst the customer or not dependent on the fact if there is comparison in what has been offered to him with respect to their own expectations (Reichheld 2006).

It has been identified that the core element for the establishment of brand equity is known to be brand loyalty, and the assets related to equity of brand will result in impacting loyalty towards the brand (Francis 2007). It has been discovered that suppliers forming closer relationships at work with their base of customers hold the tendency of having better base of customer. The management of relationship with the customers is known to be grounded on the fact that establishment of relationship should be done with learning each and every single customer (Melissa 2008). With respect to this relationship of learning each and every customer, the organization must consider learning the needs and expectation of the customers in an easy manner and these expectations must be met at an accurate duration of time, also to acquire a benefit in terms of competition.

Persuading loyalty amongst the customers is known to be continuous, and it can be considered more as a journey rather than the destination. It has been stated by Aaker (1996) that focusing on the segmentation of loyalty contributes in providing tactical and strategic insight that helps in the establishment of strong brands (JavalgÄ&mn; and Moberg 2007). If the offer being made is more than what had been expected, the customer is known to be having high degree of satisfaction and hence, remains loyal to the organization. As a significant example, if the actual performance of a particular service or product within a bank is less than the expectation, it results in dissatisfaction, but if it is more than or equal to the level of expectation, there can be achievement of satisfaction amongst the customers.

Since recent time, in the industries such as banking, where there is an involvement of extremely intensified competition, satisfaction of customer has been gaining a comparatively good deal of relevance. It can be considered easy for letting the other bank capture a customer who is displeased and dissatisfied (Melissa 2008). For raising the satisfaction of customer to the highest degree and retaining the base of customer, all that has to be done by banks in attaching the importance with the management of relationship with the customers. The benefits availed by the banks in managing their relationship with the customers are many. It helps to pick out the actual customers in the bank on a long term basis and to help them in making the relationships effective by increasing loyalty of the customer. It also helps to make the way in management of bank based on customer. In addition to this, it helps to bring in the base required for building relationship with humans by collecting and utilizing the information by the institutionalization of individual concepts on sale (JavalgÄ&mn; and Moberg 2007). There is no denial in the fact that loyalty helps to reshape the campaigns of marketing and sale being conducted by the banks. All in all, it can be stated that loyalty of customers helps in establishing successful management of relationships with the customers that increases the overall productivity of the banks in the industry.

Hence, it can simply be stated that in the situation of highly intensified competition, promotion of customer orientation in organizations is at the top most of the priority list (Armstrong 2006). Loyalty of current customer is considered as the key priority in the strategies of CRM. Loyalty contributes to present the path for availing success in the business. With respect to the achievement of loyalty of important customers, but also staying competitive within the market, organizations are known to be adapting a new strategy that is the orientation of customers. This is being given huge importance as it is considered better in comparison with the traditional strategy for the orientation of production (Francis 2007).

 

Relationship between Customer Relationship Management and Customer Loyalty

The management of relationship with the customers is known to be grounded on the fact that establishment of relationship should be done with learning each and every single customer. With respect to this relationship of learning each and every customer, the organization must consider learning the needs and expectation of the customers in an easy manner and these expectations must be met at an accurate duration of time, also to acquire a benefit in terms of competition (Reichheld 2006). In the relationship of learning, the customers will be telling the organization his or her expectations and needs, along with the fact that the organization must have the ability of meeting these expectations and needs by the services and products.

The organization may be making an offer to the customer a similar type of interaction and consumption with the rivals. Since the organization will be having better knowledge about the customer by the relationship of learning that has been developed. This helps in differentiating the organization from the rivals. The organizations should be having much information regarding the customers, making up the databases of customer and upgrading them within the duration of time forming the base for management of relationship with the customers (Holloway 2002).

Learning the demands as well as complaints of the customers by coming in with the base of customers and production of solutions different to the base of customer can be considered as other steps in managing the relationship of customers. Relationships with customers that are directed in an accurate manner leads towards satisfaction of customers and loyalty of customers. Satisfaction of customers is strongly related to the effectiveness of managing relationship with the customers, and this has a close relationship with loyalty of the customers. This is due to the fact that an extremely satisfied customer in general ends up staying loyal for a longer duration of time (JavalgÄ&mn; and Moberg 2007). The choice of customers is mainly based on the perceptions regarding satisfaction and value of the services and products being received by them. Hence, it can be stated that satisfied customers create loyal customers that plays a significant role in the management of relationship with customers.

Relationship between Customer Relationship Management and Customer Loyalty

(Fig: Relationship between Customer Relationship Management and Customer Loyalty)

(Source: Reichheld 2006)

Hence, it can simply be stated that in the situation of highly intensified competition, promotion of customer orientation in organizations is at the top most of the priority list. Loyalty of current customer is considered as the key priority in the strategies of CRM. Loyalty contributes to present the path for availing success in the business. With respect to the achievement of loyalty of important customers, but also staying competitive within the market, organizations are known to be adapting a new strategy that is the orientation of customers. This is being given huge importance as it is considered better in comparison with the traditional strategy for the orientation of production (Kathleen 2000).

Programs of Customer Loyalty

The adaptation of programs for customer loyalty amongst organization has increased with the passage of time, and the customers are known to be the main focus of attention in the present time. Programs of customers loyalty are known to be offering a number of relationship and financial rewards to the base of customer with the man aim to making the customers loyal towards the brand. Programs of loyalty have been established for rewarding the customers who are loyal by a scheme of reward (Melissa 2008). The goal maintained by the programs of loyalty are focused on establishing a higher degree of retention of customer by the provision of value and satisfaction to particular customer. These particular programs also contribute in increasing loyalty of customers towards the brand by creation of profits and switching costs by avoiding the competition on price. The value perception of customers is known to be an important condition for the development of loyalty amongst the customers towards the brand by these programs of loyalty (Peppard 2000).

The perceiving of program of loyalty has to be done as being valuable and important for the base of customers, along with having convenience and generating in value of cash for having the ability of enticing the customers within the program in a significant manner.  Organization are able to produce a number of benefits with respect to property, place, time and form that will be satisfying the demands of customers, and all of the credit goes to services and goods. Marketing and forming the services and goods that contribute in satisfying the demands of customers is considered as the base for benefits of production (Reichheld 2006). If there is satisfaction amongst the customer or not dependent on the fact if there is comparison in what has been offered to him with respect to their own expectations.

 

Conclusion

Hence, as a simple point it can be stated that the base of customers with high loyalty can contribute in generating an extremely predictable stream of profits and sales. The effect of customer loyalty on the costs of marketing are often known to be substantial as it involves less amount of cost for retaining the customer in comparison with the cost involved in the attraction of new ones (Renner 2001).

A number of organizations end up making the mistake to seek growth through enticing the base of new customers towards the brand and to neglect the ones that already exist. It has been discovered that suppliers forming closer relationships at work with their base of customers hold the tendency of having better base of customer (Peppard 2000). These close relationships contribute in increasing the loyalty of customers towards the suppliers. In addition to this, often these customers provide the suppliers with higher share in the organization of business. Establishing the loyalty of customers by marketing of loyalty is a strategy of business and not simply a program of marketing. Loyalty of current customer is considered as the key priority in the strategies of CRM (Winer 2002). Loyalty contributes to present the path for availing success in the business. Management of relationship with customers is a process combining technology, processes, and people that seeks on understanding the customers of organization. It is referred to as an integrated approach for the management of relationships by creating a focus on retention of customers and development of relationship.

 

References:

Armstrong, G. 2006. Principles Of Marketing, 11 th Edition. Prentice Hall. New Jersey.

Francis, M. 2007. Customer Relationship Management, Elsevier Ltd. Amsterdam.

Holloway, A. 2002. It’s All About Relationships”, Database: Business Source Premier, Canadian Business, Vol. 75, Issue 20.

JavalgÄ&mn;, R.G. and Moberg C.R. 2007 “Service Loyalty: Implications for Providers”, The Journal of Services Marketing, Vol. 11, No:3.

Kathleen, K. 2000. “Customer Relationship Management: How To Meansure Success?”, Database: MasterFÄ°LE Premier, Bank Accounting&Finance (Euro Money Publications PLL), Vol. 13, Issue 4.

Melissa, K. 2008. Assesing The Relationship Between Loyalty Program Attributes, Store Satisfaction and Store Loyalty. Journal of Retailing and Consumer Services. 15, 364-374.

Peppard, J. 2000. “Customer relationship management (CRM) in financial services”, European Management Journal, Vol. 18 No. 3, pp. 312-27.

Reichheld, F.F. 2006. The Loyalty Effect, Harvard Business School Press, Boston, MA.

Reichheld, F.F. 2006. “Learning from customer defections”, Harvard Business Review, March-April, pp. 56-69.

Renner, D. 2001. “Customer relationship management: a new weapon in your competitive arsenal”, Siebel Magazine, Vol. 1 No. 2.

Winer, RS. 2002. “Dynamic Customer Relationship Management: Incorporating Future Considerations into The Service Retention Decision”, Journal of Marketing, Vol. 66.

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