Facing an increasing competition for customers, Relationship Marketing has been acknowledged by many researchers and practitioners as “the new othodoxy” (Petrof, 1997). The belief behind it has been that increased customer retention will lead to increased customer profitability (Reichheld and Sasser, 1990). Strategies to reach this goal have been implemented widely and contain customer care, customer loyalty programs and in this context database and direct marketing techniques (O’Malley and Prothero, 2004). Accordingly the objective of relationship marketing is to identify, establish, enhance and maintain relationships with customers and other stakeholders at a profit (Liljander and Roos, 2002, Grönroos, 2000, Morgan and Hunt, 1994). As opposed to other methods of binding customers (e.g. contracts), relationship marketing is geared to human relationships (Liljander and Roos, 2002) and held together by normative methods and therefore trust, commitment, mutual benefit and loyalty.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Commitment, agency and trust - bases for loyalty
- Loyalty concepts and profitability
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to investigate the relationship between customer loyalty and profitability, challenging the assumption that loyalty automatically translates to increased profits. It explores the preconditions under which loyalty contributes to profitability and examines the role of customer satisfaction in this dynamic.
- The interrelationship between commitment, trust, and loyalty in customer relationships.
- The multifaceted nature of customer loyalty and its various dimensions.
- The examination of loyalty's direct link with organizational profitability.
- The role of customer satisfaction as a mediator between trust and loyalty.
- Exploring different theoretical frameworks, including agency theory, to understand loyalty development.
Zusammenfassung der Kapitel (Chapter Summaries)
Introduction: This chapter introduces relationship marketing as a dominant approach in competitive markets, emphasizing customer retention for profitability. It highlights the importance of customer care, loyalty programs, and database marketing. The chapter establishes the key concepts of commitment, trust, and loyalty, acknowledging their interconnectedness and the ongoing debate about their relative importance and sequence in building customer relationships. It mentions various viewpoints on the relationship between commitment and loyalty, with some seeing them as virtually identical and others viewing commitment as a prerequisite for loyalty or a behavioral manifestation, contrasting with loyalty's attitudinal aspect. The chapter finally establishes its goal: to investigate the conditions under which customer loyalty translates to profitability, questioning the simple equation of loyalty with "cash cow" status.
Commitment, agency and trust - bases for loyalty: This chapter delves into the intertwined nature of commitment, agency, and trust in fostering customer loyalty. It explores differing views on which concept takes precedence in building relationships, with some researchers prioritizing commitment as the ultimate stage of relational bonding. The chapter discusses the various perspectives on the relationship between commitment and loyalty, with some defining brand loyalty as commitment and others differentiating commitment as a behavioral aspect while loyalty represents attitude. The importance of commitment as a foundational element for achieving loyalty is highlighted, alongside trust as a crucial component of long-term customer relationships. The chapter examines how relationships begin and loyalty develops in the absence of initial confidence and identification, introducing two key theories: commitment through word-of-mouth recommendations and agency theory, which addresses information asymmetry at the start of a relationship. The role of customer satisfaction as a mediator between trust and loyalty is also highlighted, supported by existing research indicating the close, yet not identical, relationship between satisfaction and loyalty.
Schlüsselwörter (Keywords)
Customer loyalty, relationship marketing, commitment, trust, agency theory, customer satisfaction, profitability, word-of-mouth, behavioral loyalty, attitudinal loyalty.
Frequently Asked Questions: A Comprehensive Language Preview
What is the main topic of this paper?
This paper investigates the complex relationship between customer loyalty and profitability. It challenges the common assumption that loyalty automatically leads to higher profits, exploring the conditions under which loyalty actually contributes to a company's bottom line.
What are the key themes explored in this paper?
Key themes include the interconnectedness of commitment, trust, and loyalty in customer relationships; the multifaceted nature of customer loyalty; the direct link (or lack thereof) between loyalty and organizational profitability; the mediating role of customer satisfaction; and the application of theoretical frameworks like agency theory to understand loyalty development.
What are the objectives of this research?
The paper aims to understand how customer loyalty relates to profitability, going beyond the simplistic view of loyal customers as automatic profit generators. It seeks to identify the preconditions for loyalty to translate into profit and to examine the role of customer satisfaction in this dynamic.
What are the chapter summaries?
The Introduction sets the stage by discussing relationship marketing, customer retention, and the importance of commitment, trust, and loyalty in building customer relationships. It introduces the central question of the paper: under what circumstances does customer loyalty lead to increased profitability? The chapter on Commitment, agency and trust - bases for loyalty delves deeper into these concepts, examining different perspectives on their interrelationship and exploring how loyalty develops, particularly in situations where initial trust is lacking. It also highlights the role of customer satisfaction as a mediator between trust and loyalty.
What theoretical frameworks are used?
The paper utilizes agency theory to help explain the dynamics of information asymmetry and its impact on the development of customer loyalty, particularly in the early stages of a customer relationship.
What is the role of customer satisfaction?
Customer satisfaction is presented as a mediating factor between trust and loyalty. While closely related, satisfaction and loyalty are not identical, and the paper explores this nuanced relationship.
What are the different types of loyalty discussed?
The paper distinguishes between behavioral loyalty (actions) and attitudinal loyalty (beliefs/attitudes), acknowledging the complexities of defining and measuring loyalty.
What are the key words associated with this research?
The key words are: Customer loyalty, relationship marketing, commitment, trust, agency theory, customer satisfaction, profitability, word-of-mouth, behavioral loyalty, attitudinal loyalty.
What is the overall approach of the paper?
The paper takes a critical and analytical approach, challenging conventional wisdom about customer loyalty and profitability. It uses existing research to build its arguments and explores the complexities inherent in understanding customer relationships.
What is the significance of the research?
The research is significant because it provides a more nuanced understanding of the relationship between customer loyalty and profitability, helping businesses move beyond simplistic assumptions and develop more effective strategies for cultivating truly profitable customer relationships.
- Arbeit zitieren
- Judith Hoffmann (Autor:in), 2005, Understanding Advocacy, Loyalty and Committment. Loyalty - A 'Cash Cow' by definition?, München, GRIN Verlag, https://www.grin.com/document/50837
