In competitive markets, even satisfied customers switch or defect to competitive offers. Since loyal customers are more profitable for any organization, there is a need to identify better predictors of loyalty. Indicators of relationship strength such as trust, satisfaction and commitment are better predictors of loyalty and by including these parameters in customer satisfaction surveys; managers can modify service delivery with a focus on customer loyalty. The psychological steps across relationship stages developed by Mookerjee6 are explained below.
Switching is very common in the initial stages of a relationship process. A prospect that gets attracted by a company’s marketing programme may try out its product or service offering and becomes a customer. However, the initial interactions and experiences determine whether the customer is willing to continue or not. In the cellular service industry, the first two weeks are the most crucial. Most customers need a lot of handholding, support and technical help to start using the service. If it is handled well, customers are likely to continue using the service.
Satisfaction is a complex emotion, which depends on the offer characteristics, expectations and usage situation. Customers are satisfied when the performance of the product or service matches or exceed their expectations. Satisfied customers are more likely to continue their patronage. Therefore, satisfaction is an important intermediate step in the relationship building process and many of the satisfied customers will become clients.
Satisfaction over multiple interactions leads to a stage where the customer begins to have faith in the offering and its consistency in performance. Satisfaction leads to trust when some more antecedent conditions such as shared values and goals, dependence based on stable expectation/ perception of performance and perceived switching costs are fulfilled. Trust is defined as the willingness to rely on an exchange partner in whom one has confidence. It exists when a party has confidence in an exchange partner’s reliability and integrity and when they share common goals and values. The concept of trust is common among marketers in the packaged goods industry, which depends on trust to build brand loyalty.
Commitment to a relationship is defined as an enduring desire to maintain a valued relationship. Therefore, commitment exists only when the relationship is considered important. It can be operationalized using the two dimensions: (1) attitude towards interacting with each other and (2) the formation of bonds.
Trust and commitment are key variables because they encourage marketers to work at:
- Preserving the relationship investments with partners/clients.
- Resist short-term gains that may be the lesser than expected benefits of staying on in the relationship.
- They view potentially high-risk actions as acceptable since they expect that partners will not act opportunistically.
Loyalty is not simply repeated buying. Loyalty includes future purchase intentions, price sensitivity, and referral behaviour (positive word of mouth). In terms of measurement of loyalty or loyalty related behaviour, typical questions would refer to:
- Intentions regarding the next purchase
- Whether a change in supplier would be considered with a particular level of increase in the prices
- The number and intensity of complaints
- The tendency to talk about the supplier to other clients
The degree of desire to share positive experience also known as word of mouth
Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.