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Essay Question: Critically evaluate how organisations can retain customers through the quality of their relationships with them.

ABSTRACT:

The objective of this journal is to find out how customers can be retained through the quality of relationships they have with the organisation through its marketing communications; factors include trust etc. This article takes into consideration the core service and relational benefits which help in establishing a relationship and whose outcome leads to loyalty and retention of customers. Two companies; BOOTS and Tesco have been used as examples in order to demonstrate how they have successfully established relationships by offering core and relational benefits in order to build relationship quality and retain their customers, and the importance of relationships discussed in the conclusion.

KEY WORDS: Relationship Marketing, Customer retention, Loyalty, Relationship Quality.

et al: 2006). commitment. however the forerunners of relational quality are mainly trust. satisfaction and cooperation. Nevertheless. in order to meet the expectations of all the parties involved in the relation such as suppliers. consumers and the company itself.Page |2 MKT 11102 INTRODUCTION: Vilfredo Pareto stated in his work that 80% of sales for an organisation will come from 20% of its customers. Relationships with customers are important since not only do long term customers generate more sales but it also costs lesser to serve them. commitment and satisfaction derived from the relation help in building a bond between the two parties.26) therefore the importance of building long term relationships with customers is paramount. these constructs differ in different industries. cited in 2009a) states relationship marketing aims to find out. mutual goals.Time is also an integral part of quality relationship building. (Evans. if they are not profitable. 2009). 1997. p. dealers. which is achieved through the mutual understanding between these parties. In the short term it is . Gronroos (1999. thus companies employ a variety of tactics in order to make customers loyal and in turn increase profitability (Athanasopoulou. cultivate and enrich relations and in some cases terminate them. (McCorkell. Sabol (2002) argues that for building a relation trust is the most important factor in gaining loyalty of the consumers. CONSTRUCT OF REALTIONSHIPS: There is a variety of relational constructs used by different authors for example Odekerken et al (2001) states that trust.

fulfilment of promises. 2001). it is through this that the standard of service or benefits received can be assessed (Brady and Cronin. and Eisingerich. commitment. IMPORTANCE OF QUALITY RELATIONSHIPS: The foundation blocks of building a relationship are long-term orientation. Gronroos (1997) noted that service quality is generally conceived to comprise of functional and technical quality. two-way dialogue. The service or product is an essential component in establishing a relationship. The former is in which way the service is provided while the latter mirrors the result of the service experience. Barnes (2001) mentions that a relationship is a dynamic process and every contact can change the way it is perceived. 2008). it is becoming the most important tool to for value addition which in turn means that the benefit from the service quality. According to Kaul (2005) the quality of the service is linked to the relation of the customers to the service. Therefore according organizations should put special efforts in order to earn the trust and satisfaction of consumers thereby build relationships with them. focussing on customer share and not . 2009). trust. What makes a relationship special is the quality and effort put into it which binds a customer to the company.Page |3 MKT 11102 uneconomical for firms however the economic advantage accrues over time and so does the quality of the relations (Athanasopoulou. Relationships are first started by attracting the consumers and providing them with the Core service and relational benefits. customer education and expertise initiates the consumer's trust (Bell. Priluck (2003) stated that companies with good relationship with its customers can sometimes also justify the reason for its product failures.

cited in Gronroos 2009. for e. 2006) and gain recognition for their brand thereby driving commitment and loyalty. in order to distinguish itself from competition needs to create value. For a company. and customisation as much as possible (Little. Just the value or services of the core product are not enough to keep a customer with a company (Zineldin. Lastly special treatment benefits are VIP lounges for first class travellers.352) identifies the importance of value creation for . p. The lifetime worth of consumers are focussed on by companies in order to build relationships through usage of different technologies and relationship marketing and management (Lovelock et al. (2006. However. the functional and technical quality is of the same standards. confidence and special treatment benefits are offered (Tharau. Addressing you by your name in a shop by an employee and giving you preference is a social benefit. in recent times the core product is more or less the same.87) states that the core benefits from the product or service may not be the commanding factor in building a relation. 20. trust (Palmatier et al. In this current situation of recession developing relationships with customers is of vital importance. of a company when compared to its competitors. complimentary food on arrival at a hotel etc. 2006). companies such as Vodafone sending a text on our phone to let us know about the time of our package arrival. In order to build this bond and for both parties to be in a mutually beneficial position and above the benefits of the core product or service. p.g. 2002). Eggert et al. relational benefits such as social.Page |4 MKT 11102 market share. to reduce our anxiety is a confidence benefit. Through these companies aim to develop their quality of service over and above the core product or service and build a personal relation with the customer and in turn gain the customers satisfaction . 2007). Njenga (2010. p. et al. 2003).

additional health & beauty tips and also a quarterly magazine are issued for its most .Page |5 MKT 11102 customers in order to develop long term relations with customers. value proposition development and managing the relationship needs to be done effectively. network development. The card helps in CPA by gathering all the data such as place of shopping. and the products are tailored according to each segment's need. however BOOTS with its effective segmentation has been able to cater to the different segments in actual fact. The company adds value to the core product by rewarding loyalty with points which can be redeemed at any of its stores. BOOTS aims to increase the value proposition by making the points redeemable immediately and helps its customers treat themselves to high profile products which intends to provide customers with the social and special treatment benefit over and above the core benefits from using the product. Most companies are inundated by the amount of data. For each campaign customers are handpicked and are directly contacted by mail. 2000). EXAMPLES OF QUALITY RELATIONSHIPS: Examples of some successful companies who have been able to retain customers through the quality of relationships with them:BOOTS: BOOTS uses an "Advantage Loyalty Card" program through which it aims to develop relations with its customers. customer intimacy. promotions and benefits attracted to. product bought. Customer intimacy aims to know a company's customers (Buttle. Buttle (2000) states to build a successful relationship and add value. customer portfolio analysis (CPA). average transaction value etc. which go beyond just delivering core benefits derived from the product.

Tesco attracts its customer base by rewarding points which can go further than everyday shopping and it associates its partner organisations.Page |6 MKT 11102 loyal customers. 2005). Tesco Clubcard not only builds relations with its own customers but it also introduces customers and businesses to each other. (cited in Gronroos.BOOTSlearningstore. develop trust and thereby commitment and loyalty to the brand.pdf) These steps help in customers being satisfied with the relationship. (http://www. The quality of the company's usage of its database and the effective segmentation and tailored products has resulted in retention rates of 26% (Piskar.352) points out that for creating and maintaining long term relationships between the company and its customers offering superior value is vital. 2003. 2009. The main aim of Tesco is to be with its customers in every aspect of their lives in order to build relation and trust in the .198) has a loyalty scheme knows as Tesco clubcard in the UK. Eggert et al. 2005. a step which should be taken to further develop the quality of the relation with its customers. They have also integrated the online and offline channels together and further details related to their purchases and points can be accessed. deals are also offered from Tesco and participating companies to involve the customer with Tesco's experience every day. However BOOTS still interacts with its customers using traditional channels such as direct mailing and the company does not have any special incentives for its most valued customers. p. p.com/ks4/ad_card_text. Tesco which is known for its innovativeness for the use of their technological data (CRM data) (Rowley. cited in Rowley. TESCO: is another example of how quality of relationships and adding value for the customer can lead to customer retention and brand loyalty.

liquor etc.5% compared to 16.9%.com). Sainsbury's and Morrisons respectively (www.tesco. This can be easily comprehended by the market share Tesco has which is 30. The quality of service provided by Tesco has further helped in retention of customers. EVALUATION: A review of previous literature has shown us that quality of customer service. and the ability of relationship marketers to influence it in favour of the company or brand is also essential where the consumer believes that there is no better alternative or no other company can provide more satisfaction. commitment. These steps not only improve the level of satisfactions among its customers.Page |7 MKT 11102 brand (Rowley.3% of Asda. Relationships are based on trust. value addition over and above the core product. It is also the perception of the customers. or to locate the nearest store and for its clubcard members has launched "Clubcard on your smart phone" (http://www. 2005).3% and 12.com/clubcard/clubcard/).Value is further added by allowing customers to be part of different clubs as well which range from advice to parents about their babies to connoisseurs in wine. but also helps to maintain customer relationships by adding more value into its brand thereby achieving loyalty and retention. 16. satisfaction and proper communication between both parties along . regular contact and fulfilment of promises is vital for retaining customers and developing relationships with them.advfn. Tesco recently has also launched smart phone applications for its customers to browse through the products available at any selected store.

participating organisations offer clubcard points for each purchase its channel integration offers even more confidence to customers and offers information. special offers etc. .com/ks4/ad_card_text.BOOTSlearningstore. these were the confidence benefits offered.pdf). Focussing on the examples above. Apart from the core benefits derived from the product we will discuss about the Social. offering variety of advice and information and customers can use their points buy products from other companies as well which makes Tesco a part of their everyday life and shopping a bit more enjoyable. Tesco too takes a similar approach by offering deals from a wide range of choices. we can evaluate the scope of customer retention in terms of relationship marketing. BOOTS offers social benefits by allowing customers to treat themselves to something special in place of just reducing the cost of shopping the customer can buy an expensive perfume or bag which can be a social statement. for customers with the advantage card a temporary paper card is issued at the counter and make points redeemable immediately and points can be checked and spent using an advantage Tesco point and the machine other (http://www. also included are special offers on health and beauty. confidence and special treatment benefits. 1997) Another critical factor is sense of security in the consumer's mind .Page |8 MKT 11102 with the benefits derived from the products (Thurau. posts magazines. BOOTS offers its customers the widest range of products.

As mentioned earlier the trust. 2009). it also changes over a period of time. special benefits and confidence benefits derived from relationships help steer commitment and trust (Yuan. CONCLUSION: Social benefits. premium customers get special offers for clubcard deals and points are also doubled for premium customers. commitment. Customer Relationship Management . Duration of the relationship is a . and satisfaction can be found in the relational benefits offered (Johnsson. 2009) is vital in determining the quality of the relations. 2003). 2003). 2005). Tesco also has personalized mailings. Functional quality of a product or service can be biased as opposed to the technical quality of the same product or service over time (IBID. alliances help in creating additional value in the broadest level where interpersonal communication can be low (Egan. points are doubled for members purchasing on clubcard deals (Rowley.Page |9 MKT 11102 Finally BOOTS offer special treatment benefits by hand picking customers for their promotional and special campaigns. 2010). satisfaction and fulfilment of promises (Gronroos. personalised mailing of products according to their purchase history and faster service through advantage point. Industries such as the retail sector integration of loyalty schemes. and expectations vary from customer to customer and their duration of activity with a specific company.

Proper utilization of resources and data can help in developing profitable relations for both the consumer and the company. .P a g e | 10 MKT 11102 critical factor. Companies such as Tesco and BOOTS have been able to retain customers through value addition and by offering relational benefits as mentioned above and have taken additional measures such as providing constant training for the staff and offering incentives on superior performance in order to offer better quality of service and satisfaction for its customers every time owing to the time taken in developing and maintaining a relation. Therefore we can conclude that there is a vast scope for retaining customers by developing relationships with them thereby retaining them. relations are built over a period of time and the satisfaction of the customers is based on the service and benefits received from the company over a period of time as it is cumulative in nature.

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