ADIGRAT UNIVERSTY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MARKETING MANAGEMENT

Assessment of customer retention and loyalty (in case of Saba dimensional stone in Adwa
town)

by; Getachew Malefiaw

Advisor; Tafere (MSC)

A senior essay (research) submitted to department of marketing management of Adigrat

University in partial fulfillment of the requirements for bachelor of art (B.A) degree in
marketing management

June 2018
 Adigrat, Ethiopia

Adigrat University

College of business and Economics

Department of Marketing management

Assessment of customer retention and loyalty (in case of Saba dimensional stone in Adwa
town)

by; Getachew Malefiaw

Advisor; Tafere(MSC)

Adviser Name Signature Date

…………….. ……………
….....
 January 2018

Adigrat, Ethiopia
ACKNOWLEDGMENT
First, I will like to thank my God Jesus Crest who allows in my life will be with me are ever I
going to, guides my life by his every day mercy and blessings up to this moment. Special
thanks for my adviser Tafere for his support and kindness for his valuable advice that makes
the proposal work easy and enjoyable time he spends with me. Next I will like to say thanks all
my families, who support me by praying and economical support GOD bless all.
Abstract
The general objective of the study is to assess customer retention and loyalty in case of Saba
limestone in Adwa town. This proposal will use the descriptive research design, because it is
designing to obtain information about the current phenomena and draw conclusion from the
fact discoveries and to describe current company customer retention. The target population
of study includes manager, employees and unknown customers of Saba Limestone Company in
Adwa town. Therefore 26 employees and unknown customers. The total customers are
unknown. The researchr will be use convenience sampling and census method. Convenience
sampling use for unknown customers, because the probability sampling selecting is not known
and it is impossible to get all customers at one time, Census method use for employees,
because it have few in number of employees. Due to time and cost constraints, the researcher
will take a sample from unknown numbers of customers researcher will take 68 customers.

Table of content page

ACKNOWLEDGMENT....................................................................................................................................i
Abstract.......................................................................................................................................................ii
Chapter one.................................................................................................................................................1
Introduction.................................................................................................................................................1
1. Background of the Study.........................................................................................................................1
1. 1 Background of the Organization.......................................................................................................2
 1.2Statement of the Problem..................................................................................................................2
1.3 Research Questions...........................................................................................................................3
3. How service deliveries affect customer retention?.............................................................................3
1.4. Objectives of the Study.....................................................................................................................3
1.4.1. General Objective......................................................................................................................3
1.4.2. Specific Objectives.....................................................................................................................3
1.5. Significance of the study...................................................................................................................3
1.6. Scope of the study............................................................................................................................4
1.7. Organization of the Study.....................................................................................................................4
CHAPTER TWO.............................................................................................................................................4
2. Related Literature Review.......................................................................................................................4
2.1. Definition of Customer Retention.....................................................................................................4
2.2 Factors that affect Customer Retention.............................................................................................5
2.2.1 Customer satisfaction.................................................................................................................5
2.2.3 Service quality.............................................................................................................................6
2.2.4 Employee retention....................................................................................................................7
2.2.5. Competitive advantage..............................................................................................................7
CHAPTER THREE..........................................................................................................................................8
3. Research Methodology............................................................................................................................8
3.1. Research Design................................................................................................................................8
3.2 Source of data....................................................................................................................................8
3.3. Target Population.............................................................................................................................8
3.4 Sample Size and Sample Techniques.................................................................................................8
3.5. Date Collection Instrument...............................................................................................................9
3.6. Data Analysis....................................................................................................................................9
3.7. Time schedule and budget................................................................................................................9
3.7.1. Time schedule plan....................................................................................................................9
3.7.2 Budget Plan...............................................................................................................................10
Reference..................................................................................................................................................11
 Chapter one
Introduction
1. Background of the Study
Customer retention can be defined as, the activity that selling organization undertakes in
order to reduce customer defection, (Reich held, 1996).
Customer retention is important for firms to implement the right marketing strategy in
order to succing, (Armstrong and Kotler, 2008).Traditionally firms will focus their
marketing strategies around attracting new customers and increasing their market share.
However due to globalization most industries markets are becoming more and more
competitive forcing significant changes in the way firm to business, (Armstrong and Kotler,
2008).
Customer satisfaction regards as the key customer retention, (Kotler, 1995) and will take
Customer behavior and customer retention, (Oliver, 1980; Yi, 1990). Marketers take
customer satisfaction as a significant of positive word-of-mouth consumer loyalty and
repeat purchase, (Anderson and Sullivan, 1993).
In order to retain customers in industries characterize by high competition, firm need to
meet its individual customer’s needs and expectation (Gumesson, 2002) argue that, it is the
value of the customer’s experiences with the product or service, which is important.
Therefore, customers’ needs are important to be considering when developing product and
service. From a cost perspective, retaining an existing customer costs less than creating a
new one. The cost of creating a new customer estimate to five times more than that of
retaining an existing customer, (Reich held, 1996).

Customer retention is concern with repeat patronage, which is closely relating to repeat-
purchasing behavior and loyalty (Jacoby and Chestnut, 1978). Behavior and loyalty
contains attitudinal aspects whereas customer loyalty contains both attitudinal and
behavioral aspects. Customer retention only focuses on developing marketing strategies
that cause repeat-purchasing behavior and ignores factors that influence such behavior
(Hennig Thurau and Klee, 1997).
In addition, the longer-term customers buy more and if they satisfy, may generate positive
word of mouth promotion for the limestone. This study plan to examine the potential
construct in customer retention by investigating retention from the perspective of
customer satisfaction, competitive advantage, service quality, trust, employee retention
and attraction alternative by assessing these practice in Saba lime stostone, (Reichheld and
kenny, 1990).

1. 1 Background of the Organization

Saba limestone is Privet Company corporate in effort 1985 E.C (from interview of the
manager). It is established relatively stable place all most 1000 k.m from Addis Ababa the
capital of Ethiopia. The company located in Tigray region at Adwa town.

1.2 Statement of the Problem

The manufacturing industry in Ethiopia is expanding rapidly in order to win and maintain
the market share of industry within country and global market. Customer retention is
essential for the success of service quality firms and customer satisfaction. Service quality
has long be an important factor in customer retention. The role of service is more critical
than ever a trend, which will continue affecting customer retention (Brotman, 1994).
Customer satisfaction is regarding as the key to customer retention (Kotler, 1995) it has be
taking fundamental customer behavior and customer retention (Oliver, 1980).
Today in competitive environment customer, retention is important to maintain and grow
customer relationship in order to sustain profitable growth (Reich held, 1996).

Therefore, Saba gives attention to existing and potential customers to increase their
satisfaction, which result for retention. The challenge of so many factors that affect the
customer retention, those are customer satisfaction, attraction, service quality, employee
retention and building customer loyalty through staff excellence. The gap between
customer retention and external communication, they are dissatisfaction due to the
excessively heightening expectations developing through service provider’s
communications efforts. Dissatisfaction occurs where customer retention does not live up
to expectations held out in the company. In addition to this, the gap between perceiving
and expecting service occurs because of one or more of the previous gaps. The way in
which customers perceive customer retention does not match up their initial expectation.
According to Mullen, Anthony (2007) is in hiring upper level staffers with sufficient
emotional intelligence. Competitive advantage is the most likely way to both retain
customer and improve profitability is by adding value via a strategy of differentiation
(Baker, 1993)

1.3 Research Questions

This proposal study has the following research questions. These are
1. How pricing strategies affect customer retention?
2. What alternative does the company use to retain customer retention?
3. How service deliveries affect customer retention?

1.4. Objectives of the Study

1.4.1. General Objective

The general objective of this study is to assess the customer retention and loyalty in case of
Saba limestone in Adwa town.

1.4.2. Specific Objectives

1. To assess the effect of customer retention in the company.
2. To identify the alternative of a company use to retain customer.
3. To examine the affect service delivery on customer retention.

1.5. Significance of the study

This study is more significant for production companies to improve customer retention
strategy and can strength Saba limestones with regarding to customer retention
implication. In addition, this study may help the companies to build strong relationship
with customers. It also identifies some basic strategies to improve customer service create
profit that generate from customer retention. may create awareness to customers about
retention strategy on the company services and other relating information. It can be use as
corner stone for researchers to make further analysis on this subject. It gives deep
understanding for researchers about customer retention practice.

1.6. Scope of the study

Conceptually the researcher is focuses on assessing the customer retention and loyalty.
Geographically is the specific company of Saba limestone, which is found in Adwa town.
Methodologically the researcher uses the descriptive research design, because it is
designing to obtain information about the current phenomena and to draw conclusion from
the fact discoveries. Time scope, while conducting this study the researchr is studying starting
from month October up to the end of the study in June. In this study help make through
investigation of the problem under consideration.

1.7. Organization of the Study

This study consists of three chapters. The first chapter deals with the introduction part of
the study. Here, the statement of the problem, research questions, objective of the study,
and significance of the study, and scope of the study are included. Chapter two focuses on
literature review of important concepts and theories that are relevant to the study. The
third chapter deals the methodology use for the proposal.

CHAPTER TWO
2. Related Literature Review
2.1. Definition of Customer Retention
Customer retention involves the steps take by a selling company in order to reduce
customer defection (Reich held, 1996). Successful customer retention starts with the first
contact an organization has with a customer and continues throughout the entire lifetime
of a relationship. Customer retention is important to most companies because the cost of
acquiring a new customer is far greater than the cost of maintaining a relationship with a
current customer. Several studies put emphasis on the significance
The argument for customer retention is relatively straightforward. It is more economical to
keep customers than to acquire new ones. The costs of acquiring customers to “replace”
those who will be lost are high. This is because the expense of acquiring customers incur
only in the beginning stages of the commercial relationship (Reichheld and Kenny, 1990).
In addition, longer-term customers buy more and if satisfy may generate positive word-of-
mouth promotion for the company. Additionally, long-term customers also take less of the
company’s time and are less sensitive to price changes (Healy, 1999). These findings
highlight the opportunity for management to acquire referral business, as it is often of
superior quality and inexpensive to obtain. Thus, it believes that reducing customer
defections by as little as five percent can double the profits (Healy, 1999).
Customer retention is concern with repeat patronage, which is closely relating to repeat-
purchasing behavior and loyalty (Jacoby and Chestnut, 1978). Behavior and loyalty
contains attitudinal aspects whereas customer loyalty contains both attitudinal and
behavioral aspects. Customer retention only focuses on developing marketing strategies
that cause repeat-purchasing behavior and ignores factors that influence such behavior
Hennig-Thurau and Klee, 1997). According to Oliver (Oliver, 1997; 392) “deeply held
commitment to re-buy or re-patronize a prefer product/service consistently in the future,
despite situational influences and marketing efforts having the potential to cause switching
behavior”

2.2 Factors that affect Customer Retention

The increasing competitiveness in the financial service industry is forcing organizations to
place greater emphasis on building and establishing valuable customer relationship (Oracle
Corporation, 2005). According to Anderson et al (1993), considering the situation from a
wider perspective maintain that with the expanding global competition, the emergence of
new technology and improve communication have increase customers expectation for
fuller satisfaction on their investment. A company’s ability to attract and retain new
customers is not only related to its product or service, but also strongly related to the way
it services existing customers and the reputation it creates within and across the market
place. There are different key factors affecting customer retention. Of the numerous factors,

2.2.1 Customer satisfaction

Customer satisfaction regards as the key to customer retention (Kotler, 1995) and will take
as fundamental customer behavior and customer retention (Oliver, 1980; Yi, 1990).
Marketers take customer satisfaction as a significant of positive word-of-mouth consumer
loyalty and repeat purchase (Anderson and Sullivan, 1993).
Satisfaction is can be viewed as the key to retaining existing customers and building long-
term relationship with customers; "Investing in customer satisfaction is like taking out an
insurance policy. If some of the temporary, hardship befalls the firm “the customers will be
more likely to remain loyal" (Anderson and Sullivan 1993; 160). Among the many articles
publish, satisfaction will be taken as they require premise for the retention of customers;
thus, satisfaction is place at the forefront of relational marketing approaches (Rust and
Zahorik, 1993). Fornell(1992) stat that a fundamental aim of firms is to seek to manage and
increase customer satisfaction in order to increase customer retention rates. Cronin and
Taylor (1992) and Patterson et al., (1997) find that customer satisfaction has a significant
impact on repurchase intentions in a range of services. Dwy et al, (1988) conclude that
client satisfaction is unquestionably the key in retaining current clients in professional
services
2.2.2 Attraction Alternative
The second factor is the attraction of alternative one of the argument of Richards (1996) is
that the more alternatives attracts the more dissatisfying customers will converse, meaning
switch service provider. If the alternatives available are not considered as being good,
conversation may then be dallied in spite of dissatisfaction. On the other hand, if the
alternative attract customer may converse even though they are highly satisfying. Sharma
and Patterson (1999) state that when customers are not available substitute or computing
alternatives they may continue in service relationship even though it is less satisfactory
one. Patterson and smith (2000) conclude that when customers are aware of and perceive
other supplier as offering a differentiate service in terms of price service quality of
technical outcome they tend to be less committee to one suppler.

2.2.3 Service quality

Several studies will show that, there are direct positive link between perceive service
quality and customer purchasing intention (Ranaweera and Neely, 2003, Reich held, 1996;
Zenithal and Bitner, 1996). When defining service quality, Ranaweera and Neel
y(2003).Following definition of Zenithal (1988) the service quality is a consumers
appraisal of services overall excellence of superiority the author further conclude that
service customers may place greater importance on the quality of service rather than the
cost of acquiring service.

2.2.4 Employee retention

According to Mullen (2007), staff retention is crucial for establishing customer loyalty. The
challenge of building customer loyalty through staff excellence, according to Mullen, is in
hiring upper level staffers with sufficient emotional intelligence. The relationship between
customer retention and employee loyalty works in both directions. Satisfying employees
mean satisfying customers, and according to Reich held and Kenny (1990), satisfying
customers can in turn mean satisfying employees. It is easier for employees to deal with
customers who are pleasing than it is with those who are dissatisfying. The ability to retain
employees for longer periods confers multiple benefits. Hiring costs, value of training, and
development investments are proportional to employee longevity. In addition, long-term
employees are more likely to form bonds with customers, which can lead to additional
customer retention.

2.2.5. Competitive advantage

Competitive advantage the most likely way to both retain customers and improve
profitability is by adding value via a strategy of differentiation. while increasing margins
through higher prices. Jones (2002; 123) state that a business has competitive advantage if
its profits are higher than that of the industry standard; the business has sustainable
competitive advantage when it maintains this situation for a period. Andresen and (2000;
76) define sustainable competitive advantage as achieving success over the long term by
relying on the unique assets and skills own the business
2.2.6. Trust
The authors define trust, as the belief that the service provider can be reliance on to behave
in such a way that the long term interests that of the buyer will be served (Shamra and
Pattersen, 2000). It will be appliance reliance on confidence in the process or person. Hens,
the greeter is the level trust, the stronger is the relationship. The factor also look at
by(Morgan and Hunt, 1994)who argues that trust has a positive relation to the extent
through which the firms share similar values. Ganesan (1994) study’s shows that a trust for
firms will be for customer satisfaction exchange with firms.

CHAPTER THREE
3. Research Methodology
3.1. Research Design
This researcher will use the descriptive research design, because it is designing to obtain
information about the current phenomena and draw conclusion from the fact discoveries
and to describe current company customer retention.

3.2 Source of data

For the achievement of the objective of the study, the researcher will be using both
primary data and secondary dates, primary data will be used questionnaire, that are close
ended and open-ended, interview to manager and secondary data will be used from
internet, journals, websites and any other written documents.

3.3. Target Population

The target population of study includes manager, employees and unknown customers of
Saba Limestone Company in Adwa town. Therefore 26 employees and unknown customers.
The total customers are unknown.

3.4 Sample Size and Sample Techniques

In this proposal, the researcher will be use convenience sampling and census method.
Convenience sampling use for unknown customers, because the probability sampling
selecting is not known and it is impossible to get all customers at one time, Census method
use for employees, because it has few in number of employees. Due to time and cost
constraints, the researcher will take a sample from unknown numbers of customers
researcher will take 68 customers. The researcher will be used the following formula to
calculate sample size from the unknown populations customers of the company (Kanata,
1978)

n= (Z2.P.Q)/E2 using 90% confidence level, 10% or 0.1 margin of error (100%-
90%)

Where, n= sample size 50% or0.5 Sample proportion success

Z2=confidence level Q = 1-P, Q =1-0.5 =0.5

P= sample of proportion success Q+P=1, (0.5+0.5 =1)

Q= failure Where, E =0.1, Z =1.645, P =0.5, Q =0.5

E= Margin of error tolerated n= (Z2.P.Q)/E2 = (1.6452 X 0.5 X 0.5)/0.12=
0.67656025/0.01

n=68

3.5. Date Collection Instrument

The data will collect using questionnaires from employees, customers and interview of for
manager of Saba limestones.

3.6. Data Analysis

The collecting data will be process manually and data will be analyzed by using simple
analytical tool such tabulation and percentage to represent the analyzing data.

3.7. Time schedule and budget

3.7.1. Time schedule plan

N O A c t i v i t y M o n t h

Oct Nov Dec J a n F e b M a r Apr M a y J u n

1 Research Topic selection

2 Consulting with the coordination about the Topic

3 Topic Approval

4 Preparation of paper proposal

5 First draft proposal submission

6 Second draft proposal submission

7 Submission of final proposal

8 Approval of final proposal and clearance

9 Data Collection (Field work)

 10 Data Analysis and Report Writing

11 Submission of Final Paper first Draft

12 Submission of final paper

13 Handover approved paper

14 Presentation and defense

3.7.2 Budget Plan

I t e m Unit(quality) Unit price Total Cost

p a p e r 2 0 0 0 . 3 0 4 0
Internet 1 6 0 0 . 2 5 4 0
Photo copy 8 0 . 5 0 4 0
P r i n t 8 0 1 . 5 0 1 2 0

P e n 2 5 1 0
R u l e r - - 6
Transportation - - 3 5 0
Total cost 6 0 6 b i r r
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