The, core of Customer Retention is Customer Satisfaction with a company ́s product or service. This is the key to a company’s success and long-term competitiveness. Customer Satisfaction is often viewed as a central determinant of customer retention. Insert Coin has built a conceptual foundation in GWEN for the customer retention process, with the use of the concepts of customer satisfaction and relationship quality.
Customer satisfaction has developed extensively as a platform for monitoring and controlling activities in the relationship concept. The link between satisfaction and the long-term retention of customers is typically threated as a starting-point and that satisfaction meaningfully influences repurchase behaviours. Customer retention can be classified into three different groups:
Customer retention as a target variable of the conceptual model
Customer retention is the target variable from the fact that customer retention is widely accepted as the central objective. Retaining customers opens up considerable cost-reduction potentials that emphasizes strong customer retention.
Customer retention strongly focuses on repeat purchasing behaviour and brand-loyalty variables, where there is a conceptual difference between both of this construct; first the loyalty construct, which contain both behavioural and attitudinal dimensions and second, in customer retention where the behavioristic repeat-purchase concept pays no attention to the displayed customer behaviours.
The model extends the view of a strong impact of customer satisfaction oncustomer retention. The model incorporates the customer ́s quality perception as a central part and extends the view of quality perceptions. Two considerations take into aspect: Customer satisfaction has no compensatory (reward) and non-compensatory (penalties) attributes and the difference impacts the satisfaction.
Figure – The conceptual model of the satisfaction-retention relationship. Source: Jacoby & Chestnut, 1978.
The quality perception appears in three qualitative different manifest that result from the customer standards; resigned, stable and progressive quality perceptions. Also, considerations in the customer involvement is latent and manifest quality perceptions results in six individual and different meanings for customer retention. The product- or service-related quality perception is interpreted as a component of relationship quality, which also include the customer trust and his or her commitment.
In addition to this general mechanisms, intrapsychological, contextual, andsituational factors exist that influence the repurchase decision of the customer. They should be included in an adequate context but are not necessary in every case. Satisfaction and quality research have engaged on parallel tracks for a long time and investigations undertaken, the following aspects for the distinction of satisfaction and quality are of importance:
The close connection between the constructs can at most be maintained for certain types of quality perceptions e.g.
● Stable quality (+) perception and fixed quality (-) perceptionincrease the need for improvement to retain customers.
● Progressive quality (+) perception and resigned quality (+) perception reduce the need for improvements to retain customers.
Quality perceptions play a significant role for the retention of customers, especially in low-involvement conditions. There is a distinction between manifest and latent quality perceptions, where the manifest quality perception is based on judgement formed before the data collection. This can be seen in high involvement setting where customers have extensively gathered and processed information on the product or service.
Additional key variables assuring high degree of relationship efficiency and effectiveness for the customer must be identified out of the many relational aspects. This key variable must also be included as elements of relationship quality. Trust and commitment are incorporated as the two other basic constructs in the conceptualization of relationship quality:
● Trust is defined as the willingness to rely on an exchange partner in whom one has confidence.
● Commitment ca be defined as a customer ́s long-term ongoingorientation toward a relationship grounded on both emotional and on the conviction that remain in the relationship will yield higher net benefits than terminating it.
The customers perception and evaluation of a relationship as a whole, where product- or service-related and relational aspects are blended into one outcome; Relationship quality with three dimensions; the overall quality perceptions, trust and commitment where high quality relationship would be one with high level in all three dimensions.
Figure – Casual
links between the three dimensions of relationship quality.
Source: Morgan & Hunt, 1994
Overall Quality Leads to Trust:
Focuses on the process of trust development. Requires an initial sequence of experiences with an exchange partner that provides the customer with the opportunity to judgehis reliability.
Overall Quality Leads to Commitment:
High level of quality provides the customer with a positive reinforcement for having made the correct decision and to creating emotional bonds.
Trust Leads to Commitment:
Trust promote commitment in two way; trust is crucial to relationship efficiency and secondly trust addresses central social needs of the customer, the fulfillment of which leads to an affective commitment to the relationship.