Customer Retention and Loyalty - Essay Example

Running Head: Marketing Financial Services Customer Retention & Loyalty The roles are extending each and every day and so they are changing, similarly the roles of consumers are changing, rather than they should run after the seller, the seller has to convince them and keep on reminding them about the seller’s existence in the market, it is very difficult these day to differ between the sentences “every thing is marketing” and “marketing is everything”. The Financial services are also changing and increasing day by day, in fact every day a new scheme comes up and as soon as it establishes itself, all the efforts are directed towards its promotion so that more buyers can be convinced. Due to a lot of competition it is also disturbing for the customers to identify who can best serve them, the other related issue are about the close competition among various financial service providers. As we all know that once the idea is floated in the market then no body else can stop others from implementing it, and same is happening all around the globe, even the names acquired by the service providers for any particular service are quite much similar that customers find it difficult to remember which of the service is offered by which of the provider, similar things are happening in the color schemes and unique selling propositions of the service providers. This all is creating a lot of confusion in the mind of customers as they can take a lower quality service by thinking of it to be a higher in standard, which can also cause a higher quality service provider to have no one to serve. There are the few major factors that can give a slight glimpse on the behavior of customers in relation to the services. “Imitation strategies beyond a certain point can have harmful consequences for both firms and consumers. Two occasions for potential harm to firms occur when a consumer unknowingly purchases an imitator brand. First, the consumer may be dissatisfied with the product purchased and attribute his or her dissatisfaction to the original brand, never realizing that the brand consumed was an imitator. Second, the consumer may be satisfied with the imitator brand, become aware that it is not the original brand, and switch brand preferences in favor of the imitator brand”(Berger, Foxman, Muehling 170, Vol 24: 1990). This all is clearly showing what possible outcomes may take place. It is seriously distracting to the goals of the service provider where as the customers can also be in loss as it is quite fair to say that each and every financial service provider charges a lot for the service, however if the company is having some good reputation than due to a variety of customers, they take good care of services and also charge relatively lesser than many of the other service providers in the industry. Another problem is the repurchase of any particular service, such as people often change their leasing service providers after they pay the entire due, rather than buying the next product through the similar service providers they start looking for new and even better ones, which at times they get successful in, as the newly entered firms have some courage to serve the clients and they keep their promise in the beginning of their existence, however they mostly get distracted later on, and in this way people make repurchases from the new service providers at least for a while. So these all factors are influencing consumer behavior. “The majority of consumer purchases are potential repeat purchases. With the exception of one-time purchases, consumers buy similar products repeatedly or make repeated purchases from similar sellers. Thus, the majority of purchases represent one in a series rather than an isolated event. Understanding of any current purchase must be based on an understanding of the influence of prior purchases on later purchases. Major questions are how often and under what circumstances consumers make another purchase of a product they have tried or purchase from a seller they have previously patronized”(Peyrot, Doren 361, Vol 28: 1994). There are two important conditions associated with loyalty, those are customer retention and total share of customer. Customer retention has a lot to do with the length of relationship with a customer. A customer retention rate is the percentage of customers who have met a specified number of repurchases over a finite period of time. Many of the companies being operated under the false impression that a “retained” customer is automatically turned into a loyal one. If customer retention and total share of customer are essential for loyalty, than what is essential for profitability? As long as we are talking about Financial service providers we are having greater concerns with the profitability, which the loyalty and retention are the mean of making. Ideally if there is something that can affect the loyalty and retention than it is the service provider it self, if the service provider is having a strong background or is very excelled in giving the service keeping the customer’s benefits and preferences first, then it can have a positive impact on the buyer’s behavior. It is very clear that there are problems associated with a market share strategy. Pursuing market share can actually work against developing loyalty, as the primary purpose of the firm would simply to make profit, where as if it first keeps the customer right ahead which rarely happens in today’s world than it eventually results in greater spending and investments which can bring in some loss. So this was another point that indirectly forces the service provider to look for their own benefit as not doing so can cause the graph to fell and the company can barely survive in that case, it is all quite natural and clear that every one looks for profitability and whether intentionally or unintentionally it creates a negative impact on customer loyalty and retention. This might also be the primary reason for brand switching, which is so common in this industry. You would barely see a company interested in building a solid, loyal customer base using an approach or strategy that a company interested in simply building market share uses. Building loyalty in this era requires the company to emphasize the value of its services and to show that it is really interested in building a relationship with the customer. There is another factor, which is commonly seen these days causing loyalty and retention in both, positive and negative way, it is the communication that takes place between these two parties. As few of the companies hire sales force that is so good in communicating, knows when to approach the customer to have conversation, in which season or days the customer is found out to be more happier and when the customer is not so happy perhaps because of work load etc, this can potentially have a positive impact on retention and loyalty, once the customer realizes that the company is taking interest in his/her work and life, he/she starts taking interest in company’s activity. But there are also many companies that hire sales force which is very irritating and sticky, it just sticks to the customer and all the time it keeps on calling him/her asking for some time to see and also it does not keep a record of customer’s activities which eventually has a negative impact on retention and loyalty, in fact at times customers even break contracts with companies. The financial service providers are facing a greater competition these days as there are also few other factors affecting their businesses such as foreign investments and internet which provides the online facilities and making the customer to clear the dues on just finger click, so these all strategies have greater impacts on the entire customer scenario. There are numerous wonderful strategies for financial services and they are also supported in the marketing context. There is a marketing term that comes under marketing mix named “Personal Selling”, it is perhaps the only strategy being followed in the entire financial service industry, though there are numerous others such as providing online facility and public relations which is possible through sending gifts to the customer and all that related stuff, but personal selling holds the upper hand on this entire system. The personal selling has couple of criteria and the first one is the nature of the product while the second one is the nature of the market. The nature of the product is simple, that is the product should be sensitive in nature and also it should require a lot of convincing and persuading, after which the buyer would be interested in buying the product or service. The second criteria is the nature of the market, which means that market should not be wide spread and the number of buyers should be relatively lesser than any other common product or service. According to these criteria personal selling is the best option the financial service providers are using. It involves hiring and training of sales force and also letting them know about every single customer’s behavior, mood and the convenient time for meeting, these things turn out to be extremely important when the business is based on convincing people. Also it is so common to see advertisements of such financial service providers, now it is quite opposite to personal selling, in fact there are companies who identify the proper mode of communication and stick to that, like a company using advertising as the primary mode would rarely go for personal selling, but here it is so common to see that such companies are also interested in advertisements, however both the criteria of personal selling have been leveled but yet they are going for advertisements, the reason for this strategy is that there is a segment in our society which is not using any such service right now but has potential to use it in future. So in order to keep on reminding such people about the company’s existence advertisements are also performing a greater role. References & Bibliography Berger P.W, E.R. Foxman, D.D. Muehling, “An investigation of factors contributing to consumer brand confusion: Journal of consumer affairs”, Vol 24. Issue 1. 1990. Peyrot M, D.V. Doren, “Effect of a class action suit on consumer repurchase intentions: Journal of consumer affairs”, Vol 28. Issue 2. 1994. Griffin J, R.T. Herres, “Customer Loyalty: How to earn it, How to keep it”, San Francisco, Jossey-bass, 2002. Read More