Customer Relationship Management & Loyalty

This assignment delves into the crucial role of Customer Relationship Management (CRM) in fostering customer loyalty within the retail sector. It examines how CRM strategies influence customer satisfaction, trust, and ultimately, repurchase behavior. The analysis draws upon research papers that explore the mediating factors between CRM implementation and its positive outcomes for businesses, including competitive advantage, reputation, and customer value.

THE BENEFITS AND
CHALLANGES OF
CUSTOMER LOYALTY

Table of Contents
INTRODUCTION...........................................................................................................................1
DEFINITIONS OF KEY CONCEPTS ...........................................................................................1
MAIN BODY ..................................................................................................................................2
ESSAY THEORIES........................................................................................................................5
CONCLUSION AND RECOMMENDATIONS............................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Customer loyalty is important for the firm in order to create target customers for firm
which will help to increase sales and profitability. Customer relationship management is crucial
for firm that it will help them to increase their sales and also to identify potential customers.
Relationship marketing was first defined as a form of marketing developed from direct response
marketing campaigns which emphasizes customer retention and satisfaction, rather than a focus
on sales transactions. There are many benefits and challenges are associated with customer
loyalty. The report will cover benefits and limitations of customer loyalty with examples to
understand. Theories and models related to customer relationship management and experience
will be discussed in this report. Relationship marketing and key aspects will be covered in this
report which demonstrate how to increase potential customers and sales accordingly.
DEFINITIONS OF KEY CONCEPTS
Relationship marketing: Relationship marketing is very important for the firm that it is a facet
of customer relationship management CRM which is focused on long term customers
engagement and loyalty effectively. It is not focused on short term customer goals such as
acquisition and individual sales Balaji, (2015). Relationship marketing was first defined as a
form of marketing developed from direct response marketing campaigns which emphasizes
customer retention and satisfaction, rather than a focus on sales transactions.
Customer relationship: Customer relationship is all about maintaining the positive behaviour of
consumers in the market towards products and services by ensuring the quality and effectiveness.
It can be described as a development of running connection between firm and its clients
effectively. The relationship management include support to sales, effective communication and
technical assistance. Customer relationship management is crucial for firm that it will help them
to increase their sales and also to identify potential customers.
Customer Loyalty: It can be said that there are many different definitions of customer loyalty.
Yet so many fails to recognise that customer loyalty moves hand in hand with emotion. In simple
words customer loyalty describe the positive emotion, experience and physical attributes of
customer towards products and services Xu, Peak and Prybutok, (2015). They become loyal for
the brand and continue to purchase with them effectively. Organisations should improve their
customer loyalty in order to increase its sales and profitability. Customer loyalty is important for
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the firm in order to create target customers for firm which will help to increase sales and
profitability.
Customer Relationship management: Customer relationship management in simple words is a
interaction between company and its customers through their business relationships. This can
involve discovery, awareness, services, advocacy and purchasing behaviour Askariazad and
Babakhani, (2015). Customer relationship management also refers to the behaviour of an
individual after using the products and services offered by firm in the market effectively. This
can be positive or negative and depends on the quality of products and services. The company
should understand customer experience that is an integral part of customer relationship
management. Different company have long evaluated touch points and also some critical
moments in which a customer interact with firm, offerings and purchase after.
MAIN BODY
BENEFITS OF CUSTOMER LOYALTY
Customer loyalty moves hand in hand with emotion and they become loyal for the brand
and continue to purchase with them. Organisations should improve their customer loyalty in
order to increase its sales and profitability. Customer loyalty is important for the firm in order to
create target customers for firm which will help to increase sales and profitability. Here are some
benefits of customer loyalty for the firm discussed below:
Brand Advocacy: According to Benedettini, Neely and Swink, (2015), brand advocacy occurs
when a customer becomes a brand advocate. Brand advocates are your raving fans evangelists
who are so hopelessly in love with your brand that they will go out of their way to promote it for
you, without having to be compensated. Brand advocacy is supported by social media to become
more strong and powerful. Followers on Facebook, Instagram, Twitter will view ideas and
thoughts as creditable that it will help to promote the brand as well. It can be said that a strong
following of brand on social media will help to achieve better rankings. This will attract new
customers as well and increase sales for the businesses.
For an example, Morrison is famous clothing and other retail and food, drink firm
provides fashionable clothes for men and women through online shopping and also supermarkets
are available for the customers Bohari, Hin and Fuad, (2017). The firm is located mainly in
United Kingdom. The company has a number of followers on Facebook such as 679913 likes,
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206596 talking about firm and 24569 people already visited. This will help to boost revenues
which is 1631.7 Cr. as on 2017.
Price insensitivity: Price insensitivity describe that a customer is happy with the price of
products and services offered by firm in the market. In simple words, a happy customer will
purchase the products even the price is increased by firm just because he trust the brand.
According to Brashear-Alejandro, Kang and Groza, (2016), if firms will provide better customer
experience in terms of quality of products and service offered by them in market through
rewarding and showing the appreciation. This will definitely make them fall in love with you and
your company.
For an example, Apple which is a prominent brand have traditional price for its products
and services which gets higher only and this is all because they now that their customers are
price insensitive. Even if the I-phone X is more costly than a Pro book laptop with similar
specifications and features. Apple customer will choose to pay more because they feel they are
getting a better quality product from a brand they have had positive experiences with in the past.
Customer rewards program will help to provide a brand experience which they never forget or
can not find somewhere else.
Customers listen to you: It is very crucial for the firms to stay connect with their potential and
target consumers in the market. In order to do that some necessary activities will be done by
company such as E-mail contacting, surveys and marketing. It is important to convey them about
firm next project, come and shop again policy and remind them to shop again with new products
and services in the market Calvo-Mora, Navarro-García and Periañez-Cristobal, (2015). The
most desirable thing about reward programs is that it motivates and encourage people to sign up
with company websites from which they can easily contact you. This will help to provide
information about new products and services.
For an example, Apple firm can easily provide integrating mail services such as Mail
Chimp or Klaviyo in order to drive reward programs. With your rewards program gathering
contact information, and apps like Klaviyo sending out the emails, you’ll be well on your way to
sending valuable communications to customers who look forward to hearing from you. This will
help company to deliver information about their new products and services to customers which
will be targeted or potential effectively. This will also help to manage an effective
communication process and will increase profitability and customer loyalty.
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LIMITATIONS OF CUSTOMER LOYALTY
The main object of customer loyalty program is from which different firms provides
rewards to their consumers who are loyal for them through promotions, points and discounts
effectively. It will help to deliver many advantages but still there are some disadvantages also.
Here are some consequences of loyalty programs discussed below;
Difficulty in pinpointing: According to Che, andm et..al (2015), It is very difficult for loyalty
framework to break away the transactional spirit. It can be said that many times it is appeared
that frequent buyer is the loyal one for firm. It is no necessary that he or she likes the company
that's why they are purchasing it can be just because it is convenient for them. In addition to this,
he or she can buy because they noticed the benefits offered by firms according to loyalty
program. However, loyalty programs can be assessed by mixing advocate marketing tactics to
loyalty programs effectively (Xie and Chen, 2014). This will help to see who is a frequent buyer
and who is loyal among them and willing to vouch for you.
For an example, Firms like MI, Red Mi and online shopping websites. Such businesses
provide discount on products and services to identify their potential customers and their needs
effectively. This will also help them to increase their sales by selling old stock n discount rates
towards customers in the market. Such rewards programs will enhance referring, reviews and
likes for the firm effectively and efficiently.
Balancing bottom line: According to Henrique and Matos, (2015), out of all the advantage and
disadvantages of loyalty programs, the financial activities are the most stressful and difficult to
manage. In that case many firms provide discounts on their old stocks to customers in order to
increase its sales and production. This will significantly impact their profitability.
For an example, Tesco typical $50 sale transaction breaks down to $40 in costs and $10
in profit. A 5% loyalty discount — $5 off a $50 sale — results in a 50% decrease in profits. The
costs remain the same, but instead of earning $10 from the sale, profit is reduced to $5. What
appears to be a small discount in this case, 5%, — can significantly impact profits. The loyalty
programs should be managed well and according to the prices in order to make sure they will not
bear the financial loss within Tesco effectively and efficiently. Apart from this, if the program is
running good and according to the plan discounts will be managed that there is no problem with
that Wong, Wu and Cheng, (2015).
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Market saturation: It can be said that loyalty programs are everywhere just like the products
and services. In addition to this, purchase demands and requirements, membership provision and
benefits are also similar for them. In this modern and ultra competitive world, businesses are
unable to manage and control their loyalty programs due to the fear of lost sales effectively. It is
very difficult to design and manage a loyalty program based on competitive advantages and
sustainability that can not be copied as well.
For an example, A Maritz poll firm found that four out of 10 loyalty program participants
quit at least one program, and thus indicates the same Karjaluoto, Mustonen and Ulkuniemi,
(2015). This is the main reason that many experts recommend measures of loyalty such as
recency, frequency and monetary values RFM. RFM is a critical tool which helps to measure
customer loyalty but not in a perfect manner (Matiş and Ilieş, 2014). Thus, market saturation is
crucial for the firm to understand in order to manage their profitability and sales effectively.
ESSAY THEORIES
Customer relationship model
Customers profitability is the main objective for any firm in order to manage their
consumers in the market. The customer relationship development model will help to understand
how to manage and control customers Umashankar, Bhagwat and Kumar, (2017). It can be
described as a development of running connection between firm and its clients effectively. The
relationship management include support to sales, effective communication and technical
assistance. Customer relationship management is crucial for firm that it will help them to
increase their sales and also to identify potential customers. Customer relationship model can be
described as an approach which will help to manage the interaction between firm and customer
that tries to analyse information about business history in order to improve and develop business
relationship with consumers while focusing on customer loyalty and retention effectively.
IDIC model, according to Kaura, Durga Prasad and Sharma, (2015), the model suggests
firms to take action regarding building, keeping and retaining long term customer relationship.
Identity: The businesses should identify their potential customers and a deep knowledge of them
effectively. In order to serve them effective and quality products and services according to their
needs firm should analyse more and more.
Differentiate: The model helps to differentiate the customer on two basis such as their needs and
value. The firm should analyse which consumer is generating more value to them and will
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produce in the future as well. Effective knowledge is required by the management in order to
identify the potential needs and requirements of customers towards products and services.
Interaction: Interaction is a way from which the firms are able to evaluate actual demands of
customers in the market. Direct interaction with consumers makes believes that firm has a
concern with them and also they want to serve them individually and effectively.
QCI MODEL
There are some activities required by the firms in order to retain and acquire their
customers. According to this model Martínez, (2015), relationships process with the external
environment. Because when a customer wants to start selling process or wants to interact with
the organization, external environment directly affects the customer experience. External
environment also affects the planning process of the organizations. The customer relationship
model reflect the QCI model in which relations are developed by firm in order to make
customers happy and here in QCI model the customer experience is affected by internal and
external environment of organisation (Johnsen and Lacoste, 2016).
Customer management activities include process of evaluating different customers such
as targeted, conversion, potential, retainer and winning back to consumers.
Porter's value chain model
Porter's value chain model is based on system and how inputs are changed into outputs
which are purchased by consumers. There are activities involved in value chain model such as:
Primary activities
Such activities are directly connected to the physical creation, support, maintenance and
sale of products and services.
Inbound logistics: Inbound logistics is a process in which storing, receiving and distribution of
inputs are included and supplier relationship management is a key aspect here in order to create
value.
Operations: Operational activities helps to change inputs into outputs which are sold to
customers effectively. Operational system and its process creates value here.
Outbound logistics: Outbound logistics activities helps to deliver products and services to
customers in the market. For an example, storage, collection and system for distribution which
may be internal or external within the firms Ozuem, Thomas and Lancaster, (2016).
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Sales and marketing: Marketing will help businesses to ensure that customer will buy products
and services from them rather than any other competitive firm (Jaber and Simkin, 2017). How
well the firm communicates with customer, how they assess them, how many benefits they offer
etc. such things creates value here.
Services: Services are provided by the firm after the products are purchased by customers in the
market in order to maintain value of product and services delivered to the consumers.
Support activities
Supporting activities supports primary activities as discussed above. According to Pérez
and Del Bosque, (2015), procurement supports operations with certain activities, but it also
supports marketing and sales with other activities.
HRM: Human resource management is crucial for all the firms that how well firms recruit new
employees, hires, trains, rewards, retain and motivate employees within the firm. People working
in the firm are significant sources for value that management of human resources creates value
here.
Technological development: These activities relate to managing and processing information, as
well as protecting a company's knowledge base Tasci, (2017). Management of technical
resources, acquire technological advantages, information about technology costs and technical
sources creates value here.
Infrastructure: These are a company's support systems, and the functions that allow it to
maintain daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.
Customer loyalty theory
According to Renko and Druzijanic, (2014), customer loyalty management is a key goal
for every business. Loyal customers creates value for firms in terms of reliable revenue and
sustained profits. Theories and models will help to understand customer loyalty aspects from
which firms can easily boost their profitability and production. In simple words customer loyalty
describe the positive emotion, experience and physical attributes of customer towards products
and services. They become loyal for the brand and continue to purchase with them effectively.
Organisations should improve their customer loyalty in order to increase their sales and
profitability.
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Customer satisfaction: Improvement in satisfaction of customers will help to build loyal
consumers for the firms. According to the expert Saeidi, and Saaeidi, (2015), performing a
standardized survey of your customers using questionnaire will help to improve customer
satisfaction needs and requirements. Collecting feedbacks and improvement suggestions is also a
part of this process which helps to gain loyal customers.
Expectations: Confirmation of expectations is another key for businesses to increase loyal
customers. Loyal customers develop a certain though and idea of service and quality which they
are expecting from the firm. Long term consumer values and consistency are crucial to maintain
loyal customers in the market.
Trust: Trust is also similar to expectations which should be confirmed. Customers should
believe that they can trust firms in order to purchase products and services effectively
Stathopoulou and Balabanis, (2016). This will also produce reliable ethical values and help to
maintain a long term customer relationship management.
Growth and development: The main challenge with the firms is to maintain loyal customers
with the concern of growth and development (Islam and Rahman, 2016). In order to do that some
certain strategies and plans should be formulated by the businesses in order to grow business
effectively. Negotiating the customer balance is a key skill of management.
The value chain model describe the importance of managing resources where customer
loyalty theory describe the positive emotion, experience and physical attributes of customer
towards products and services. In this customer satisfaction and requirements are given priorities
by firms and the value chain model is directly connected to the physical creation, support,
maintenance and sale of products and services.
CONCLUSION AND RECOMMENDATIONS
It can be concluded from the above report that customer relationship management is very
important for firms in order to manage customer loyalty towards brand effectively. Customers
are the key aspects of business that firm should deliver quality and effective products which will
help them to manage their customer satisfaction and needs effectively. Customer relationship
management is crucial for firm that it will help them to increase their sales and also to identify
potential customers. Interaction is a way from which the firms are able to evaluate actual
demands of customers in the market. In order to serve them effective and quality products and
services according to their needs firm should analyse market effectively. A strong following of
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brand on social media will help to achieve better rankings. This will attract new customers as
well and increase sales for the businesses. There are various ways from which a firm can easily
manage their customer and loyalty in order to achieve targets and goals.
The firm is able to manage challenges and issues from which the firms are able to
evaluate actual demands of customers in the market. In order to serve them effective and quality
products and services according to their needs firm should analyse market effectively.
Improvement in satisfaction of customers will help to build loyal consumers for the firms.
Customer relationship model can be described as an approach which will help to manage the
interaction between firm and customer that tries to analyse information about business history in
order to improve and develop business relationship
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