Impact of Customer Relationship Management on customer retention, loyalty and customer service

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for the academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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Table of contents

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 1: INTRODUCTION1

1.1 Introduction1

1.2 Problem Statement2

1.3 Research Questions2

CHAPTER 2: LITERATURE REVIEW3

2.1 Customer relationship marketing3

2.2 Customer Profitability6

2.3 Customer Lifetime Analysis7

2.4 Customer retention8

2.5 Customer loyalty11

2.5.1 The measurement of customer loyalty15

2.6 Customer satisfaction16

2.7 Linking customer retention, value, satisfaction, and loyalty18

REFERENCES20

CHAPTER 1: INTRODUCTION

1.1 Introduction

Customer relationship marketing (CRM) and relationship marketing in general are hot topics for managers and academics alike. Both the 2002-2004 and the 2004-2006 MSI Top Tier Research Priorities include topics in the relationship-marketing genre. The 2004-2006 MSI Top Tier Research Priorities for the customer management community identifies the key research topics including customer portfolio management, measuring and predicting lifetime value of a customer, segmenting and managing the customer relationship desired by the firm, managing and maintaining customers through multiple channels, and implementing and assessing the impact of CRM. Many organizations have embraced relationship marketing and its focus on customer lifetime value. For example, First Union Corporation in Charlotte, North Carolina recently upgraded his or her customer service call centre's computer system to include a profitability measure for each customer. The call center computer system, affectionately called "Einstein", can determine the ranking of a customer (profitable or unprofitable) in only 15 seconds. The computer screen then displays a colour (red, yellow, or green) as a signal to the customer service representative of the customer's current profitability status. The profitability ranking is valuable to both the representative and the firm for making decisions on customer requests such as fee waivers and annual percentage rate reductions.

Jones, Taylor, Becherer, and Halstead (2003, 18) liken relationship marketing to a good conversation through which a potential customer is drawn to the firm through a series of progressively more fulfilling back-and-forth interactions. Following the conversation analogy, there are two distinct stages in the process: striking up the conversation for the first time (acquiring a new customer) and sustaining the conversation (retaining the customer). Relationship marketing shifts the manager's focus from the one-time act of acquiring new customers to the comprehensive process of acquiring and retaining customers by developing relationships. The ultimate goal of relationship marketing is to initiate relationships with potentially high-value customers and convert them into customers committed to the firm. Committed customers should then exist in relatively low-maintenance relationships.

1.2 Problem Statement

Customer relationship management is a very important tool for any company to maintain a good and profitable relationship with its customers. Good and well-planned customer relationship management can many implications for a company, customer relationship marketing can have an impact on customer retention, ...