Of all the strategies being used in marketing, the development of customer loyalty by giving them with unique benefits is one of the most popular.. However, this is still not enough. Customer satisfaction may not be able to ensure a certain company, or a certain hotel for this matter that customers will return to purchase or stay. The trend then now is not just to ensure the satisfaction of their customers but to also make sure that their customers would return for future business transactions (Kandampully and Suhartanto, 2000).
Because of this, it has been said that relying on customer loyalty is more effective than actually having to rely on pricing strategies to keep businesses alive. According to the different studies made in relation to the said topic, a 5 percent increase in customer loyalty that is often related with customer satisfaction produces a profit increase which range from about 25 to 85 percent. Hence, managers should ensure that their services fully satisfy their customers as this is the only way that could increase their profits.In the same manner, as mentioned in one of the previous paragraphs, businesses should also see to it that the satisfaction their customers receive on their first transaction with their businesses should in return, ensure them of the customers’ loyalty, existing or prospective (Kandampully and Suhartanto, 2000). Retailing defined by Varley and Rafq (2004) as “an activity of selling goods and services to final consumers for their own personal use and concerned with getting goods in their finished state into the hands of customer who are prepared to pay for the pleasure of eating, wearing or experiencing particular product items”.
On the other hand, Baker (1998) defined retailers as “any establishment engaged in selling merchandise for personal or household consumption and rendering services incidental to the sale of such good”. Businesses in the retail industry often struggle in making profits due to the competitive nature of their market. The presence of so many competitors in the retailing industry has been caused by different factors such as low barriers to entry. At the same time, competition is also affected by the lack of product differentiation.Traditionally, retailers knew all their customers personally. They know what their preferences are and more often than not, are aware of what was happening in their lives, Because of the existence of this kind of relationship, the retailers could react quickly and formulate marketing strategies based on the needs of individual customers.
In the same manner, they were also able to develop good relationships with their customers through the establishment of friendships and interactions.As a result, the retail industry revolves around the customer more than any other industry. Due to this, it is not enough to simply interact with the customers. Rather, they are expected to know them better These all changed, however with the growing chains and building malls and the continuous promotion of self-service. With these changes, more and more retailers have lost their contact with their customers.
As a result, they are also simply losing the loyalty that the customers once entrusted upon them.Hence, more and more retailers are now trying to regain the loyalty they lost as they begin to value of their customers through programs incorporated within the idea of customer relationship management. According to Varley and Rafq (2004) interactions between retailers and customers generates vast amount of information and with the help of recent technological developments retailers started to use this information in identifying the changes happen in consumers’ behaviour. In fact, this gave opportunity for the retailers in retaining their customers as well as increasing their loyalty (Dowling and Uncles, 1997).
By stating recent technological developments Varley and Rafq (2004) referred EPOS (electronic-point-of-sale) systems. In these systems retailers are able to collect wide variety of data regarding to popularity of their offerings, sales, stocks etc. Recognising the importance of EPOS system in collection of the data, retailers are started to introduce EPOS based loyalty schemes in which the retailers were able to collect the data about customers’ personal and demographic information as well as their product choices.
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