5 constructs that shape customer retention

8th Feb 2016

Gone are the days when companies used a one-size-fits-all approach to market a product or service, and it is therefore important to understand exactly why customers prefer one company’s offering to its competitors. 

Here, Professor John Murphy of Manchester Business School and Doctor Ram Raghavan, co-founder of Riddlebox, a company that measures employee and customer experience, highlight five concepts that, together, have a huge bearing on repeat spend. However, while each of these constructs is important, just measuring one element alone is not enough to predict customer behaviour.

1. Satisfaction

Perceptions of a service encounter can be strengthened or weakened with every customer experience, so organisations should work hard to maintain, or improve on, customers’ current satisfaction levels. 

2. Loyalty

High levels of customer satisfaction often result in loyalty. Loyal customers tend to return to an organisation despite a few sour episodes, whereas others may start looking for alternatives. However, academic literature classifies loyalty as an attitude that can change, which means a loyal customer is not necessarily a committed one. Prolonged loyalty, on the other hand, results in commitment.

3. Commitment

Customers who are contractually committed are locked in and have to stay with an organisation even if they are dissatisfied. In general, they commit because exit costs are generally too high. These customers do not necessarily have to be satisfied or loyal, but still buy from the organisation in question. 

4. Trust 

Commitment without lock-in or contractual obligation occurs when customers trust an organisation. In the same way that employees who don’t trust their employers are unlikely to be engaged, customers who don’t trust an organisation will be inclined to take their business elsewhere. In many ways, trust is the key driver that shapes customer experience and purchase behaviour.

5. Empathy 

The final piece of the jigsaw is empathy, and lack of it by employees can have serious consequences for customer retention. Empathetic service staff can recognise when customers aren’t happy, presenting them with the opportunity to influence their repurchase intentions.

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