Excellent Custom «Literature Review: What Is the Best Way to Retain Consumers?» Free Essay

«Literature Review: What Is the Best Way to Retain Consumers?»

A sustainable business is one that constantly grows and expands, and in order to keep its development, management team has to create a specific approach to catch and hold their customers’ attention and make them willingly stay with a company and entice their purchasing behaviour. Following the findings of the study by Harvard Business School, a capability of an organisation to retain at least 5% of customers results in profit growth ranging from 25 to 95% (Jeng & Bailey 2012; Stahl, Heitmann, Lehmann & Neslin 2012). This fact explicitly demonstrates that customer retention is significant to be taken into account by the management team. While academic research on the topic is rich, the scholars admit that a one-fits-all-sizes strategy hardly exists. At the same time, clarification of the main value necessary for achievement of consumer retention is possible based on the ideas and evidence collected by theorists and practitioners. For instance, consumer trust (Hasan, Subhani, Khan & Osman 2012; Kamari, F & Kamari, S 2012), loyalty (Chen 2012; 2015; Haenlein & Kaplan 2012), and satisfaction (Yeung, Ramasamy, Chen & Paliwoda 2013) are listed among the most potentially successful ways to retain the clientele. Therefore, the purpose of the paper is to identify and clarify the best way to retain customers and explicate positive and negative sides of the alternatives in the context of the literature review.

To start with, all 15 sources evaluated for relevance for answering the introduced research question have indicated that trust is one of the most significant factors in customer retention. Apart from recognition of importance of this factor, retention strategies built on trust are likely to ensure better positioning of a company among rivals (Stahl et al. 2013), a higher-level competitive advantage (Chen 2015), larger market shares and customer expenditures (Yeung, Ramasamy, Chen & Paliwoda 2013), to list a few. In addition, Hasan et al. (2012) have explored the issue of trust in the scope of word of mouth strategy as a way to position the product or service through strong emotions. The researcher has stressed that trust-centred retention can be developed on the basis of “outstanding services and commendable products,” along with “motivating consumers to share their ideas and experiences and their positive opinions” (Hasan et al. 2012, p. 5). In contrast, the level of expertise and experience of the recommender of a particular product or service does not impact business-to-consumer trust development and retention of the existing consumers.

On the other hand, in the digital era, the Internet has become a primary contributor to interactive and productive business-to-consumer relationships, and trust is the “key to these relationships” (Kamari & Kamari 2012). This statement is justified because of contemporary overreliance of both businesses and consumers on the online domain. Meanwhile, the efficiency of such relations and interdependence is impossible without trust (Kamari & Kamari 2012; Hasan et al. 2012). The scholars and practitioners have recognised that building trust and trustworthiness is vital for long-term relations and consumer retention since it is the most important social capital enabling cooperation and coordination between the above-indicated actors within the risky and uncertain environment (Kamari & Kamari 2012).

On a similar note, trust is crucial in terms of customer retention and reconciliation of the flawed business-to-consumer relationships, in case any disruptions in this connection occur. To illustrate, Nguyen and Mutum (2012) have emphasised that “the risks of depleting customer trust as they perceive themselves being exploited by firm’s customer relationship management (CRM) offerings” if the latter is too frequently used or misused (p. 400). Similarly, Joireman, Gregoire, Devezer, and Tripp (2013) have explored a significant perspective with relation to trust such as its double deviation. The findings of the research have confirmed that even breaking consumer trust can have both positive and negative responses from consumers. First and foremost, the positive or negative initial intensions of a company in light of depleting consumer trust define their response to a firm. In other words, negative intensions lead to consumer revenge and abandonment of a firm, while positive intensions enable the customers’ second chance to the business. For instance, Toyota’s recalls of its cars due to possible flaws in their quality resulted in millions of losses, but at the same time, revived trust of the loyal customers. Secondly, a fast and fair relationship restoration can be ensured through apology, compensation and revival of consumer trust through open accountability, honesty and positive implications in future endeavours (Joireman et al. 2013). Hence, the role of trust in customer retention seems indeed crucial in the scope of the above evidence.

Loyalty is another significant strategy of consumer retention widely emphasised by managers and studied by theorists in the field. For instance, Wang and Wu (2012) have asserted that “corporate image impacts customer loyalty in both newer and older relationships” (p. 58). Whereas in newer business-to-consumer relationships this factor matters most, in older ones, loyalty is established through the perceived value which can be a concept of multifaceted nature, involving quality of the goods/ services and customer-centrism among other issues. Therefore, retention of consumers through loyalty requires trustworthiness and credibility of a firm in the context of numerous factors. Simultaneously, loyalty-based retention has been established within the online dimension as well. To illustrate, Ladhari and Leclerc (2013) has found that “e-loyalty is positively related to e-satisfaction and e-trust” (p. 560). This study shows that online-based consumer loyalty may seem impossible without mediation of trust. Thus, loyalty can be regarded as a supplementary part of trust-centred consumer retention.   

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At the same time, the evidence exists that loyalty of consumers may be undermined through the process of abandonment of unprofitable customers (Haenlein & Kaplan 2012). While the businesses seemingly attempt to focus on profitability through loyal customer base, such an approach is detrimental for the organisational performance as a whole. Specifically, due to that, online dimension leaves no borders to information flaw, the consequences of the aforementioned strategy can be quickly spread among existing customers leading to their exit, dissatisfaction with a company’s performance, and their individual abandonment of a firm (Haenlein & Kaplan 2012). Depletion of trust is undeniable in this respect.

What is more, customer satisfaction is one more driving force to encourage retention of the clientele. In this respect, Jeng and Bailey (2012) have analysed the specificities of customer satisfaction and retention with respect to mobile communications. On the grounds of this research, the above outcome was achieved mostly through brand image, quality of the service, and responsiveness to customer complaints. In addition, demands for consumer satisfaction levels are extremely high and these trends continue. In particular, Torres and Kline (2013) have reported that clients in hospitality sector, especially hotel industry, request for different forms of delight rather than just satisfaction of their needs as a way of retention of the old and attraction of new customers. The similar findings have been identified by Narteh, Agbemabiese, Kodua, and Braimah (2013). Nonetheless, Verhoef and Lemon (2013) have emphasised that overconcentration on consumer satisfaction can be a failing approach to retention. For instance, the strategy may be flawed if management develops a framework that is not consumer- but IT-centred, when “consumer lifetime value” is disregarded as a key metric, or a company fails to adequately invest in its analytic capacities, to list a few (Verhoef & Lemon 2013, p. 1).

Apart from that, Cheng (2012; 2015) has evidenced that satisfaction is a constituent of consumer loyalty, while trust is a mediating power between these two concepts. Moreover, the higher the customer satisfaction-to-loyalty ratio, the larger the market share and profits the organisation is likely to have. In this regard, the assumption can be made that trust or its lack as a mediator and determining factor of the levels of satisfaction and loyalty can both facilitate or minimise the outcomes for a firm. Although Cheng (2012; 2015) has not stated this fact explicitly, the above findings seem ample evidence for justification of this suggestion.

In conclusion, the findings of the review clearly demonstrate that trust is an integral part of the alternate customer retention strategies and one of the most effective means to organise smooth and productive business-to-consumer relationships in perspective. On the one hand, this emotional bond can help the management of any company to construct long-term cooperation with consumers and profitable business functioning. Additionally, a proper trust-centric retention framework will allow a firm an opportunity of reconciliation of disrupted relationships and successful outcomes even if the flaw made in its performance is severe. On the other hand, while loyalty and satisfaction are evidenced to be other important strategies of customer retention, they cannot be regarded as independent and the best to be referred to. Specifically, the studies have showed that trust is either a mediator in retaining through these means or it is an integral constituent of building consumer retention through satisfaction and loyalty. Therefore, managers should pay utmost attention to trust as a centrepiece of any consumer retention strategy and a best way to ensure the evolution and profitability of a company in the long run in accordance with the findings of the paper.

 

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