IMPACT OF CUSTOMER RETENTION ON BUSINESS PERFORMANCE
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IMPACT OF CUSTOMER RETENTION ON BUSINESS PERFORMANCE
Chapter One:
Introduction
1.1 Background of the Study
Customers are the backbone of any business; without them, organisations would be unable to sustain their performance. This is because such companies are thought to have no sales, profits, and so no market value.
As a result, customer management is regarded as a critical business priority, with the primary focus shifting in recent years from acquiring new customers to retaining existing ones.
Both practitioners and academicians have recognised that it is considerably easier and less expensive to keep existing consumers than to invest in potential customers.
high level of client retention is seen to contribute significantly to improved overall business performance. A review of previous research on customer retention reveals that the financial sector has been fully explored, leaving potential for more exploration into client retention in the fast-food industry.
Customer retention is defined as a customer’s commitment to conduct business with a specific firm on a regular basis (Hansemark and Albinsson, 2004). Furthermore, Molapo and Mukwada (2011) discovered that businesses go to great lengths to prevent clients from switching merchants and hence keep them indirectly.
Erdis (2009) has also proven that enterprises should focus their marketing efforts on pleasing their current consumers in order to retain them and build long-term connections with them. Customers will commonly patronise businesses that suit their demands, fostering long-term relationships (Fill, 2005).
Farquhar (2004) suggested that retained consumers boost revenues since obtaining new customers is expensive. This is consistent with Reichheld and Schefter’s (2000) research, which determined that enterprises that increase customer retention by 5% can increase earnings by 25-95%.
Furthermore, recruiting new clients costs a corporation five times as much as retaining an existing customer (Tu, Lin, & Chang, 2011). Thus, improving client retention will significantly raise a company’s profitability and performance (Sim, Mak, & Jones, 2008).
1.2 Statement of Research Problem
Most businesses, particularly those in the fast-food industry, do not prioritise customer retention. Customer retention has been shown to have a greater impact on profitability than market share,
economies of scale, and other elements that are thought to provide a company a competitive advantage. In fact, organisations that reduced customer defections by 5% increased profitability by 25% to 85%.
Traditionally, marketing management depended on permutations and combinations of the marketing mix factors (product, price, place, and promotion) to attain market dominance by increasing market share through customer acquisition.
This method analyses the development of homogeneous portions of rather heterogeneous clients. It does not account for the customer’s history of affiliation with the seller, and hence does not disclose the customer’s actual purchasing behaviour.
Sellers who use the traditional marketing method also employ aggressive branding and advertising tactics. However, brands with the largest market share are not usually the most profitable. In some situations, they might even be unprofitable.
Relationship marketing, on the other hand, focuses on client retention, increasing spending, and building long-term relationships with customers.
According to Gronroos, a research scholar, marketing is the establishment, maintenance, and enhancement of relationships with customers and other parties at a profit in order to meet the objectives of the parties concerned.
This is accomplished through the reciprocal exchange and fulfilment of promises’. Customer retention should thus be incorporated into every firm’s strategic marketing planning approach.
On this note, the researcher investigates how client retention affects corporate performance.
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