Application: Strategy, Communication, Sales, NPD/NSD

The Concept

No marketer can put together a strategy or plan for a market of any kind without thinking through the relevance of this interesting concept. It is closely related to service quality, after care, and relationship marketing. It suggests that, if buyers think that they receive good service, they will be loyal to the supplier, returning again and again to buy. Loyalty, a long-term feeling of attachment to a supplier, is thought to occur when buyers are satisfied and have investment in the relationship which is too great to sacrifice for a cheaper or lower quality alternative. This has prompted marketers to think seriously about marketing to existing customers as much as (some would say more than) to new customers.

It has been the thinking behind many discount retail schemes to repeat purchasers and huge investment in customer relationship management (CRM) systems. Some have even asserted that it is the primary determinant of profit and growth because loyal buyers produce greater cash flow, cost less to service, and spread positive word-of-mouth (see Reicheld, F.F., 2003). The positive stories from loyal buyers counteract any negative reputation and, if they outweigh the negative stories, help to grow demand for the product or service (as illustrated in Figure L.1). This net positive reputation has been suggested ...

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