Page 88 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Unit 4: Customer Retention, Acquisition and Expectation

3. Trust: Trust the third component of the model, is interrelated with emotional bonding. Notes
Trust exist when one party has confidence that he or she can rely on the other exchange
partner. Trust can be defined as the willingness of the customer to rely on the organization
or brand to perform its stated function. Trust reduces uncertainty/risk and is viewed as a
carefully thought out process, whereas brand affect may be an instantaneous response. In
many situations, trust means a customer believes that the marketer is reliable and has
integrity. In many personal selling situations, trust means that a customer has confidence
that the sale representative is honest, fair and responsible and that his or her word can be
relied on. If a delivery date is given the buyer has confidence that the product will be
shipped on time. When there is trust in a relationship, all partners believe that none will
act opportunistically. Marketers, especially the marketers of services, establish trust by
maintaining open and honest communication and by keeping the promises they make.
4. Choice Reduction and Habit: Contrary to traditional economic theory, consumer research
shows that people have a natural tendency to reduce choices. In fact consumers like to
reduce their choices to a manageable set, usually not more than three. People feel
comfortable with familiar brands and well known situations that have been rewarding.
Part of customer loyalty, such as the absence of brand switching behaviour is based on an
accumulation of experiences over time. With simple repetition we become familiar with
a brand, store, company, Web site, or search engine. We develop habits that result in
continuity. For example, it has been estimated that consumers go to the same supermarkets
up to 90 percent of the time.

There can be a switching cost associated with change to the unfamiliar, the untried or the
new. There may be a cost in time, money, or personal risk. In other words, as the adage “if
it ain’t broke, don’t fix it” suggest there may be a perceived risk in change. Perceived risk
means the customer may be uncertain about the consequences of making a purchase.
There may be perceived performance risk or social risk. The customer may think the new
brand will not perform as well as the current brand. The customer may believe his/her
friends will not like the new brand as well.
5. History with the Company: Final component of customer loyalty involves the customer’s
history with the company. One’s history with the company influences one’s habits. But we
should draw a distinction between repeat behaviour and contact history with the company
and its image. A positive corporate image – the perception of the organization as a whole –
can have a favourable impact on customer loyalty, creating habitual responses to the
company name itself. Wal-Mart, for example is known for everyday low prices while
another department store, such as Nordstrom, may be known for excellent customer
service. Thus, perceptions of the company’s historical image can impact customer intentions,
loyalty and likelihood of buying. The CRM system, however, is usually more focused on
a customer’s actual purchasing history.

4.1.4 Strategic Customer

Customer interaction channels encapsulate all the possible ways of interacting with customers.
This comprises a mix of old legacy channels such as call centres, mail, sales force, and new
channels such as mobile, Internet, voice automation, and interactive TV. The issues here are
which of the new channels will provide an efficient means of improving customer access and
convenience, and which of the “old” channels need to be re-engineered to improve customer
service and cost effectiveness. Internet could fall in either category for some companies. Internet
sales and service capabilities are still to be implemented, whilst for others these are in place but
failing to achieve their potential.

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