Customer Relationship Management, Second Edition Show
Research shows that there are three forms of customer commitment: relational commitment, instrumental commitment and value-based commitment. In this chapter, learn about all three types of customer commitment and get key performance indicators (KPIs) for customer retention programs. Learning from research into customer commitmentA number of authorities have urged companies to work on developing customer commitment so that they develop a strong attachment to, or engagement with, a brand or company. Three different forms of commitment have been identified: instrumental, relational, and values-based. 1. Instrumental commitment: this occurs when customers are convinced that no other offer or company could do a better job of meeting their needs. They are not just very satisfied, but unbeatably satisfied. All expressed and latent needs have been met. When a customer feels that his or her bank has the best products, the best access, the best processes, the lowest interest rates on loans and the best reputation, he or she is committed. 2. Relational commitment: customers can become highly attached to a company's people. An emotional tie may be formed with an individual person, a work group or the generalized company as a whole. Customers who talk about ' my banker ' or ' my mechanic ' or ' my builder ' are expressing this attachment. They feel a sense of personal identification with that individual. Often, these are employees who ' break the rules' or ' go the extra mile ' to completely satisfy customers. They are reliable, competent, empathic and responsive. When these employees recover an at-risk customer, they create a friend. Customer-focused organizations make heroes out of these individuals. They are feted and celebrated. For example, American Express tells the story of a customer service agent who responded to a call from a customer who had been robbed, by arranging to have replacement travellers checks delivered personally to the customer. The CSA also confirmed the customer's hotel reservation, arranged for a car to collect the customer from the phone booth and notified the police, all above and beyond the call of duty. Customers can also become attached to a work group. In banking, for example, some customers are highly committed to a specific branch and prefer not to transact elsewhere. Finally, customers can become attached to an organization as a whole, believing its people to be better than competitors on dimensions that are important to the customer. They may provide ' the best service ' or be ' the friendliest people'. 3. Values-based commitment: customers become committed when their values are aligned with those of the company. Values can be defined as follows: Values are core beliefs that transcend context and serve to organize and direct attitudes and behaviours. Customers have many and varied core beliefs, such as environmental consciousness, honesty, child protection, independence, family-centredness and so on. Many of these reflect cultural norms. Where these values coincide with those of an organization, the customer may become committed to the organization. Companies that are accused of using child labour, damaging the environment or otherwise acting unethically place themselves at risk. Nestlé had been accused of marketing infant formula in African countries where the infrastructure made its use dangerous. Many babies died as mothers used unclean water and unsterilized equipment. This is estimated to have cost the company $40 million. Sales of Shell fuel were estimated to have fallen between 20 and 50 per cent during the Brent Spar boycott. The company had planned to decommission the 4000 tonne Brent Spar oil platform by dumping it into the North Sea. Just as customers can take action against companies that they feel are in beach of their values, they can also commit to companies that mirror with their values. Research supports the claim that there is a hierarchical relationship from values, to attitudes, to purchase intention, and ultimately to purchase. A number of companies benefit from values-based commitment: Body Shop, John Lewis, Harley Davidson, Co-operative Bank and Virgin.
Context makes a differenceContext makes a difference to customer retention in two ways. First, there are some circumstances when customer acquisition makes more, indeed the only, sense as a strategic goal. Secondly, customer retention strategies will vary according to the environment in which the company competes. When launching a new product or opening up a new market a company's focus has to be on customer acquisition. In contexts where there are one-off purchases such as funerals, infrequent purchases such as heart surgery, or unique conditions such as gave rise to the demand for Y2K compliance software, customer retention is subordinate to acquisition. The impact of contextual conditions on the choice and timing of customer retention practices has not been thoroughly researched. However, we can see that a number of contextual considerations impact on customer retention practices:
Key performance indicators of customer retention programsCRM practitioners are concerned with achieving a number of key performance indicators (KPIs) for these customer retention activities, among them:
The choice of KPI will vary according to context. Some companies do not have enough data to compute raw retention rate per segment. Others may not know their share of wallet (share of customer spending on the category). The role of researchCompanies can reduce levels of customer churn by researching a number of questions:
The first question can be answered by contacting and investigating a sample of former customers to find out why they took their business elsewhere. Customers defect for all sort of reasons, not all of which can be foreseen, prevented or managed by a company. For example, Susan Keaveney identified eight causes of switching behaviours in service industries generally: price, inconvenience, core service failures, failed employee responses to service failure, ethical problems, involuntary factors, competitive issues and service encounter failures. Only six of these eight causes of switching behaviours can be influenced by the service provider. Another industry-specific study found that between 20 percent and 25 percent of supermarket shoppers changed their primary store in a 12 month period. Twenty-four percent of switchers changed allegiance because a new competitive store had opened, 14 percent because they had moved house, 11 percent for better quality and 10 percent for better choice. The second question attempts to find out if customers give any early warning signals of impending defection. If these were identified the company could take pre-emptive action. Signals might include the following:
Customer researchers are also advised to analyse the reasons for customer defection, and to identify the root causes. Sometimes these can be remedied by management. For example, if you lose customers because of the time taken to deal with a complaint, management can audit and overhaul the complaints management process. This might involve identifying the channels and touchpoints through which complaints enter the business, updating complaints database management, or training and empowering frontline staff. Root causes can be analysed by customer segment, channel and product. The 80:20 rule may be applicable. In other words, it may be possible to eliminate 80 percent of the causes of customer defections with relative ease. Next StepsContinue to the next section: Customer development and termination strategies Download Chapter 9, Managing the customer lifecycle: customer retention and development Read other excerpts and download more sample chapters from our CRM and call center bookshelf Dig Deeper on CRM tools and strategy
What are commitments to the customers?Customer commitment is a retention strategy that focuses on keeping people loyal by consistently delivering on the brand's value proposition and fostering relationships. Commitment to customers is a marketing concept that emphasizes the complete customer experience, from initial contact to post-purchase support.
What is commitment in customer relationship?Commitment can only be attained when there is mutual trust and the two parties share each other's values. In a committed relationship both suppliers and customers strive to uphold the relationship and never want to exit which in turn results in building the relationship stronger and sharper.
Which are three ways to get commitment from the customer?Research shows that there are three forms of customer commitment: relational commitment, instrumental commitment and value-based commitment. In this chapter, learn about all three types of customer commitment and get key performance indicators (KPIs) for customer retention programs.
Are the major factors of customer commitment?Other factors which explained commitment include service quality, reliability and marketing activities by the service provider. Switching costs had significant and positive impact on commitment.
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