Customer loyalty is determined by three factors: relationship strength, perceived alternatives and critical episodes.
It is claimed by Reichheld and Sasser (1990) that a 5% improvement in customer retention can cause an increase in profitability between 25% and 85% (in terms of net present value) depending upon the industry.
In the cycle of success, an investment in your employees’ ability to provide superior service to customers can be seen as a "virtuous circle".
This in turn can create customer loyalty, improved sales levels, and higher profit margins.
He looked at the benefits of obtaining the loyalty of suppliers, employees, bankers, customers, distributors, shareholders, and the board of directors.
Duff and Einig (2015) expanded the model to debt issuers and credit ratings agencies to investigate what role commitment plays in issuer-CRA relations.
The satisfaction-profit chain is a model that theoretically develops linkages and then enables researchers to test them statistically for a firm using customer data (both from surveys and other sources).
The satisfaction-profit-chain refers to a chain of effects whereby increased performance on key attributes leads to improvements in overall satisfaction, which in turn affects loyalty intentions and behaviors.
The increased customer loyalty is shown to affect short- and long-term financial outcomes including sales, profitability, and stock price.
In many firms, especially service-oriented industries such as retailing, health-care, financial services, education, and hospitality the level of satisfaction experienced by front-line employees is a critical component.
Earlier models of customer commitment conceptualized it as a unidimensional construct (e.g., Garbarino and Johnson 1999; Moorman et al.
The five commitment dimensions include: Typically, loyalty data is being collected by multi-item measurement scales administered in questionnaires by software providers such as Confirmit, Medallia, and Satmetrix.
All historical trends for different segmentations and their standard of living may also be very helpful in developing customer retention strategy.