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MCS 1000 (215)
Chapter 22

Chapter 22 Introductory Marketing Notes

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University of Guelph
Marketing and Consumer Studies
MCS 1000
Douglas Adlam

Chapter 22 Marketing Managing RelationshipsBuilding LoyaltyThe Search for Customer Loyalty Loyalty A customers commitment to continue patronizing a specific firm over extended period of time Means behaviour preferences likingfuture intentionsDefection A customers decision to transfer brand loyalty from a current service provider to a competitor A rising defection rate shows that something is wrong w quality or competitors offer better qualityfall in profits 0 defection means keeping every customer the company can profitably serve Why is Customer Loyalty Important to a Firms Profitability Research has found that the longer customers remained w a firm the more profitable each industry became4 factors that cause growth1 Profit from increased purchases or in a credit cardbanking environment higher account balances Business customers grow larger over time therefore need to purchase greater quantities2 Profits from reduced operating costs As customers become more experienced they make fewer demands on the supplier They also make fewer mistakes when involved in operational processes3 Profit from referrals to other customers Positive word of mouth are free sales advertising4 Profit from price premium New customers often benefit from intro promotional discounts Longterm customers are more likely to pay regular prices When customers trust supplier they are willing to pay higher prices at peak periodAssessing the Value of a Loyal Customer Loyal customers arent always more profitable than those making onetime transactions The challenge is to determine the costsrevenues associated w serving customers from different market segments at different points in their customer lifecycleshow to predict profitabilityWhy are Customers Loyal Customers arent inherently loyal to any one firm Rather we need to give our customers a reason to consolidate their buying with usthen stay w us We need to create
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