Loyalty programs such as those run by airlines do not create loyalty and retain customers. Once all competitors offer similar schemes, all that happens is that marketing costs have risen in that industry. Argue for or against the proposition that loyalty programs are effective customer retention strategies. What is the relationship between customer satisfaction and retention? Go online and identify three for-profit companies engaged in values-based retention marketing. What similarities can you find between them? Some customers are inherently not profitable and ‘retain’ because they extract more value from the firm than they provide in terms of revenue, reputation and recommendation. Identify three strategies for addressing this sort of retention ‘problem’. What are the risks of each for the business? Directions and Criteria Question 1 should have a word count of no less than 150 words. Questions 2 & 4 a minimum word count of 100 words. Question 3 should have a minimum of 200 word count and at least one website cited. A total of 550 word count for your submission.

Q1) Earlier businesses were product-centric where they used to manufacture standard products and push them to the market where customers with minimum options were forced to purchase whatever the firms offered. With the advent of technology, digitalization, globalization and increased competition, the new age customers are extremely aware of the product and service offerings of the firms. They are able to make purchase decision after careful consideration of the specifications and features of the product, its pros and cons and the value they perceive in the product for the price they pay. With the increase in competition and availability of a number of options, customers are increasingly becoming choosy in their purchases and this has become a challenge to companies to retain customers. A dissatisfied customer is more likely to switch his choices and move to competitor products resulting in lost sales for the firm whereas a satisfied customer stays with the firm and repeatedly purchases its products thus increasing the lifetime value. Hence, the more the customer is satisfied with the product or the service, the higher will be the retention rate.
Q2) Amazon – Amazon offers wide range of products at relatively lower prices to customers with prompt delivery. It also manages returns effectively and provides prompt refund or replacement.
Dell Computers – Dell Computers offers businesses and individual customers with wide range of configurations with medium pricing. Its uniqueness lies in the services it offers after purchase of the product. The customer service team is highly effective and prompt in resolving issues.
Apple Inc. – Apple Inc. is known for its unique products, which offer unique and innovative features through its products. It offers various accessories that are compatible only with its products and software thus helping the firm in retaining customers towards purchasing other products.
Q3) The similarities among the three firms include the customer centric products and services they offer with sole focus of retaining the customers thus increasing the customer lifetime value through repetitive purchases. Amazon excels in all fronts that include offering variety of products, prompt delivery, returns and refunds thus ensuring its customers come back to the website to make the purchase. Dell Computers excels in the timely delivery as well as the after-sales service it offers to the customers, which prompts the Business-to-Business customers to place repetitive orders depending on whether the contract is lease based, or one-time purchases. Apple, while offering innovative products and designs though at higher prices, thrills the customers with unexpected features and specifications. Its customer service is top-class with immediate resolution to any hardware or software problems that occur irrespective of whether the product is in warranty or out of warranty.
Q4) Below are the three strategies addressing the retention problem with customers who extract more value from the firm than the value they provide through purchases –
Maintaining a limit for the reward programs and discounts offered to the customers
Risk – Risk can be that the customer gets dissatisfied and switches to competitor products, which offer better discounts and rewards
Linking customer rewards to their next few purchases thus encouraging them to purchase more for the sake of rewards.
Risk – Customers might not make purchases just for the sake of rewards as they might not require the product anytime soon.
Use the customers to increase the positive marketing or publicity of the product through referral programs and campaigns.
Risk – Customer might be disinterested in active involvement to promote the products.
 
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