1.5 Satisfied customer means loyal customers?
The need to satisfy is connected to the need to improve the customer retention. A satisfied customer will be more willing to use the service in the future. Except for some cases, a satisfied customer will be by hypothesis a loyal customer. It is very important for companies to maintain a good retention among their customers. Some reasons, for focusing on retention, are the following: there is a growing competition, the advertising costs are increasing and the market is stagnant: the population rate is declining and the GNP is growing at a declining rate.
Retaining a customer means to increase the word of mouth, to make them recommend the company and to keep them away from the competition. However, there are some exceptions to bear in mind, customer satisfaction doesn't necessarily lead to retention if the cost of switching are low, if many substitutes exists or if there is no differentiation and low involvement."The pursuit of customer satisfaction is grounded in the belief that satisfied customers are more valuable to the firm because they are expected to: be retained longer and in greater numbers, buy more goods, cost less to serve, be willing to pay slightly higher prices, respond faster to promotional efforts, suggest and evaluate new products and revenue streams, and refer others - which helps reduce the cost of acquiring new customers."
The advantage of the customer retention results in the profit derived from sales. A study published in the Harvard Business Review, showed that reducing defection by 5 % could boost profit from 25% to 85% . The authors W. Reichheld, and W. Sasser specified that these 5% in defection reduction lead in "85% more profits for bank's branch system, 50% more in an insurance brokerage, and 30% more in an auto-service chain". In the same time, retention contributes to reduce operation cost. Keep actual customer is much cheaper than to gain new ones. It represents an economy of time and money; it cost 4 to 5 times less to keep current customer rather than gaining new ones .
A study from the Strategic Planning Institute of Cambridge described by Tom Peters , has discovered that "Companies rated in the top third on relative perceived product quality out earn those in the bottom third by about two-to-one (on return on investment) over the long haul." And he claimed that low price strategy could be efficient in the short run but hardly ever last. It means the perceived quality is the most important factor determining the long-term profitability. Moreover, in his book, R. Zemke , explained the satisfaction of customer was a main concern. First, the leaders can charge an average, 9 to 10 percent more for their services than their lower quality competitors. It influences their growth and their return on sales. The high customer satisfaction companies grow twice faster than the low-service competition and improve their market share by about 6 % a year, the low service competition lose an average 2 % annually". The author also focuses on return on sales - it is an average of 12% for companies considered as high service by the PIMS, yet it is just 1% for the ones rated low.
