Customer has been established as an important determinant

Customer
retention refers to the activities and actions companies and organizations take
to reduce the number of customer defections. The goal of customer retention
programs is to help companies retain as many customers as possible, often
through customer loyalty and brand loyalty initiatives. It is important to
remember that customer retention begins with the first contact a customer has
with a company and continues throughout the entire lifetime of the
relationship.

The
rapid growth in competition among organizations of all types has posed several
challenges for them regarding maintaining their customers and achieving
business objectives. Due to that, organizations have shifted from traditional
marketing towards relational exchange practices with customers that could yield
greater business profits on the long term. For this reason, focusing on
customer retention has become very important for improving organizational
performance and competitiveness. In order to achieve customer retention, it is
important to note that customers tend to evaluate their purchase experiences in
terms of the perceived value that results from the amount of money spent to get
a product or service and the benefits received in return. Therefore, a positive
customer experience has a significant impact on customer retention and purchase
behaviour (Bapat and Thanigan, 2016). To sustain customer relationships and
ensure organizational effectiveness, it has become vital to understand what
constitutes customer retention (Afzali and Ahmed, 2016).

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In
order to respond the intense competition among businesses, it is as become
important to search for the drivers of customer retention. Previous studies
examined several factors and predictors of customer retention in different
industry contexts. However, the nature of these factors tends to be different
from industry to industry. This study focus on Sri Lankan retail sector to
explore customer retention through the customer loyalty programs, which company
offers.

Perceived
value has been established as an important determinant of consumers’ perception
and retention. In the current business environment which is highly competitive
and frequently changing, retailers should clearly develop their understandings
and predictions towards the behaviour of consumers in buying and selecting
different goods and services for satisfying their needs (Roy, Datta, and Basu,
2017). Therefore, in order to obtain and secure a competitive advantage in
target markets, several retailers have focused on differentiating themselves by
establishing a distinct brand image in the minds of their consumers towards
their department stores in an attempt to influence and motivate their purchase
behavior (Shamsher, 2016). By looking at previous literature, it also shows
that some scholars considered sales promotions and store environment as
important factors that influence customer retention in the retail context.

Customer
relationships can be established and maintained through consumers’ trust and
brand commitment which result from positive purchase experiences. According
to Van Vuuren et al. (2012), understanding what constitutes trust and commitment
is vital in order to develop long-term relationships. Relationship marketing
encompasses creating bonds with business customers by fulfilling their needs
and honoring commitment. Morgan and Hunt (1994) added that relationship
commitment and trust require firms to provide superior products and services to
their customers and communicating brand value. Instead of focusing on
short-term benefits, organizations adopting relationship-marketing strategy
establish long term bonds with their profitable customers. Consequently,
customers tend to develop trust towards these organizations, and the joint
commitment enables both parties to fulfil their needs. Therefore, the higher
degree of trust and commitment ultimately lead to greater customer retention
(Hilman and Hanaysha, 2015).

Customer
retention can be described as the process of building customer loyalty towards
a particular brand, thus resulting in repurchasing its products or services
over time (Cannie, 1994; Danish, Ahmad, Ateeq, Ali, and Humayon, 2015).
Customer retention emphasizes on repetitive patronage which is mainly
associated with consumer’s repurchase behaviour and brand loyalty (Buttle,
2004). In other words, customer retention entails a long-lasting customer
commitment towards a brand and maintaining such relationship as a result of
positive perceptions and past experiences (Boohene, 2013; Mohamed and Borhan,
2014). Customers who happily make most of their purchases from a certain brand
usually have higher degrees of satisfaction towards it than those who show less
commitment. Moreover, a successful customer-brand relationship makes consumers
less attracted to price promotions offered by other competitors. Anderson and
Sullivan (1990) also illustrated that customer retention provides financial implications
to organizations because gaining new customers is more costly than maintaining
existing ones due to the expenses that they spend on advertising and promotion
to influence their purchase behavior.

Customer
retention has largely been considered to be the main objective for
organizations that focus on relationship marketing strategy (Coviello, Milley,
R., and Marcolin, 2001; Grönroos, 1991). Although the accurate measurement and
definition of customer retention can differ among industries and organizations
(Aspinall, Nancarrow, and Stone, 2001), there is a general agreement that
emphasizing on customer retention can enable organizations to gain several
benefits and advantages (Ang and Buttle, 2006; Buttle, 2004; Dawkins and
Reichheld, 1990). For instance, retained customers are willing to pay higher
prices on purchasing a company’s products or services than new customers, and
they appear to be less sensitive to the receptions of promotional offers which
are usually created to obtain new ones (Ang and Buttle, 2006). Furthermore,
loyal customers who keep their relationships with a particular brand are likely
to purchase its products frequently, recommend its products to others, consume
less time from the service providers, and have less sensitivity to its price
changes (Sim, Mak and Jones, 2006; Reichheld and Sasser, 1990). Previous
literature also showed that acquiring new customers costs almost seven times
more than that of maintaining existing ones (Sim et al., 2006), and that
developing customer retention will result in improved profit margins. All of
these benefits confirm the importance and value of retained customers for brand
success.

Retaining customers
has also been established as a key objective for several organizations,
especially in the current competitive business environment as several brands
devote considerable amount of time and financial capital on creating
long-lasting and mutual relationships with their potential customers in order
to achieve greater degree of performance and satisfy marketing objectives
(Bataineh, AlAbdallah, Salhab, and Shoter, 2015). In view of that, the creation
and implementation of relationship marketing as a business strategy to maintain
customers can enable a brand to obtain resilient and sustainable competitive
advantages (Roberts, Varki, and Brodie, 2003). However, it is not an easy to
establish customer relationships and maintain them over time unless the company
understands their customers’ needs and expectations. For this reason, it has
become vital for organizations to understand the needs and expectations of
their customers for managing their brand relationships, and then obtain the
necessary resources

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