Customerretention refers to the activities and actions companies and organizations taketo reduce the number of customer defections. The goal of customer retentionprograms is to help companies retain as many customers as possible, oftenthrough customer loyalty and brand loyalty initiatives. It is important toremember that customer retention begins with the first contact a customer haswith a company and continues throughout the entire lifetime of therelationship.Therapid growth in competition among organizations of all types has posed severalchallenges for them regarding maintaining their customers and achievingbusiness objectives. Due to that, organizations have shifted from traditionalmarketing towards relational exchange practices with customers that could yieldgreater business profits on the long term.
For this reason, focusing oncustomer retention has become very important for improving organizationalperformance and competitiveness. In order to achieve customer retention, it isimportant to note that customers tend to evaluate their purchase experiences interms of the perceived value that results from the amount of money spent to geta product or service and the benefits received in return. Therefore, a positivecustomer experience has a significant impact on customer retention and purchasebehaviour (Bapat and Thanigan, 2016). To sustain customer relationships andensure organizational effectiveness, it has become vital to understand whatconstitutes customer retention (Afzali and Ahmed, 2016).Inorder to respond the intense competition among businesses, it is as becomeimportant to search for the drivers of customer retention.
Previous studiesexamined several factors and predictors of customer retention in differentindustry contexts. However, the nature of these factors tends to be differentfrom industry to industry. This study focus on Sri Lankan retail sector toexplore customer retention through the customer loyalty programs, which companyoffers.
Perceivedvalue has been established as an important determinant of consumers’ perceptionand retention. In the current business environment which is highly competitiveand frequently changing, retailers should clearly develop their understandingsand predictions towards the behaviour of consumers in buying and selectingdifferent goods and services for satisfying their needs (Roy, Datta, and Basu,2017). Therefore, in order to obtain and secure a competitive advantage intarget markets, several retailers have focused on differentiating themselves byestablishing a distinct brand image in the minds of their consumers towardstheir department stores in an attempt to influence and motivate their purchasebehavior (Shamsher, 2016). By looking at previous literature, it also showsthat some scholars considered sales promotions and store environment asimportant factors that influence customer retention in the retail context. Customerrelationships can be established and maintained through consumers’ trust andbrand commitment which result from positive purchase experiences. Accordingto Van Vuuren et al.
(2012), understanding what constitutes trust and commitmentis vital in order to develop long-term relationships. Relationship marketingencompasses creating bonds with business customers by fulfilling their needsand honoring commitment. Morgan and Hunt (1994) added that relationshipcommitment and trust require firms to provide superior products and services totheir customers and communicating brand value.
Instead of focusing onshort-term benefits, organizations adopting relationship-marketing strategyestablish long term bonds with their profitable customers. Consequently,customers tend to develop trust towards these organizations, and the jointcommitment enables both parties to fulfil their needs. Therefore, the higherdegree of trust and commitment ultimately lead to greater customer retention(Hilman and Hanaysha, 2015).Customerretention can be described as the process of building customer loyalty towardsa particular brand, thus resulting in repurchasing its products or servicesover time (Cannie, 1994; Danish, Ahmad, Ateeq, Ali, and Humayon, 2015).Customer retention emphasizes on repetitive patronage which is mainlyassociated with consumer’s repurchase behaviour and brand loyalty (Buttle,2004). In other words, customer retention entails a long-lasting customercommitment towards a brand and maintaining such relationship as a result ofpositive perceptions and past experiences (Boohene, 2013; Mohamed and Borhan,2014). Customers who happily make most of their purchases from a certain brandusually have higher degrees of satisfaction towards it than those who show lesscommitment. Moreover, a successful customer-brand relationship makes consumersless attracted to price promotions offered by other competitors.
Anderson andSullivan (1990) also illustrated that customer retention provides financial implicationsto organizations because gaining new customers is more costly than maintainingexisting ones due to the expenses that they spend on advertising and promotionto influence their purchase behavior.Customerretention has largely been considered to be the main objective fororganizations that focus on relationship marketing strategy (Coviello, Milley,R., and Marcolin, 2001; Grönroos, 1991). Although the accurate measurement anddefinition of customer retention can differ among industries and organizations(Aspinall, Nancarrow, and Stone, 2001), there is a general agreement thatemphasizing on customer retention can enable organizations to gain severalbenefits and advantages (Ang and Buttle, 2006; Buttle, 2004; Dawkins andReichheld, 1990). For instance, retained customers are willing to pay higherprices on purchasing a company’s products or services than new customers, andthey appear to be less sensitive to the receptions of promotional offers whichare usually created to obtain new ones (Ang and Buttle, 2006).
Furthermore,loyal customers who keep their relationships with a particular brand are likelyto purchase its products frequently, recommend its products to others, consumeless time from the service providers, and have less sensitivity to its pricechanges (Sim, Mak and Jones, 2006; Reichheld and Sasser, 1990). Previousliterature also showed that acquiring new customers costs almost seven timesmore than that of maintaining existing ones (Sim et al., 2006), and thatdeveloping customer retention will result in improved profit margins. All ofthese benefits confirm the importance and value of retained customers for brandsuccess.
Retaining customershas also been established as a key objective for several organizations,especially in the current competitive business environment as several brandsdevote considerable amount of time and financial capital on creatinglong-lasting and mutual relationships with their potential customers in orderto achieve greater degree of performance and satisfy marketing objectives(Bataineh, AlAbdallah, Salhab, and Shoter, 2015). In view of that, the creationand implementation of relationship marketing as a business strategy to maintaincustomers can enable a brand to obtain resilient and sustainable competitiveadvantages (Roberts, Varki, and Brodie, 2003). However, it is not an easy toestablish customer relationships and maintain them over time unless the companyunderstands their customers’ needs and expectations. For this reason, it hasbecome vital for organizations to understand the needs and expectations oftheir customers for managing their brand relationships, and then obtain thenecessary resources