IMPACT OF STORE ENVIRONMENT ON CUSTOMER LOYALTY
Significance of Store Loyalty for Retailers
Retailers like manufacturers need to differentiate their offerings. They want to create differential advantages for their stores, so that their customers no longer see one store as substitutable for any other. The essential purpose of of a differential advantage for retailers, as for manufacturers, is to increase loyalty among customers. Selling oriented retailers often say "compare us to the competition-we offer the best deals." The market-oriented retailer aims to convince them that this particular store satisfies their needs better than competing stores, either because the prices are consistently to be trusted, or in aspects other than price. A successful differential advantage will push up the total perceived cost (actual and emotional) of going to another shop. Retailers, by offering a shopping experience tailored to differentiated customer needs, they could hope to improve margins, without losing too much volume to price competitors.
In most FMCG markets the brand leaders are not the least expensive brands. This might encourage retailers to believe that consumers (who are also shoppers) are willing to pay extra for perceived quality.
In the face of slow growth and highly competitive markets, a good defence with focusing on the right current customers is critical. A strategy that is effective in acquiring new customers may not be the most effective in retaining current customers. Marketing tools such as coupons and promotions are minimally effective. Recent evidence suggests that profits may be enhanced when strategies focus on retaining current customers. Even small increases in retention rates can dramatically increase profits. They also found that increase in retention rates better explain the increase in profits, than market share, scale, cost position, or any other competitive advantage variables.
Increased customer retention has two important effects. (1) A gradual...