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Managing your most loyal customer relationships

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  • Larson, John
  • Jaworski, Bernard J.
  • Larson, Jack

Abstract

Conventional wisdom regarding customer relationships suggests that a company should strive to deepen the loyalty of its customer base. While multiple approaches have been suggested, each approach advocates moving a subset of the customer base from one level of affinity (e.g., neither satisfied nor dissatisfied) to a higher one (e.g., satisfied). While seemingly appropriate, this approach assumes that moving customers up to higher categories is important and should be the focus of a firm’s efforts. Instead, we recommend an approach that involves focusing a firm’s resources disproportionately on its most satisfied customers. This approach provides two major benefits relative to conventional approaches. First, it focuses a firm’s resources on a narrow segment of customers. Hence, it requires significantly less financial outlay and associated financial risk than any approach that is aimed at all or even a majority of customers. Second, as we demonstrate, the financial benefit from leveraging high satisfaction levels among a subset of the current customer base significantly exceeds the financial benefit of other strategies (e.g., moving customers up from neutral to satisfied). We present the results from two case studies that illustrate our main points and provide useful examples of how to leverage a firm’s highly satisfied customers.

Suggested Citation

  • Larson, John & Jaworski, Bernard J. & Larson, Jack, 2021. "Managing your most loyal customer relationships," Business Horizons, Elsevier, vol. 64(1), pages 141-147.
  • Handle: RePEc:eee:bushor:v:64:y:2021:i:1:p:141-147
    DOI: 10.1016/j.bushor.2020.09.002
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    References listed on IDEAS

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    1. Neil A. Morgan & Lopo Leotte Rego, 2006. "The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance," Marketing Science, INFORMS, vol. 25(5), pages 426-439, September.
    2. Nicholas I. Fisher & Raymond E. Kordupleski, 2019. "Good and bad market research: A critical review of Net Promoter Score," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 35(1), pages 138-151, January.
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