Sunday, August 22, 2010

Service Loyalty Creates Customer Loyalty

An organisation’s “primary focus should not be to merely attract customers, but to obtain their loyalty and, thus, their patronage, not only for the present, but also for the long-term. While organisations attract their customers through their promise, the customer’s decision to purchase is founded on the trust that the firm will fulfil their needs,” (Kandampully, 1998, p.436).

In an era when customer service seems to be something that is sadly lacking for many – there are unique opportunities for organisations to gain market share and create a competitive advantage, through focusing, not only, on offering service but on the creation of customer loyalty as well.

Two of the basic theories in customer satisfaction include disappointment theory and prospect theory. The theories are based on the premise that our reaction to service; which can be described either as, disappointment, neutral or elation; is based on the service we receive in relation to our expectations. Disappointment theory states that, “the greater the disparity between outcome and expectations, the greater is the person’s disappointment or elation;” whereas prospect theory states that “the evaluation of satisfaction will display diminishing sensitivity. That is, marginal values of gains and losses decrease in size with increasing levels of satisfaction and dissatisfaction,” (Homburg et al, 2005, p.87).

Customer service is not just about exceeding your customer expectations on a consistent basis, (rather than a transaction specific event), but also about understanding and meeting their future needs and future expectations. This takes time and effort, and presupposes that your organisation already has the relationship with your customers, where you can engage with them to discuss and understand their future needs. As Kandampully mentions, “the primary objective of the service provider is identical to that of the tangible goods producer, i.e. to develop and provide offerings that satisfy customer needs, thereby ensuring their own economic survival”, (p.432).

Another advantage of offering superior service on a consistent basis is that research has shown that it can lead to the customer being willing to pay more for a product or service. Homburg, Koschate and Hoyer’s, 2005, research supports “the managerial belief that satisfied customers – those receiving higher quality service or who feel better about the product – are, in fact, willing to pay more for it and that the relationship is non-linear. The results suggest that the measurement and enhancement of customer service should focus on cumulative satisfaction rather than on transaction-specific satisfaction,” (p.94).

Focusing on service loyalty to create customer loyalty is either part of your organisations culture or it isn’t. A culture of service loyalty only exists and works in practice, when the whole organisation embraces and owns the principle and it becomes part of their daily routine in all interactions, both tangible and intangible, with existing or potential customers. The principle of service loyalty becomes part of the organisations ‘brand and image culture’ and brings with it a distinct competitive advantage.

As Kandampully states, “a customer’s loyalty and trust is gained by the service personnel’s commitment to seamless, consistent and superior service, which manifests itself, to the customer, as ‘service loyalty’. It is through service loyalty that an organisation achieves customer delight and customers’ honest participation (customer voice) in the relationship – this is, indeed, the key to continuous improvement and sustained superiority,” (1998, p.439)


Homburg, C., Koschate, N. and Hoyer, W.D. (2005). Do Satisfied Customers Really Pay More? A Study of the Relationship between Customer Satisfaction and Willingness to Pay. Journal of Marketing, Vol. 69, p.84-96.

Kandampully, J. (1998). Service quality to service loyalty. A relationship that goes beyond customer service. Total Quality Management, Vol. 9, No. 6, p.431-443.

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