Key Factors Affecting Customer Retention Marketing Essay

winder Factors Affecting node Re 10tion trade EssayThe objectives of this thesis ar to examine the influence of the interaction among over two satis featureion with utility case, harvest-home woodland, touch on, and faulting barriers on guest computer storage at Apollo Education and re returnion Organization. The field of operation started with an assumption which all above elements discombobulate direct impacts on client memory board and of the essence(p) to throw students in foreign owned education firms. It provoke be seen from the results that thither is a unconditional birth amongst product reference, egresss case, hurt, guest at angiotensin-converting enzymement and fracture barriers with node holding. The sample size of this quantitative explore included 104 current great(p) students at Apollo capital of Vietnam. Building on the quantitative aspects questionnaire was designed to examine the guest memory board, rectifyment quality, pr oduct quality, expenditure, node ecstasy and work shift barriers and to e trulydayize the finding to the biggish population. There ar likewise limitations as well as future look for implications at the end of this research study. Further more than(prenominal), the descriptive analysis is used to die the limit to which the factors preserve guest memory board. node memory board is an valuable element of a foreign owned education firm in todays increasingly rivalrous environment. Management moldiness identify and improve upon factors that tin can limit node take flightion. These include transformationing barriers and client gladness with dish quality, product quality, pricing.Clearly, there argon compelling arguments for management to c arfully consider the factors that baron attach client retention deems. A destiny of studies give way emphasized the substance of guest retention in the industry like banking or hospitalism such(prenominal) as Dawkins and Reichheld, 1990 Marple and Zimmerman, 1999 Page et al., 1996 Fisher, 2001. However, there has been little attack to investigate factors that baron wiz to client retention in education firm. Most of the studies confuse heightened on the impact of individual constructs, with bring out attempting to link them in a perplex to further explore or explain retention. If retention criteria be non well managed, clients might still leave their suppliers, no study how hard bankers try to retain them.Keywords node retention, Service Quality, harvesting Quality, Customer Satisfaction, Switching Barrier.Chapter 1 Overview of the researchBackground of ResearchDespite of the vivacious difficulties of the economy, in 2011 and 2012, education remains one of the few positive developing atomic effect 18as. tally to experts it is receivable to the stable development of education. Peoples learning needs be increasing their take of coronation in learning is increasing too. This inv estment is not interrupted by fear, worried intimately funding on the contrary, students can save umpteen another(prenominal) other expenses to spend on their studies or their children.In the field of education, it can be said that in 2012 a lot of bleak position language centers are opened. The main modestness is that position is more and more serious, becoming obligatory recruitment essentials of many enterprises.According to the purview, using side of meat proficiently helps graduate students quickly necessitate a job and receive two times higher issue compared to non-English speaking candidate. Therefore, parents bequeathing not hesitate to invest in their children English learning at the prestigious center from an early age. More naughty and white collared workers leave behind enroll with the purpose of increasing salary, in interpose.Apollo Vietnam, which was makeed in 1994, is the prototypical fully foreign owned English language training follow in Vietnam and an affiliate ofInternational House a well open and trusted name in English teaching. With the slogan Where the best beget better, Apollo continues to strive to maintain the high standard English teaching arrangement in Vietnam.Apollo has made and continues to make a lot of contri furtherions to Vietnamese society such as scholarships for students, fun learn English and teachers training for topical anaesthetic schools and several well-known and well-loved television shows, for sample, The Golden Bell, The Road to Olympia and wed Youths.Apollo has s pull down moder centers based in Ho Chi Minh, Ha Noi, Da Nang, Hai Phong and fractures a variety of educational programs and operate, such as Public courses ( including English for Young Learners, Teens, bounteouss, IELTS TOEFL iBT), Corporate English, School Partnership Program and Overseas take in Services.Apollos has a lot of reachments in education and training, recognized by the Vietnamese Government and the United KingdomFirst foreign organization that has stock two campaign medals for the Cause of Education from the Vietnamese Ministry of Education and TrainingIn2008, Apollos Chairman of the Board of Directors, Mr. Khalid Muhmood, was alike awarded the MBE (Member of the British Empire) by faerie Elizabeth II for providing international-standard English training in Vietnam.Apollo is collaborating with principal endorsers, such as Cambridge University, DOET,Nokia, Fahasa, Nestle, Prudential and many more.Apollo is also the English content postr for e very(prenominal)day game shows in Vietnam like Peak to Olympia, Golden Bell, Hot VTeen, and Doremi.Apollo has distinct courses designed for creation students at Apollo at different ages, especially for adult. occupy have look at Appendix 6 for more details. conundrum Statement and Research QuestionsIn recent years, a lot of English language centers with huge capital and investment are opened place Apollo in the fiercer competition with inviolate existing competitors like British Council, linguistic process Link, ILA, ACET, RMIT,Clever Learn, Oxford English UK, as well as novel entrants such as Alphabest, AMA,and so forth As a result, fewer unfermented clients are being pursued by an increasing number of emolument providers. Under those circumstances, a large share of a firms resources must be devoted to the present guest base in order to make them contented and retain them. ane significance of client retention is its close relationship to the companys continued survival, and to strong future growth. Hence, for a company, to maintain a stable profit level when competition is fierce, a defensive strategy which strives to retain existing nodes is more important than an aggressive one, which expands the size of the boilersuit market by inducement potential nodes (Fornell, 1992).Apollo currently has a good student retention rate of young learner segment, about 80%, whereas for adult segment in recent years, its all around 50% ( frame 2). As it can be seen from Figure 1, Apollo had from 640 to 700 adult student turns from 2009 until present and one forth of companys public revenue comes from those adult students which means that each month a lot of revenue shouldnt have lost if more careful measurements and priorities are force to adult segment. As a redevelopment company, no one likes the fact that 50% of adult students leave after enrolling one course at Apollo. Therefore, Apollo should try to find out the see to itings why they leave and solutions to retain more current adult students.Figure 1 Apollos Average Number of Adult Students from 2009 to 2012 (source interior document)Figure 2 Apollo Adult Studentss Retention Rate from 2009 to 2012 (source internal document)There is a large number of literature about customer dedication, customer ecstasy simply not many studies are saturated on the specific topic of customer retention. Moreover, there are many different characters in the context of English training service by foreign company compared to the regular service. Part of my job relates to retaining existing adult students at Apollo. Gaining better understanding of how to retain adult students at Apollo allow not only help me to work more efficiently but also make small contribution to companys development.The research questions that are discussed in this thesis are as belowWhat are the main determinants and influencers of customer retention at Apollo capital of Vietnam?How can these factors and determinants be developed and evaluated at Apollo Hanoi?Hence, the primary purpose of this study is to investigate the strategies at Apollo Hanoi to amplify customer retention. After reading the related literature, as discussed above, it was found out that it would be more appropriate to answer these questions by designing a perplex to determine customer retention.Thesis ObjectivesThis study explores the impacts that improvements in switching barriers a nd overall customer triumph by improving product or English course quality, service quality, price could have on customer retention at Apollo Hanoi, as it is a key indicant of customer retention, which in turn affects profit.On one hand, this thesis would be an opening to the further researches harmonize to the related area, and on the other hand, this study whitethorn have whatever limitations. There are other factors influencing customer retention, apart from factors suggested in this thesis such as, the demographic characteristics of customers, their life cycles, and their purpose pattern of English courses, that would be studied in future researches.The general objective of the research was to examine the extent to which key indicators affecting customer retention are having an impact on Apollo Hanoi and identify travel that Apollo Hanoi should take, if proven necessary.The research is more specifically aimed toFind out the reasons why left students ended the relationship w ith ApolloDiscover what factors are around important to encourage students study the next level at Apollo according to customers perspectivesIndicate the level of gladness of adult students with such factors at Apollo HanoiFind out whether switching barriers has strong effect on students conclusiveness to stayPresent recommendations to Apollo Hanoi on how to enhance its customer retentionThesis scope and limitationsScopeThis research was limited to Apollo Hanoi overdue to the limited reach of the tec who will be conducting his research and equaled proclivity for control over the research process apart from these limitations.LimitationsTimeThe researcher faced time constraints in the process of collecting data. As a result, many aspects of the research had to be accommodative of other activities going on at Apollo Hanoi, which included a survey the company had issued forcing the issuing of the questionnaire for this research to be delayed to avoid over questioning of adult stude nts.financeThe researcher was constrained financially. This primarily attributed to the fact that the research was primarily self-sponsored. As a result, certain value adding aspects of the research could not be administered effectively. entropy CollectionApollo management was not in a position to demote all the entropy requested due to lack of availability of the selective information as requested and the inability of the company to disclose all documents as they are.The researcher also stimulated problems with adult students, as many were loth(p) to fill in the survey and answer the questions in interviews.Thesis organizeMy thesis will be divided into six chaptersIntroduction belles-lettres ReviewMethodologyEmpirical FindingsRecommendations and conclusionsIn the introduction chapter, the background information such as brief information of foreign education in general and English training in grouchy in Vietnam, objectives of my research, hypotheses will be presented.In litera ture review chapter, the related theories will be introduced.Methodology chapter will explain the research techniques and methods.Empirical Findings, data analysis, recommendations and conclusions will show the actual and gathered data and results of this research.Conceptual frameworkProduct QualityOverall Customer Satisfaction impairmentCustomer retentionService QualitySwitching barriersCHAPTER 2 Literature ReviewCustomer retentionCustomer retention plays a very important occasion in organizations economic portfolio. It is the act of belongings customers resulting from service quality and customer satisfaction (Ross 1995). Companies should be interested in retaining customers, though, for the following reasons (Reichheld 1996)Getting new customers can be five times more than the cost obscure in satisfying and retaining current customers. It needs a lot of effort to induce satisfied customers to switch from their current suppliers to others.The average company loses ten part of its customers per year.A five percent decrease in the customer defection rate can increment net profit by 25 percent to 85 percent, depending on the industry.The customer profit rate carrys to increase over the life of the retained customer.According to Werner and Kunar 2000, retention may lead to increased profit over time if there is a coerce ongoing relationship or an inertia driven relationship if cost of maintenance decrease over time at a rapid rate than revenues. It is further argued that boil down on customer loyalty can provide general commercial advantages due to the following reasonsCustomers cost less(prenominal)(prenominal)(prenominal) to retain than to acquire.A loyal customer will commit more to its chosen supplier.About half the new customers come from referrals from existing customers/ clientsThe opinion of customer retention comes from the ideal of customer orientation or customer focusinged marketing, which calls for organizing the company towards the sa tisfaction of the customer needs. Ideally this requires that the offering should focus on the customer and his needs and/or expectations.Weinstein Johnson (1999) recommended that at least 75% of an organizations marketing budget should be spent on customer retention strategies and strengthening these relationships. Besides this realization, there is a general lack of focus on customers profitability is still king (Ross 1995). Most firms focus a significant amount of resources to attract and acquire new customers, instead of tutelage the existing ones. It is generally thought that once a customer is acquired, keeping the customer is simple through superior products and services (Payne 2006, 2). Ross (1995) continued to maintain that a focus on cash flow and short-term profits is not something wrong, but long-term profit and market share both require a base of satisfied customers which are retained by a focus on satisfaction with product quality, service quality, pricing and creati ng high switching barriers.We notice that customer retention is a concept that requires management to focus on customers by analyzing the indicators that reflect their satisfaction with services.Key factors affecting customer retentionRetention depends on how it is measured and presented, but even more on the expectations and targets set for the activity. Therefore, the need for having a simulate which determines the customer retention influencers so as to evaluate them is essential for such a firm to be conquestful in the agonistic markets.As mentioned before, a model will be developed based on the previous researches for evaluating different factors which influence customer retention and this model will be applied for Apollo Hanoi. Earlier studies of factors affecting customer retention un unmistakably concentrate on customer satisfaction and the switching barriers (e.g., Dick Basu, 1994 Gerpott, Rams, Schindler, 2001 lee Cunningham, 2001). It is studied that customers exp eriencing a high level of satisfaction are credibly to remain with their existing providers and maintain their relationship with the firm. However, according to some research, customer satisfaction, while positively influencing customer retention, is not always a comfortable condition, and, in some cases, fails to produce the expected effects. Hence, these researchers suggest that it is necessary to analyze other potentially influential factors. It is in this context that the concept of the switching barrier was proposed (Jones, Mothersbaugh, Betty, 2002).Furthermore, it has been demonstrated that the switching barrier plays the role of an adjustment variable star in the interrelationship mingled with customer satisfaction and customer retention. In other words, when the level of customer satisfaction is identical, the level of customer retention can exchange depending on the magnitude of the switching barrier.Hence, many studies have been done on the subject of customer retent ion and loyalty. They developed models so as to determine different factors influencing customer loyalty and retention. The main model that was developed in these studies is a result of an empirical causal model is as below. It will also be used in this researchCustomer RetentionOverall Customer SatisfactionSwitching BarriersFigure 1 Determinants of customer retention, model by Kim, et. al., 2003Each factor contains some variables like switching barriers which include switching cost, interpersonal relationship, attractiveness of alternatives, service recoveryThe education firms must maximize customer satisfaction and the switching barrier in order to enhance customer retention. In particular, they must focus on service quality, product quality, pricing policy and offer customer-oriented services to improve customer satisfaction. At the uniform time, efforts to raise the switching barrier must be built for a long-term relationship.Customer satisfactionCustomer satisfaction roots fro m a comparison between customers expectations and experiences. It means positive reaction to a service experience. If the customers perceived experience matches the expectations, customers are assumed to be satisfied. If the preceding expectations were higher than the gain of the service, the customers are considered to be disappointed and or dissatisfied. (Ylikoski 2000, 109).Stock (2005, 59) argued that customer satisfaction is an important driver of organizational performance and a key component of competitive strategies and sustainable advantage .Therefore, in market driven economy, measuring customer satisfaction is very important and customer satisfaction is essensial to the firms survival, growth and success (Guo et al., 2004, 141). According to the marketing concept, customer needs are essentially satisfied by integrated marketing, with the intention to satisfy customers while earning profit the basal idea is that satisfied customers will be more likely to re leveraging, l eading to increased sales and market share for the company (Innis and La Londe, 1994, 2). Hence, to achieve long-term business success, it is springy to keep customers happy (Stank et al., 1997, 2).Customer satisfaction has been considered as the main element for customer retention in a lot of researches, and has consequently moved to the forefront of relational marketing approaches (Rust and Zahorik 1993). According to Anderson and Sullivan (1993), the more satisfied customers are, the higer is their retention. On the other hand, there are studies and publications where the relationship between satisfaction and retention has been noted not to be so straightforward (Hennig-Thurau and Klee 1997). In some industries, customer satisfaction scores tend to correlate with retention whereas in other industries, there is little or no correlation (Lowenstein 1995, 11-12).Kotler (2003, 73) state that firms should measure satisfaction frequently, because customer satisfaction is the key to c ustomer retetion. The highly satisfied customer stays loyal longer, buys more from the firm, talks favorably, pays less attention to competing brands, is less sensitive to price, offers ideas to the company, and be less to serve than new customers, because transactions are routine. Customers will defect if they are very dissatisfied, dissatisfied, or even indifferent. Hence, firms have to frequently survey their customers level of satisfaction and target to create very satisfied customers, because they are most likely to stay loyal to the firm. According to Bolton (1998), the level of satisfaction explains a significant portion of explained difference in the duration of service provider -customer relationship, comparable to the effect of price. Besides, Bolton stated that it was a common misconception that organizations which focus on satisfaction are failing to manage customer retention. Furthermore, managers and researchers might have underestimated the greatness between custome r satisfaction and retention due to the complexity of the relationship between these factors.In a research by Ranaweera and Prabhu (2003), it was argued that while satisfaction may be an important driver for retention, it only does not ensure service loyalty trust, switching barriers, and emotional reaction such as inertia and indifference might also affect retention. In their research, Ranaweera and Prabhu adopted a holistic approach to examine the combine effects of satisfaction, trust, and switching barriers in a continuous purchasing setting. The findings denoted that customer satisfaction and trust have strong and positive effects on customer retention, although the effects of trust on retention are weaker than that of satisfaction. The results also proved that switching barriers have a significant effect on customer retention. According to the research, it is proved that satisfaction is the main driver of customer retention buy if trust is absent, satisfaction will have less impact on retention.The correlation between satisfaction and customer retention is not usually as simple and straightforward as stated before. Reichheld et al. (2000) argued that a concept called the satisfaction trap is represented while it may seem nonrational that increasing customer satisfaction will press out retention and therefore profits, the facts are opposite as 60 percent and 80 percent of customers who defect say they were satisfied or very satisfied with their former supplier. According to Storbacka et al. (1994), customer satisfaction is only one dimension in increasing relationship strength strong relationships can be dependent or perceived of contextual bonds that function as exit barriers. It is vital to understand that contextual barriers can generate possible dissatisfaction which emerges as the importance of the contextual bonds imposes. The article ends arguing that the relationships are remarkably different between different individual consumers. Some may be very committed to the relationship and for them the perceived satisfaction with the relationship is very important. Others may find the relationship unimportant, and for those customers, the satisfaction component is so practically significant.Extensive evidence suggests the positive influence of customer satisfaction on loyalty (Bolton, 1998 Fornell et al., 1996 Musa, 2004). In fact, many researchers pointed out that in order to improve business performance firms should measure and manage customer satisfaction and its importance has led marketing scholars to recommend firms to improve their customers satisfaction judgments as satisfaction is a key to customer loyalty and retention (Fornell et al.). Customer satisfaction with a companys products or services is very much viewed as the key to a companys success and long-term competitiveness.Product qualityA prominent reason why customers do not retain with company is that their products are not fulfilling its functions properly. Wh en products fail to perform their functions completely and properly, then products are useless for customers, when customers are not satisfied with products and do not use it, they will reduce its retention and relationship with company (Buzzell and Gale 1987). Product quality plays a vital role in customer retention and has positive relationship with customer retention. Customers compare the perceived performance of a product or service with some performance standard. Customers are satisfied when the perceived performance is great than the standard, while dissatisfaction occurs when there is lack of standard for performance falls. Product quality is the strategical benefits of quality in contributing to market share and return on investment (Anderson and Zeithaml 1984). Searching for quality is credibly the most important consumer trend of the 1980s (Rabin 1983) as customers are now demanding higher quality in products than ever before (Leonard and Sasser 1982).A company could us e a number of strategies to retain its customers. Of great importance, product quality for customer retention to such strategies is the wider concepts of customer service, customer retention, and relationship marketing. Companies can ready loyalty and retention through using of number of techniques, including database marketing, customized products in limited editions, cashable against a variety of goods or service, issuing loyalty cards, preferential discounts, light gifts, special promotions, newsletters, of magazines, members clubs, or it has been argued that customer retention is linked to employee loyalty, since employees are the ones that build up long-term relationship with customers.Service qualityService quality is a critical issue in the service industry (Stafford, Stafford and Wells, 1998) and of particular importance for English training providers who characteristically offer English courses which are homogeneous in nature. Moreover, service quality is both directly a nd indirectly related to loyalty through satisfaction (Bloemer, De Ruyter and Peters, 1998). Therefore, those companies which deliver quality of services better than their competitors would surely have greater possibilities of success. In order to understand the level of service quality of an education firm, a measurement should be established. However, quantifying service quality is not simple and too subjective.Nowadays, education firms provide the same types of English courses, but they do not provide the same quality of services. Besides, customers today are more aware of alternatives and their expectations of service have increased. Service quality can, hence, be used as a strategic tool to build a distinctive advantage over competitors. Although quality cannot be improved unless it is measured, it can be defined from several perspectives duh as the ability to satisfy the needs and expectations of customers (Bergman and Klefsjo (1990), or the overall features and characteristic s of a product or service that bears on its ability to satisfy given needs.A reason for customers to switch is that companies fail to provide the better and effective customer service to them. These services include pre-sale service and post- sale service (Lewis Mitchell, 1990). If customers are not satisfied with customer service of the company, it will force them to change the supplier. Service quality is very important for the retention of the customers and have positive relationship as if firms provide service according to the customer requirement than it will also retain the customer as well as lowering manufacturing costs and improving productivity. Service quality is consumers judgment about the overall excellence or superiority of products (Zeithaml 1988). The design and implementation of service delivery processes plays a very important role in the overall competitiveness of modern organizations. Roth and Jackson (1995) provided clear evidence that process aptitude and ex ecution are major drivers of performance due to their impacts on customer satisfaction and service quality in education firm.Bearden and Teel (1983) found a positive relationship existing between service quality and customer satisfaction. The positive relationship between service quality and customer satisfaction creates true customers, increase efficiency, market shares, and profits, heavy sales volume, higher revenue, and reduces cost by economies of scales, and retain customer.(Anderson and Sullivan 1993) Satisfied customer do not often switch their service providers and therefore, the cost of retaining existing customers is significantly lower than attracting new ones. These customers my also spread their satisfaction by positive word of let the cat out of the bag which influences non-existent customers desire to engage with the organization and work as free promotional agents (Gronroos 2007, Zeithmal and Bitner, 2000)The positive effects by practising service quality models ar e a competitive differentiation that favors the enterprise, chances of potential growth, better employee morale, customer loyalty and retention, customer satisfaction, economic growth and profits, employee motivation and vision, favorable advertising, greater productivity and minimisation of loss for the customers.The evidence that customer loyalty makes an organization more gainful makes it imperative that complaints and other unfavorable behavioral intentions should be handled effectively and apropos to ensure the stability of these relationships. It is important for organizations to also acknowledge that customers may also switch because of the attraction of competitors that are providing better service, more personable service or higher quality. In this case, customers are not switching because of unsatisfying service. Managers of service firms should know that some customers would still switch services even when they are satisfied with a former provider (Keaveney, 1995).Pric ePrice is another factor for customers to be retained or not to retain with companies. Due to competition, companies are playing with prices of products and services. Clients always required products on most cheap price.Previous researches show that there is positive relationship between price and customer retention and the stability would increase the potential for customer retention. Company should lower customers price sensitivity, reduce the costs of failed marketing and of new customer creation, reduce operating costs due to customer number increases, improve the effectiveness of advertising, and enhance business reputation (Fornell, 1992). Customers often switch mainly due to some pricing issues, for example high price perceived, unfair or deceptive pricing practices (Peng and Wang, 2006). Therefore, so as to increase customer satisfaction, it is essential for service firms to actively manage their customers price perceptions, for example carrying out attractive pricing, offer ing reasonable prices mix, lower prices without decreasing quality, etc.Price might be one of the most important determinants of customer decisions (Srivastava and Lurie, 2001). Managers could make use of price matching to stimulate repeat purchase behavior (reducing price defection), because price matching may indicate a commitment to protect customers , the objective of it is to keep customers happy so that they would come back and buy again. (Reichheld and Sasser, 1990) suggest that repeated existing customers focus less on price savings than new customers do. Understanding long-term price matching effects on customers is important so as to determine whether price matching has a lasting impact on customer behavior that is evaluating the effectiveness of these policies in stimulating customer retention, in addition to customer acquisition (Kukar-Kinney, 2006).Ol