Q.1 Discuss the interrelationships among customer expectations and satisfaction, perceived value and customer retention.

Why is customer retention essential? Q2. A college student has just purchased a new personal computer. What factors might cause the student to experience post purchase dissonance? How might the student try to overcome it? How can the retailer who sold the computer help reduce the students dissonance? How can the computer manufacturer hepl in the same? Q3. Discuss how reference groups exerts influence on consumer behaviour.

The interrelationships between customer expectation and customer satisfaction are all too often poles apart. Customer expectations should be high because they are parting with their hard earned cash for a product or a service that should be given with good grace, good manners and an eye to making the customer experience an even better one. Unfortunately, this is very often not the case. It isn't just a customer relationship that is essential, it is an excellent customer relationship that is essential, and the reasons for this should be obvious. If a customer receives poor service, not only will they vote with their feet and never spend their money with you again, but they will also make sure that everybody they know hears about how bad you are. Conversely, if your customer service is beyond reproach, they will return and will recommend you to everyone that they know and you will benefit from the extra business. The businesses that have the best customer service, and therefore, the ones that can meet customer expectations and so take advantage of the increased business that brings with it, are the ones that invest time and effort in training their staff properly. There are many businesses that offer a similar product and service to each other so the question must be asked, why should a customer choose us rather than our competitors? Unless you are selling something that is totally unique and is something that everybody needs, you cannot afford not to develop a relationship with your customers and give them the satisfaction that they, only too rightly, expect. The answer to the question then, is that customers will choose you because you will give them a great experience.

Perceived value not satisfaction is the key determinant for customer retention and profitability (John Smibert) It is interesting that so many organisations invest heavily in measuring their customer satisfaction when it has limited influence on customer retention and growth. Research clearly shows that customers commit and invest more with their providers when they perceive high value derived through the relationship. Research, and anecdotal evidence, also shows that despite a very high level of satisfaction with suppliers, and their products and services, customers will jump ship if they perceive that they will get higher value and competitive advantage by committing to a competitor. So the bottom line is that we need to continually measure and manage our customers perception of value.

Why customer retention is important Every business needs customers to survive, and it undertakes every possible action to get them. It runs advertisement campaigns on television, in print, and even on web. It hires public relation firm to build trust and create positive corporate image. It hires search engine optimization expert to make their web presence prominent. It does everything that is needed to be done from sponsorship to realizing corporate social responsibility to hiring best people to making product available within the customers reach to pricing it attractively. A company does everything to acquire new customers, but when it comes to retaining them, most of the businesses fail; may be because some of the decision makers do not see any point in spending time on retaining customers. I have heard business people saying that why should they worry about customer retention, if they can get a lot more by spending some dollars on promotion. I wish they knew why it is important for them to retain their customers for as long as it is humanly possible, and how customer retention becomes the only difference between a failure and success in business.

Benefits of customer retention No acquisition cost

It takes time and money to acquire new customers. How much money it will take to acquire a new customer depends upon how crowded the industry is, and how high the customers have raised their perceptual boundary. The money needed to create could be anything from 10 cents to 1000 dollars, and even time spent could range between seconds and hours even days.

Because your job is not to find customers, but to serve them

Indeed. You are not in the business to have fun in hiring and firing your customers. We are here to make some money and that too without much effort well, there are may be some people who love hiring and firing game.

You can focus on doing what you know best

We all know that hiring new customers require time. We need to itch out a strategy then create an acquisition plan, implement it, and wait for the data to flow in, so that we can analyze what is working and what is not. Meanwhile, it is also our job to keep an eye on the number of customers that come as an effect of new strategy. Afterward, we tweak the system and rinse and repeat it.

All this is time consuming, and if we devote our resources on this activity then when will we create value for the customers we have just acquired, or those who are with us for long time? We need time for that as well; therefore, instead of finding a new customers everyday and forgetting old ones, we should be focusing on retaining our existing customer. This will give us a lot of free time to create value by doing what we know best, and from what customers come to us.

You know what your customers need, and what are their aspirations, fear, and desire
Not just acquisition takes time, but building a relationship also takes time. After we have successfully wooed new customers, we need to spend time and energy on building a relationship with the new customers. We need time to understand their desires, aspirations, expectations, spending pattern, and their price sensitivity. And while we do that, the profit from new customers remain on the lower side. The effort on all this could be saved provided you decide to concentrate your effort on retaining your existing customers. With existing customers you do not need to think too much about anything that we discussed above. We already know it.

You have already recovered the acquisition cost on existing customers

As said, it takes time, energy, man power, and money to acquire a new customer, and all this adds up to the cost, which means diminished profit. It is only after the customers are with us for some time that we recover the cost incurred during the acquisition process. With existing customers, we already have recovered the cost, so they are already profitable. This cannot be said about the new customers, as they are yet to prove their worth. And at the onset, we even do not know if they will stay with us or not. So why take chances? I hope this article has been convincing enough, and have helped you make a more informed decision for your company. New customer acquisition should be done (after all, this is how we grow), but not at the cost of losing existing customers. I wrote three more articles on the same topic. You can click on the links given below to know more about customer retention.

Q 2 A persons attitudes may lead to one kind of behavior in one situation and a different behavior in a different time and place. For example, a person may have a strong preference for one brand but purchase a brand that is on special because of having to economize. Factors :

Attitudes are more often relatively consistent with behavior; some times they are influenced by situational factors. These situational factors such as time, place, and social environment plays vital role in ones life. Post purchase dissonance occurs mostly in case of expensive products. After the purchase, the student might be exposed to ads of other brands with more features and more extensive software than the computer he or she selected. Overcome : In order to reduce post purchase dissonance, the student should see the advantages in his/her computer (i.e., ads for the brand purchased). The retailer who sold the computer can help reduce the students dissonance The retailer can help by backing the manufacturers warranty with a service contract and by mailing buyers information about new software packages for the computer when such products become available. The computer manufacturer can help in the same The manufacturer should help reduce post purchase dissonance by using advertising which includes messages reassuring purchasers that they made the right choice, offering strong, comprehensive warranties, and providing a tollfree user-information hotline.