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ABSTRACT
As customers are the backbone of any business, firms without customers would not be able to sustain their performance. This is because such firms are believed to have no revenues, no profits and therefore no market value. Accordingly, managing customers is deemed to be very crucial business agenda in which the key focus has been switched in recent years from attracting new customers to preserving existing ones. Both practitioners and scholars have discovered that it is much easier and cheaper to retain the exiting customers than investing on the potential customers. A decent customer retention level is believed to be a significant contributor towards improvement in the overall firm performance. Accordingly, this study explores the customer retention practices adopted by fast-food firms in general and Favourites fast-food in particular while examining the factors that retain customers and the subsequent impact of customer retention practices on business performance. A survey of forty (40) customers of Favourites Fast-Food Asaba showed that customer service and quality of product have significant influence on customer retention which inturn has direct impact on business performance. Hence, it is advisable for fast-food businesses to pursue an effective and efficient customer service and ensure high and consistent quality of their product.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
As
customers are the backbone of any business, firms without customers
would not be able to sustain their performance. This is because such
firms are believed to have no revenues, no profits and therefore no
market value. Accordingly, managing customers is deemed to be very
crucial business agenda in which the key focus has been switched in
recent years from attracting new customers to preserving existing ones.
Both practitioners and scholars have discovered that it is much easier
and cheaper to retain the exiting customers than investing on the
potential customers. A decent customer retention level is believed to be
a significant contributor towards improvement in the overall firm
performance. A glimpse on the existing researches on customer retention
highlights that financial sector has been thoroughly investigated which
leave a room for a detailed investigation on customer retention within
the fast-food industry.
Customer retention is seen as an obligation
by a customer to carry out business transactions with a particular firm
on a regular basis (Hansemark & Albinsson, 2004). In addition,
Molapo and Mukwada (2011) have ascertained that firms are all out to
foil attempts by customers to switch retailers and indirectly retain
them. also, Erdis (2009) has established that firms direct their
marketing efforts to please their current customers in order to retain
them and foster long-term relationships with them. Customers will
frequently patronise firms which meets their needs and hence, an
enduring relationship will be fostered (Fill, 2005).
Farquhar (2004)
claimed that retained customers increase firms’ profits because
acquiring new customers are a costly affair. This is in line with the
findings of Reichheld and Schefter (2000) which ascertained that firms
that are able to raise customer retention by five per cent would be able
to boost profits by 25 – 95 per cent. In addition, the costs of
acquiring new customers are five times more than retaining an existing
customer for a firm (Tu, Lin, & Chang, 2011). Thus, boosting
customer retention will increase firm’s profits and performance by leaps
and bounds (Sim, Mak & Jones, 2008).
1.2 STATEMENT OF RESEARCH PROBLEM
Customer
retention is not given the attention due to it, by most firms especially
the fast-food industry. It has been found that customer retention has
more impact on profits than market share, economies of scale and other
variables that are considered to provide competitive advantage to a
firm. In fact, it has been found that companies, which reduced customer
defections by 5 per cent, could boost profits from 25 per cent to 85 per
cent.
Traditionally, marketing management has relied on
permutations and combinations of the marketing mix elements (product,
price, place and promotion) to achieve market dominance through enhanced
market share by acquiring new customers. This approach considers the
formation of homogenous segments of relatively heterogeneous customers.
It does not take into account the history of association between the
customer and the seller and hence does not reveal the actual buying
behaviour of the customer. Aggressive branding and promotions are other
tactics used by sellers adopting the traditional marketing approach. But
brands with the highest market share are not always the most
profitable. In some cases, they may even be unprofitable.
The
relationship marketing approach on the other hand, focuses on customer
retention, encouraging increased spending and on long-term relationships
with customers. Gronroos, a research scholar, has stated - ‘Marketing
is to establish, maintain and enhance relationships with customers and
other parties at a profit so that the objectives of the parties involved
are met. This is done by a mutual exchange and fulfillment of
promises'. Customer retention should thus become a part of the strategic
marketing planning process of any firm.
It is on this note that the researcher investigates the impact of customer retention on business performance.
1.3 OBJECTIVES OF THE STUDY
The overall
objective of the research study is to examine the impact of customer
retention on business performance. Other specific objectives include:
- To determine the factors that influences customers retention
- To examine the dimensions of customer retention
- To examine the relationship between customer retention and business profitability
1.4 RESEARCH QUESTION
The following research questions formed the basis for the study:
- What are the factors influencing customer retention in the fast-food industry?
- What effect does customer retention has on business growth?
- What is the relationship between customer retention and business profitability?
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