Customer Loyalty and Cybermarketing Ideaistic Evolution

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1、Customer Loyalty and Cyber-marketing Ideaistic EvolutionCustomer Loyalty and Cyber-marketing Ideaistic EvolutionHong Peng* Hong Peng, female, Ph.D. candidate and associate prof. of School of Business Administration, Zhongnan University of Economics and Law; Main research field: E-business; Address:

2、School of Business Administration, Zhongnan University of Economics and Law, No.114 Wuluo Road, Wuhan, Hubei, China, Postcode: 430064. Zhihao Chen* Zhihao Chen, male, associate prof. of School of Business Administration, Zhongnan University of Economics and Law; Main research field: E-business and C

3、yber-marketing; Address: School of Business Administration, Zhongnan University of Economics and Law, No.114 Wuluo Road, Wuhan, Hubei, China, Postcode: 430064. Zhongnan University of Economics and LawAbstract: Customer loyalty has already aroused the extensive attention of the marketing area, but it

4、 has been ignored by numerous enterprises in cyber-marketing. Therefore, establishing online customer loyalty and emphasizing the cultivation of loyalty is a new subject for enterprises during their cyber-marketing implementation. Customer loyalty is on the basis of customer satisfaction, but custom

5、er satisfaction does not mean that the customer has higher loyalty. Customer loyalty is the key factor to improve enterprises competitiveness, and it is the foundation stone of enterprise development and the most important source of enterprise long-term profit. Internet has both positive and negativ

6、e influence on customer loyalty. We should cultivate customer loyalty from customer relation maintaining, customer relation management, virtual experience and so on in the Internet environment.Key words: cyber-marketing customer loyalty customer satisfaction1. IntroductionIn the early 90s of the 20t

7、h century, the rapid growth of Internet has formed and dominated the “Internet Economy” within almost the whole 90s. The nearly crazy e-commerce upsurge has become logos, entering a new steady developing period after the Internet foamy wreckage in the year 2000. From the technical oriented first gen

8、eration e-commerce to the second generation, this is oriented by commerce (Laudon & Traver, 2002). Under such a background, more and more scholars consider that traditional marketing conception should be applied in the Internet environment and should be extended and evolved.In 1996, the author of Th

9、e Loyalty Effect, Frederick Reichheld, on the basis of thorough research on such trades as software, advertising agent, etc, issued research report Zero Loss: The Coming of Service Industry Quality Period in Harvard Business Review. Reichheld pointed out that, when the enterprises customer retention

10、 ratio increases by 5%, their profit increase will reach 25%-85%. At the same time, the service cost that is provided for old customers is less each year. This conclusion caused the extensive concern of the marketing industry. Before and after this conclusion, such as sale promotion cost for new cus

11、tomers is 6 times higher than that for old customers, the success probability for promotion to new customers is 15% while it is 50% for old customers, etc, the verdict discovered by enterprises and researchers which is almost accordant with game theory, has been taken as principle in the marketing a

12、rea.However, when more and more enterprises gradually understand that they shouldnt only focus their attention on developing new customers, many cyber-marketing enterprises stress attracting new customers as their emphasis for Internet business. They are wild about the technique for attracting new c

13、ustomers and always emphasize the customer increase rate. They provide various kinds of interests to attract new customers while ignoring the maintenance for the customers already exist, needlessly to say how to cultivate customer loyalty. Therefore, establishing online customer loyalty and emphasiz

14、ing the cultivation of loyalty is a new subject for enterprises during their cyber-marketing implementation. This paper just does some probes on this issue.2. The Connotation for Customer LoyaltyCustomer loyalty is usually defined as the behavior of repeatedly buying the same brand or product. But t

15、his is just the superficial description, the more profound definition for loyalty is that, a kind of responsibility for buying the same product or service in the future, which makes customers buy the same brand even when they are facing other brands marketing or under the circumstance that is possib

16、le to change the product brand. Although customer loyalty does have relation with repeat buying, it is not equal to repeat buying (Jacoby & Kyner, 1973). The three factors that determine the customer loyalty are products superior quality, personal pursuit and sustain and influence by colony culture.

17、 Based on the depth of customer loyalty, it can be divided into four administrative levels, namely perceived loyalty, sensibilities loyalty, intent loyalty and behavior loyalty.Outstanding quality of the product is the basis of actualizing the loyalty. If customers are not interested in the products

18、, loyalty cannot be a reasonable target for them to pursue. That is to say, it is impossible to form loyalty without satisfying product. But outstanding product or service is just the least requirement to realize customer loyalty. As a matter of fact, the representation of the product only forms the

19、 most superficial perceive loyalty. Only when customers ratify the product with their geist, further loyalty like sensibilities and intent loyalty comes into being. Just as Kotler (2001) pointed out, customers joviality creates a kind of appetency against products and services, it is not only a kind

20、 of rational preference, but also high degree customer loyalty thereby forms. To obtain the sensibilities, intent and behavior customer loyalty, it needs other factors support. Perfectly satisfiedLocal telephoneAviationHospitalPCAutomobile12345SatisfactiondegreePerfectly unsatisfiedLowHighLoyaltyDeg

21、ree High competition areaStaple goods or low differenceNo difference for customersThe monopoly under control or a few substitutesBrand assets occupying a leading positionPowerful loyalty schemeNon-competing areaFigure 1 The Relationship between Customer Satisfaction and Customer loyaltyAction loyalt

22、y as the highest level, can be realized only when the colony the customer is affiliated with, like family, stratum, also sustain using the product. Or else, customers will not repeat buying even if they are “heart loyalty”. As you can see, the relationship between product representation and customer

23、 loyalty is not as consanguineous as the customer satisfaction. If enterprise cannot satisfy one of the above customers expectations, the intrinsic condition for realizing loyalty is destroyed.From the definition of customer loyalty, we also can see that customers future behavior (repeat buying or c

24、hanging brand) is related with loyalty. Kotler (2001) and other persons traced out the relationship between customer satisfaction and customer loyalty within the different industry markets (see Figure 1). We can see that when satisfaction degree is higher, loyalty degree is higher under various kind

25、s of situations. But in intensive competing industries like mobile, PC industry, theres no enormous difference between not so satisfied and comparatively satisfied. But between customers who are satisfied and those who are perfectly satisfied, the loyalty degree has enormous difference. Even lower j

26、ust a little from the perfect satisfaction line, the loyalty degree will down a lot. But for those monopoly market or sellers market, loyalty will keep on the relatively high level whenever customers are satisfied or not. It seems that this is the ideal condition for protected or ruling industries o

27、r enterprises, but these enterprises will finally pay tremendous expenses for customers dissatisfaction.3. Marketing Ideaistic Evolution3.1 From Customer Satisfaction to Customer LoyaltyIn the marketing area, it is known to all that customer satisfaction is the necessary condition for customer loyal

28、ty. We can say that customer loyalty develops from customer satisfaction. Customer satisfaction theory, as the marketing Bible, comes of the 60s in the previous century. It has formed a set of relatively maturate and perfect theoretical system after developing for full 40 years. Its achievements are

29、 not only applied in the enterprises marketing activities, but also used in the national customer satisfaction evaluation system and gradually filtered in the whole country economic circulation system.Enterprises achieved remarkable performance after they implemented the customer satisfaction market

30、ing tactic. But some problems also gradually appeared during the implementation, many enterprises found that it cannot be the fundamental function for upgrading enterprises competitiveness. American mobile industry made a Stat., they found that 85%-95% of customers claim that theyre satisfied with t

31、he products, but only 30-40% of them choose to buy the original brand or type. Some enterprises in other industries even encountered that customers whom they had tried their best to satisfy choose their competitors product in the next transaction. Some enterprises also found a kind of unable balance

32、 relation between customer satisfaction and enterprise performance and competitive power, this phenomenon is named “customer satisfaction trap” by Reichheld.Before 90s of the 20th century, although it was widely considered in the academe that satisfaction degree is related to loyalty degree, some sc

33、holars had realized the deficiency for customer satisfaction for a long time. In 1986, Deming pointed out that “it is not enough to make customers be satisfied”. With the transition from sellers market to buyers market and grown up of e-commerce, more and more scholars find that the relation between

34、 satisfaction degree and loyalty degree is not as direct as beeline. Zones and Sasser (1995) considered that “only make customers be satisfied and have the right to choose in many ways, which is not enough to maintain their loyalty for the enterprise and brand”. Reichhelds research (1996) indicated

35、that 65%-85% of customers who claim theyre satisfied or perfectly satisfied will be lost and turn to other brand. Stewart (1999) pointed out that it is wrong to consider customer satisfaction in certain degree will consequentially lead to customer loyalty. Neal (1999) also considered that it is wron

36、g to conceive customer satisfaction will lead to customer loyalty, which is approbatory by enterprises and academe circle during the past 10 years. Because most loyal customers are satisfied while satisfied customers are not always loyal. Oliver (1999) investigated which aspect of customer satisfact

37、ion effect related with loyalty and loyalty effect was resulted in which factors of satisfaction. After deepen research on the factors of forming customer loyalty, he pointed out that satisfaction is the necessary stage to form loyalty, but satisfaction is not so important after the loyalty formed,

38、whether customers will be loyal or not, it is rest on the other factors after satisfaction formed. Oliver also pointed out that 90% of the satisfied customers is possible to betray. Marketing master Kolter (2001) also admitted: the high satisfaction degree cannot guarantee the customer loyalty. Some

39、 scholars like Buttle (1991), Reichheld (1993), Mitchell (1998), Naude & Buttle (2000) approved that customer satisfaction is not equal to loyalty from the angle of relation marketing. On the contrary, unsatisfied customers may become loyal customers. These conclusions make the satisfaction research

40、 and relation marketing research that is supported by customer satisfaction face new subjects almost at the same time. Therefore, deep customer loyalty research is attracting more and more scholars and being paid attention to by more enterprises.3.2 Customer Loyalty Is the Footstone of Enterprises G

41、rowth and the Headspring of ProfitAccording to the marketing theory, for the growing market, supply cannot meet the demand. At this time, enterprises can gain more profits. While for an almost balanced market, enterprises and customers almost possess the same status, only those who can win more cust

42、omers, gain more profits. But for shortage market, it is not necessary for an enterprise to provide services for all customers; only providing services for the core customers can gain the same abundant profits.However, under the circumstances of market economys increasingly matures and gradually com

43、ing into being of buyers market, many important problems that enterprises face are not only the market occupation rate, but how many loyal customers they possess. Many enterprises start to pay more attention to customers feedback and enterprises competition target has changed from the quantity of ma

44、rket share (market occupation rate) to the quality of market share (quantity of loyal customers).Customer loyalty has an important meaning for enterprises survival and development. Cost must be paid to obtain new customers; this cost will be more expensive under the supply exceeding demand market. B

45、ut their contributing to enterprises is very meager. In some trades, new customers are even unable to contribute to enterprises in a short time. Comparatively speaking, loyal customers (old customers) create overflow value upon the enterprises: loyal customers will generally be the “disseminator”of

46、the products and services; theyll try to recommend to others, this kind of public praise marketing is most welcomed by enterprises. Most loyal customers generally accept a certain markup for the price just because of convenience of shopping (Frederick, 2000). Loyal customers can often obtain higher

47、values like unique products and emotional demand during the relation maintenance with enterprises. Therefore, theyre not so sensitive about the price like new customers and theyd like to accept higher price for the products and services than that for new customers. We can say that, the quantity of l

48、oyal customers determines enterprises survival and development. Customer loyalty is the key factor of upgrading enterprises competition ability and the footstone for enterprises development and main headspring for enterprises long-range profit.4. Cyber-marketing and Customer LoyaltyAfter experiencin

49、g an explosive growth period, the first generation of e-commerce that had started by using web advertisement to promote the products since 1995, was eventually ended with the crash of the network concept stock in April, 2000. Based on the first generation of e-commerce which takes experimenting, cap

50、italization and high competitiveness as its characters, the second generation of e-commerce, which started in 2001, has stressed the commerciality which should have been paid attention to during the first generation. Such misunderstanding ideas as “rewriting all business rules of traditional economy

51、” and “rooting out traditional marketing channels and intermediary” have been corrected, and then e-commerce enters into a new stage of steady development.However, as a new thing, e-commerce is a new subject for the scholars of various countries to explore how to use the successful experience in the

52、 traditional economic environment for reference. In addition, after being spoiled by excessive enthusiasm for quick success and instant benefit during swaddle period, todays e-commerce has a lot of deficiencies. Those deficiencies are shown as cyber-marketing only emphasizes on attracting customers

53、attention while neglects the cultivation of customer loyalty. This is a great fault. “The price does not follow the rules of the network, but loyalty does. Without the function of loyalty, it is of no avail even if the best e-commerce mode has been designed.” (Reichheld, 2000) In a sense, customer l

54、oyalty under the environment of network is more important than that under the environment of traditional market. Especially in the future, with the improvement of popularization degree of Internet and the slow increase of the number of online customers and enterprises that launch the cyber-marketing

55、, customer loyalty is significant for enterprises.4.1 The Reality of Cyber-customer Loyalty4.1.1 The dualism of customer loyalty under the Internet environmentInternet with the natures of opening, freedom and globalization has offered a wide market for enterprises to develop cyber-marking, also offe

56、red massive option space and convenient option root for customers at the same time. With the establishment of the online market, the study on online customers also becomes the important subject of domestic and abroad marketing circle. The earliest research began from studying commodity category that

57、 online customers mostly like to purchase. This kind of research analyzes not only the suitable commodity categories for selling on the Internet, but also online consumption characteristics and consumer psychology with commoditys specialty. It has reached the fact that the customers on the Internet

58、usually have the basic features such as striving for convenience and pursuing novelty, which are easy to change. More pursuit theyre seeking is the domination power when shopping-network has just created such ideal environment for them. They like changing continually among numerous website, moving f

59、rom a website to another website just by clicking the mouse gently. This cheap diversion cost makes the scholars infer that online customers have low loyal degree and even not at all.However, in the research of plenty of practical examples afterwards, the scholars discover that the fact is not like

60、that. Online consumers are not apt to change and fond of pursuing the novelty and changing the website continually like what thought originally. On the contrary, they have higher loyal degree than that of customers under traditional consumer mode. Most of them have very high loyalty to online enterp

61、rises which they log-in for the first time or have good impression on, and it is very obvious in the commercial activities of B2C and B2B (Reichheld, 2000). Evidently, the influence of Internet for customer loyalty has dualism. 4.1.2 Trust, the most key factor influencing customers behaviorThe furth

62、er researches show that main reason for above-mentioned situation is that customers shopping psychology has greatly changed. Firstly, in this virtual space of network, the consumers are unable to get the experience in person to the real products through organs, such as hands, eyes, nose, tongue, etc

63、. To reduce risk of shopping, choosing an online shop with high credit is the most important and the most pivotal step for customers to consume online. Secondly, the consumers make the consumption decision depending on various kinds of information from cyberspace and the credibility of the website f

64、ormed in the past trade. But for customers, the cyberspace is too free to judge the true or false of online information.By contrast, the trust obtained in the past trade can often influence more upon their consumer behaviors. Thirdly, the openness of online information makes the products prices of a

65、ll enterprises totally visual. Any pricing action on their products would be perceived and responded immediately by their rivals. The final result is that competition advantage based on price is reduced greatly. “The highest credit online enterprise that I know becomes the principal and key factor for online shopping, whereas favorable in price, the diversified choice and so on withdraw to the secondary status.” (Reichheld, 2000)Fourthly, in network age, customers are reluctant to spend much time and energy in searching and comparing information due to the quicken up of w