The value of different customer satisfaction and loyalty metrics in predicting customer retention, recommendation, and share‐of‐wallet

Abstract

Purpose-The purpose of this research is to examine different customer satisfaction and loyalty metrics and test their relationship to customer retention, recommendation and share of wallet using micro (customer) level data. Design/methodology/approach-The data for this study come from a two-year longitudinal Internet panel of over 8,000 US customers of firms in one of three industries (retail banking, mass-merchant retail, and Internet service providers (ISPs)). Correlation analysis, CHAID, and three types of regression analyses (best-subsets, ordinal logistic, and latent class ordinal logistic regression) were used to test the hypotheses. Findings-Contrary to Reichheld's assertions, the results indicate that recommend intention alone will not suffice as a single predictor of customers' future loyalty behavior. Use of a multiple indicator instead of a single predictor model performs better in predicting customer recommendations and retention. Research limitations/implications-The limitation of the paper is that it uses data from only three industries. Practical implications-The presumption of managers when looking at recommend intention as the primary, even sole gauge of customer loyalty appears to be erroneous. The consequence is potential misallocations of resources due to myopic focus on customers' recommend intentions. Originality/value-This is the first scientific study that examines recommend intentions and its impact on retention and recommendation on the micro (customer) level.

Influential Factors on Word of Mouth in Service Industries (The case of Iran Airline Company)

“…In addition, the results from the structural equations showed that word of mouth is one of the important predictors of customers' intention to refer to the company. The results of this study were consistent with those of previous studies about the effect of satisfaction (Brown et al 2005;Heiitmann et al 2007;and Wangheim and Bayno, 2007), trust (Sirdeshmukh et al 2002;Dick and Basu, 1994;Wangheim, 2005), perceived value (Zeithaml, 1996;Bloemer et al 1999), service quality (Hartline and Jones, 1996;Gruen et al 2006;Keiningham et al 2007) and loyalty (Ranaweera and Prabhu, 2003;Hennig-Thurau et al 2002) on word of mouth. Moreover, the effectiveness of word of mouth in consumer's decision is also consistent with the findings of researchers like Litvin et al (2004) and Oneil et al (2002).…”

“…The result of a study by Hartline and Jones (1996) showed that the perceived value affects on the behavioral intentions of customers, especially on the word of mouth, because customers that think they have received a rather high value have more commitments to the organization and try to recommend the members of the reference group to be loyal to that organization (McKee et al, 2006). Researches have shown that the perceived value is one of the factors predicting the word of mouth (Hartline and Jones, 1996;Gruen et al 2006;Keiningham et al 2007). Based on the above argument, the fourth hypothesis is proposed as follows: The fourth hypothesis (H4): the perceived value has a positive significant effect on the formation of words of mouth about service companies.…”

Impact of Service Quality of Short Messaging Service on Customers Retention; An Empirical Study of Cellular Companies of Pakistan

“…Loyal customers are reported to have higher customer retention rates, commit a higher share of their category spending to the firm, and are more likely to recommend others to become customers of the firm. (Zeithaml, 2000, "Keiningham, et al 2007). Chen (2008) says that perceived value of service and satisfaction with the service has significant positive effect on behavioral intentions of usage in future.…”

Stakeholder Perceptions Regarding eCRM: A Franchise Case Study

“…However, the direct links from relationship → trust → repeat purchase intention → loyalty have been difficult to demonstrate empirically. As a relevant example, while it is generally recognized that a relationship of trust (versus a relationship without trust) is more likely to result in a customer recommending a firm to their friends and family, to encourage repeat purchases, and to result in customer retention, some findings show that recommendation intention alone is not a good predictor of a customer's future loyalty (Keiningham, Cooil, Aksoy, Andreassen, & Weiner, 2007). This finding puts into question the direct link between satisfied customers referring the firm to another customer as a signal for future intention and will be a key element of investigation by our study.…”