Content area
Full text
Dwayne D. Gremler: Department of Business, College of Business and Economics, University of Idaho, Moscow, ID, USA and
Stephen W. Brown: College of Business, Arizona State University, Tempe, AZ, USA
ACKNOWLEDGMENT: The authors are thankful for the support of this research from the Center for Services Marketing and Management at Arizona State University and the University of Idaho Seed Grant Program.
The cultivation of customer loyalty is an important, if not the most important, challenge facing most businesses. Indeed, businesses are concerned about not only attracting and satisfying customers, but also developing long-term relationships with them. Such organizations expend considerable effort cultivating these relationships with customers (Reichheld and Sasser, 1990). In practice, what these firms are striving for is the development of relationships with loyal customers.
Firms have increased their efforts to retain customers for various reasons, but most often the reasons relate to the customers' direct value to the company. Loyal customers can lead to increased revenues for the firm (Reichheld, 1993, 1996; Schlesinger and Heskett, 1991), result in predictable sales and profit streams (Aaker, 1992), and these customers are more likely to purchase additional goods and services (Clark and Payne, 1994; Heskett et al., 1997; Reichheld, 1996). Yet, to more accurately assess the full value of a loyal customer, we believe firms must look beyond the influence of these direct measures. That is, firms should look beyond direct revenue streams and include the value of all the benefits associated with possessing a loyal customer (Zeithaml and Bitner, 1996).
One particularly salient benefit, especially for service organizations, is word-of-mouth (WOM) communication - loyal customers often generate new business via WOM recommendations to prospective and other existing customers of the firm (Reichheld, 1996; Reichheld and Sasser, 1990; Schlesinger and Heskett, 1991; Zeithaml et al., 1996). That is, the recommendations made by a loyal customer, especially those helping to generate new customers, add to the value that core customer brings to the firm. We propose the term loyalty ripple effect to indicate this added value a loyal customer can have to a firm. In addition to developing this new construct in the paper, we explore word-of-mouth behaviour and the loyalty ripple effect in two services contexts. A brief review of literature related to customer value, service...