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Determinants of customer loyalty factors and its impact in consumer durable white goods market in chennai city, tamilnadu a study
- 1. International Journal of Management (IJM)– 6502(Print), ISSN 0976 – 6510(Online)
International Journal of Management (IJM), ISSN 0976
ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)
Volume 2, Number 1, Dec - Jan (2011), © IAEME IJM
Volume 2, Number 1, Dec - Jan (2011), pp. 15-29
© IAEME, http://www.iaeme.com/ijm.html ©IAEM E
DETERMINANTS OF CUSTOMER LOYALTY FACTORS AND
ITS IMPACT IN CONSUMER DURABLE WHITE GOODS
MARKET IN CHENNAI CITY, TAMILNADU-A STUDY
A.R.Krishnan
Research Fellow, SRM School of Management
SRM University, Chennai, India
Email: arkrish555@yahoo.com
ABSTRACT
This study is initiated on determinants of customer loyalty factors in consumer
durable white goods in Chennai city, Tamilnadu, India. The questionnaire is designed by
the researchers a seven item scale from strongly disagree (-3) to strongly agree (+3) to
identify variables of customer loyalty. In the present study therefore used cronbach’s
alpha scale as a measure of reliability. Its value is estimated 0.947. Sophisticated
statistical model ‘Regression analysis’ has been used. The factors of deliver on promises,
provides accurate brand information, value for me, good brand choice, handles critical
problem well, consistence in service, lowest price, less transaction time, need fulfillment,
rewards programs and properly settled complaints constituted the key factors of customer
loyalty in white goods in Chennai city. Finally outcome of this research would be helpful
to the practitioners, planners, policy makers and academicians who are involved in the
concerned area.
Keywords: Customers, Customer Loyalty, CRM.
1.0 INTRODUCTION
Customer Relationship Management (CRM) is about developing learning
relationships in which companies exchange personalized service for the loyalty of their
customer. Customers convey their preferences, explicitly and implicitly, to the company
through communications and purchasing behavior. Companies track and act upon these
preferences with customized products and personalized service. The company
understanding of customer preferences is hard won over time by both the company and
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
the customer. This learning relationship becomes a unique and valuable service offered
by the company and the customer’s response with loyalty and repeat business.
The consumer durables industry consists of durable goods and appliances for
domestic use such as refrigerators, air conditioners and washing machines. Products that
aren't consumed or quickly disposed of and can be used for several years are durable
goods also called hard goods.
White goods are generally machines which perform housekeeping tasks, such as
cooking, food preservation, and cleaning clothes. The consumer durable white goods
industry is heavily influenced by various energy-saving regulations, affecting not only the
appliances themselves, but the manufacturing facilities as well.
1.1 Need and Importance of CRM
The customer relationship approach realizes that the marketing risk is important
but at the same time the focus is on shifting efforts solely from customer acquisition to
customer retention as well as to ensure the optimality and equality of resources viz, time
money and manpower. Thus the focal point of customer relationship marketing is
disciplined, holistic approach in identifying the taste and preferences on individual basis
to develop and enhance relationship over the customer life.
As promise and trust are the two key elements in the customer relationship
management, the responsibility of the marketer does not pre-dominantly include
promising and persuading customers as passive counter parts in the market place, but it is
with the help of these promises that he can build and maintain the relationship with the
customers. Hence is important to fulfill promises to achieve customer satisfaction,
customer retention and customer base building and long term profitability. However in
customer relationship management, every customer is viewed on the terms of his lifetime
value as equivalent to a market.
1.2 CRM Objectives
CRM is not a short term phenomenon. The adoption of relationship requires sheer
patience and the result bear fruit after a few years.
• To develop strongest relationship with the customer by the marketers have to
identify, built a data base of current and potential customers with lots of
information about their needs and preferences.
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
• To enhance the relationship with the customers on long term basis in order to
ensure long term relationship marketing, do not get the customer forget about
over the life time.
2.0 LITERATURE REVIEW
Customer relationship management managing the customers has become one of
the central ways to make the companies’ operations more effective and profitable
(Raulas, 2005). Customers should be seen as investments, because without customers a
company will not have any profits, no revenues and consequently no market value.
Customers are without a question the life-blood of any organization (Gupta and
Lehmann, 2005). The underlying assumption of CRM is that by nurturing the existing
customer relationships and keeping the lucrative customers satisfied and loyal it is
possible to make the business more profitable. The relationship should however benefit
both the company and the customers, so that a mutually beneficial relationship is
generated (Raulas, 2005).
Loyalty is defined as “a state of mind, a set of attitudes, beliefs, desires and so on”
stone, (2000). Kotler (2008) said that delighted customers become loyal to the
organization and customer relationship management plays an important role in making
customers loyal. Further among the satisfied customers, completely satisfied customers
only can be a delighted one. Thus CRM has to focus on customer delight rather than
satisfaction. However, Hill and Alexander 2006, argue that misunderstanding of customer
loyalty by the senior managers and marketing executives have mislead strategies for
securing the customer loyalty and also criticized that many of them take afford to attract
the customers by giving some bribe to customers.
Reliability, serviceability and energy-saving features were the attributes
consumers desired most. Brand name communicated quality to them, but was not an
important choice criterion. However, consumers were willing to pay more for an air-
conditioner with a reputation for quality. It is also indicated that consumers searched for
product information from friends and family, manufacturers' websites and brochures, but
not from the Yellow Pages or through salespeople. However, dealers were highly
influential during the decision-making process by helping consumers to refine their
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
choice criteria and choose systems that satisfied their end goals Victoria Seitz, Nabil
Razzouk, David Michael Wells, (2010).
Raulas (2005) underlines, that regular contact is the critical factor in the
development of the relationship. There is a positive effect on customer relationships if the
company manages to keep the optimal contact with its customers. One of the
cornerstones of CRM is to perform intentional, measurable and an adequate amount of
communication that is conducted in right time, and with the right customization and
through the right channel. Previous research has proved that the most important reason
why customers switch to competitors is the lack of contact or insufficient communication
from the company (Raulas, 2005).
In simple terms, customer loyalty from Czepiel’s (1990) perspective is a notion to
describe the end result of a relationship between the company and the customer. In order
to gain loyalty, the company can provide incentives that will increase the value for the
customers and in that manner create buying fidelity among them (Blomqvist et al., 2000).
From that point of view, a loyal customer engages the company over a long-term to
satisfy his/her needs or a part of the need (Blomqvist et al., 2000). Customer loyalty is
although a more complex concept than that. By screening the theories, the authors have
chosen to focus on three different theories: Three drivers of retention (Gustavfsson,
Johansson and Roos, (2005), Relative attitude and behavior relationship (Dick and Basu,
1994) and the conceptualization of customer loyalty (Dowling et al., 2003).
Loyalty programme, quality is important for relationship quality; however, efforts
to assure personal interaction quality with customers are needed to improve relationship
quality as well as customer loyalty (Patrick Vesel, Vesna Zabkar, 2010).
3.0 STATEMENT OF THE PROBLEM:
The factors determining customer loyalty have been brought to light by marketing
research. But this information still is far away for some producers engaging in the
productions and services. Consequently producers are unable to exploit this information
for their success. However white goods in Chennai are one of most competitive segments
and also pointed out this competition will create more challenging environment in
maintaining their market share. This encouraged the researchers to do this research.
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
4.0 OBJECTIVES OF THE STUDY:
1. To examine key factors of customer loyalty in consumer durable white goods in
Chennai city
2. To determine the factors of customer loyalty in leading consumer durable markets
of Chennai city
3. To suggest certain measures in order to improve the customer loyalty in leading
brands of white goods.
5.0 RESEARCH DESIGN AND STRATEGY:
5.1 Period of study
This research was conducted from October to December 2010.
5.2 Sampling strategy
The study was conducted for 1050 respondents using convenient sampling, non
probability method.
5.3 Data sources
The study was complied with the help of primary data. Primary data were
collected through questionnaire survey. Secondary sources were collected from journals,
magazines, and hand books.
5.4 Measures:
The questionnaire was administered to 1050 respondents in the city of Chennai.
Based on the literatures and experts advice questionnaire is designed. In the questionnaire
a seven point likert’s summated rating scale from strongly disagree (-3) to strongly agree
(+3) was adopted to identify the variables of customers loyalty.
5.5 Statistical Tools used
In the present study, we analyzed our data by employing regression model. For
the study entire analysis is done by personal computer. A well known statistical package
of Statistical Package for Social Sciences (SPSS) 13.0 versions was used in order to
analyze the data.
6.0 ANALYSIS AND THEIR FINDINGS:
To identify the potential underlying dimensions of the customer loyalty of the
durable white goods respondents are used in the present section. Responses of the
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
variable are subjected to regression model method. Before applying regression model,
testing of the reliability of the scale is very much important as it shows to which a scale
procedures consistent result if measurements are made repeatedly. In this section,
researches therefore, used cronbach’s Alpha scale as a measure of reliability. Its value is
estimated to be 0.849 for Audio brands, 0.891 for Washing machine, 0.922 for Air
conditioner, and 0.836 for refrigerator of customer loyalty variables. If we compare our
reliability value with the standard value alpha of 0.6 advocated by Cronbach’s (1951), a
more accurate recommendations Nunnally & Bernstein(1994) or with the standard value
of 0.6 as recommended by Bagozzi & Yi’s (1988) researchers find that the scales used by
us are highly reliable for regression model.
6.1 Regression Model On Customer Loyalty
An in depth study of loyalty would not be complete without the identification of
the key indicators of customers loyalty. Assuming the existence of linear relationship
between the independent variables and dependent variable, multiple regression analysis
has done between the level customer loyalty of the different predictor variables of loyalty
and overall loyalty of the service.
6.1.1 Regression model on Customer Loyalty Audio Brands.
This study attempted to develop a model to analyze loyalty of audio brands.
Stepwise regression analysis of loyalty (Y) is performed with the variables X1- Deliver
on promises; X2- Provides accurate brand information , X3- Value for me; X4- Good
brand choice; X5- Handles critical problem well; X6- Consistence in service; X7- Lowest
price; X8- Less transaction time; X9- Need fulfillment;X10- Rewards programs, X11-
Properly settled complaints for the audio brands.
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Table 1.1 Regression Model-Loyalty-Audio Brands
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .776a .602 .596 .227
b
ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 65.335 11 5.940 114.994 .001a
Residual 43.283 838 .052
Total 108.618 849
a
Coefficients
Un standardized Standardized
Coefficients Coefficients t Sig.
Model B Std. Error Beta
(Constant) 2.799 .055 51.149 .000
Deliver on promises -.054 .010 -.143 -5.250 .001
Provides accurate brand information -.065 .014 -.159 -4.480 .001
Value for me -.017 .013 -.040 -1.335 .182
Good brand choice -.108 .015 -.222 -7.298 .001
Handles critical problem well -.031 .012 -.085 -2.643 .008
Consistence in service -.011 .010 -.033 -1.118 .264
Lowest price .028 .011 .081 2.639 .008
Less transaction time -.085 .012 -.239 -7.395 .001
Need fulfillment -.036 .012 -.093 -3.132 .002
Rewards programs -.048 .012 -.146 -4.075 .001
Properly settled complaints .004 .010 .014 .408 .683
a. Dependent Variable: overall audio loyalty
Source: Field Survey 2010 level of significance (0.05%)
The R value (0.776) indicates the multiple correlation coefficients between all the
entered independent variables and dependent variables. The R square value in the model
summary table shows the portion of the variance accounted for by the independent
variables that is approximately 60% of variance in loyalty is accounted for by. The
ANOVA table indicates the p-level to be 0.001.This indicates that the model is
statistically significant at a confidence level of 99.999. The P-level indicates the
significance of the F value. Also note that t- tests significance of individual independent
variables indicate that Deliver on promises; Provides accurate brand information ;Good
brand choice; Handles critical problem well, Lowest price, Less transaction time, Need
fulfillment, Rewards programs for the audio brands are the independent variables are
statistically significant in the model. The standardized coefficients Beta column, gives the
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
coefficients of independent variables in the regression equation including all the predictor
variables.
Customer Loyalty Y = -0.143 x1-0.159 x2 -0.040 x3 -0.222 x4 -0.085 x5 -0.033 x6
+0.081 x7 -0.239 x8 -.093 x9 -0.146 x10 +0.014 x11 (1.1)
6.1.2 Regression model on Customer Loyalty Washing machine Brands.
This study attempted to develop a model to analyze loyalty of washing machine
brands. Enter method regression analysis of loyalty (Y) is performed with the variables
X1- Deliver on promises; X2- Provides accurate brand information , X3- Value for me;
X4- Good brand choice; X5- Handles critical problem well; X6- Consistence in
service;X7- Lowest price;X8- Less transaction time; X9- Need fulfillment;X10- Rewards
programs,X11- Properly settled complaints for the washing machine brands.
Table 1.2 Regression Model-Loyalty-Washing machine Brands
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .842a .710 .706 .206
b
ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 93.595 11 8.509 199.637 .000a
Residual 38.273 898 .043
Total 131.868 909
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
(Constant) 3.141 .054 57.991 .000
Deli Deliver on promises -.042 .011 -.103 -3.963 .001
Provides accurate brand -
-.181 .012 -.400 .001
information 14.588
Value for me -.066 .013 -.134 -5.031 .001
Good brand choice -.039 .012 -.081 -3.306 .001
Handles critical problem well .020 .011 .054 1.824 .069
Consistence in service -.036 .008 -.101 -4.386 .001
Lowest price -.014 .008 -.037 -1.662 .097
Less transaction time -.070 .010 -.177 -6.752 .001
Need fulfillment -.018 .014 -.041 -1.297 .195
Rewards programs -.033 .012 -.097 -2.759 .006
Properly settled complaints -.009 .011 -.027 -.841 .401
a. Dependent Variable: overall washing machine loyalty
Source: Survey 2010 level of significance (0.05%),
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
The R value (0.842) indicates the multiple correlation coefficients between all the
entered independent variables and dependent variables. The R square value in the model
summary table shows the portion of the variance accounted for by the independent
variables that is approximately 71% of variance in loyalty is accounted for by. The
ANOVA table indicates the p-level to be 0.001.This indicates that the model is
statistically significant at a confidence level of 99.999. The P-level indicates the
significance of the F value. Also note that t- tests significance of individual independent
variables indicate that Deliver on promises; Provides accurate brand information , Value
for me; Good brand choice; Consistence in service; Less transaction time; Rewards
programs, Properly settled complaints are the independent variables are statistically
significant in the model. The standardized coefficients Beta column, gives the
coefficients of independent variables in the regression equation including all the predictor
variables.
Customer Loyalty Y = -0.103 x1 -0.400 x2 -0.134 x3 -0.081 x4 +.054 x5 -0.101 x6 -
0.037 x7 -0.177 x8 -0.041 x9 -0.097 x10 -0.027 x11. (1.2)
6.1.3 Regression model on Customer Loyalty -Air conditioner Brands.
This study attempted to develop a model to analyze loyalty of air conditioner
brands. Enter method regression analysis of loyalty (Y) is performed with the variables
X1- Deliver on promises; X2- Provides accurate brand information , X3- Value for me;
X4- Good brand choice; X5- Handles critical problem well; X6- Consistence in
service;X7- Lowest price;X8- Less transaction time; X9- Need fulfillment;X10- Rewards
programs,X11- Properly settled complaints for the air conditioner brands.
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
Table 1.3 Regression Model-Loyalty-Air conditionner Brands
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .865a .748 .745 .213
b
ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 107.297 11 9.754 215.344 .001a
Residual 36.146 798 .045
Total 143.443 809
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Std.
Model B Error Beta t Sig.
(Constant) 2.706 .048 56.926 .001
Deliver on promises -.046 .009 -.115 -5.070 .001
Provides accurate brand information -.016 .014 -.040 -1.149 .251
Value for me -.017 .014 -.036 -1.199 .231
Good brand choice -.029 .003 -.158 -8.332 .001
Handles critical problem well .024 .011 .061 2.299 .022
Consistence in service -.076 .010 -.189 -7.683 .001
Lowest price .031 .011 .074 2.794 .005
Less transaction time -.009 .011 -.022 -.845 .399
Need fulfillment -.022 .012 -.054 -1.847 .065
Rewards programs -.212 .014 -.615 -15.648 .001
Properly settled complaints -.013 .012 -.036 -1.121 .263
a. Dependent Variable: overall ac loyalty
Source: Survey 2010 level of significance (0.05%)
The R value (0.865) indicates the multiple correlation coefficients between all the
entered independent variables and dependent variables. The R square value in the model
summary table shows the portion of the variance accounted for by the independent
variables that is approximately 75% of variance in loyalty is accounted for by. The
ANOVA table indicates the p-level to be 0.001. This indicates that the model is
statistically significant at a confidence level of 99.999. The P-level indicates the
significance of the F value. Also note that t- tests significance of individual independent
variables indicates that deliver on promises, good brand choice, consistence in service,
lowest price, rewards programs are the independent variables are statistically significant
in the model. The standardized coefficients Beta column, gives the coefficients of
independent variables in the regression equation including all the predictor variables.
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
Customer Loyalty Y = -0.115 x1 -0.040 x2 -0.036 x3-0.158 x4+0.061 x5-0.189 x6+0.074
x7-0.022 x8 -0.054 x9 -0.615 x10 -0.036 x11 (1.3)
6.1.4 Regression model on Customer Loyalty -Refrigerator Brands.
This study attempted to develop a model to analyze loyalty of audio brands.
Stepwise regression analysis of loyalty (Y) is performed with the variables X1- Deliver
on promises; X2- Provides accurate brand information , X3- Value for me; X4- Good
brand choice; X5- Handles critical problem well; X6- Consistence in service; X7- Lowest
price; X8- Less transaction time; X9- Need fulfillment;X10- Rewards programs,X11-
Properly settled complaints for the refrigerator brands.
Table 1.4 Regression Model-Loyalty-Refrigerator Brands
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
a
1 .820 .673 .669 .192
b
ANOVA
Mean
Model Sum of Squares df Square F Sig.
1 Regression 71.369 11 6.488 175.262 .001a
Residual 34.724 938 .037
Total 106.094 949
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
(Constant) 2.403 .046 52.091 .000
Deliver on promises -.091 .009 -.250 -10.593 .001
Provides accurate brand information -.009 .010 -.024 -.871 .384
Value for me -.038 .010 -.100 -3.959 .001
Good brand choice -.032 .008 -.089 -3.916 .001
Handles critical problem well -.092 .010 -.238 -9.196 .001
Consistence in service .062 .008 .182 7.767 .001
Lowest price .070 .007 .222 9.534 .001
Less transaction time -.080 .009 -.220 -8.661 .001
Need fulfillment .041 .012 .094 3.470 .001
Rewards programs -.142 .009 -.477 -15.759 .001
Properly settled complaints -.014 .009 -.041 -1.481 .139
a. Dependent Variable: overall ref loyalty
Source: Survey 2010 level of significance (0.05%)
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The R value (0.820) indicates the multiple correlation coefficients between all the
entered independent variables and dependent variables. The R square value in the model
summary table shows the portion of the variance accounted for by the independent
variables that is approximately 67% of variance in loyalty is accounted for by. The
ANOVA table indicates the p-level to be 0.001.This indicates that the model is
statistically significant at a confidence level of 99.999. The P-level indicates the
significance of the F value. Also note that t- tests significance of individual independent
variables indicates that Deliver on promises, Value for me, Good brand choice, Handles
critical problem well, Consistence in service, lowest price, less transaction time, Need
fulfillment, Rewards programs are the independent variables are statistically significant
in the model. The standardized coefficients Beta column, gives the coefficients of
independent variables in the regression equation including all the predictor variables.
Customer Loyalty Y = -0.250 x1- 0.024 x2 -0.100 x3 -0.089 x4 -0.238 x5 +0.182 x6
+0.222 x7 -0.220 x8 +0.094 x9 -0.477 x10 -0.041 x11. (1.4)
Table shows the Mean and Standard Deviation of dependent variable Customer Loyalty
Table 1.5
Dependent variable Mean Std deviation value
Loyalty –White goods value
Audio brands 34.22 17.351
Washing machine 37.54 16.341
Air conditioner 32.98 19.437
Refrigerator 39.50 14.433
Findings on Customer Loyalty –Regression model
1. It is inferred that from the regression model on loyalty of audio brands deliver on
promises, provides accurate brand information, good brand choice, handles critical
problem well, lowest price, less transaction time, need fulfillment, rewards programs
for the audio brands are the independent variables are statistically significant. These
factors have positive impact on customer loyalty and, value for me, consistence in
service, properly settled complaints are the factors have negative impact on customer
loyalty.
2. It is inferred that from the regression model on loyalty of washing machine brands
deliver on promises, provides accurate brand information , value for me, good brand
choice, consistence in service, less transaction time, rewards programs, properly
settled complaints are the independent variables are statistically significant. These
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
factors have positive impact on customer loyalty and handles critical problem well,
lowest price, need fulfillment, properly settled complaints are factors have negative
impact on customer loyalty.
3. It is inferred that from the regression model on loyalty of air conditioner brands
deliver on promises, good brand choice, consistence in service, lowest price,
rewards programs are the independent variables are statistically significant. These
factors have positive impact on customer loyalty and provide accurate brand
information, value for me, handles critical problem well, less transaction time, need
fulfillment, and properly settled complaints are factors have negative impact on
customer loyalty.
4. It is inferred that from the regression model on loyalty deliver on promises, value for
me, good brand choice, handles critical problem well, consistence in service, lowest
price, less transaction time, need fulfillment, rewards programs are the independent
variables are statistically significant. These factors have positive impact on customer
loyalty and provide accurate brand information; properly settled complaints are
factors have negative impact on customer satisfaction.
7.0 SUGGESTIONS AND RECOMMENDATIONS TO THE
MARKETERS
1. The marketers must consider taking measure to make consumer durable white
goods customer more customers friendly. There being a strong association between
satisfaction and loyalty, the decision makers must take advantages of this and try to
strengthen the relationship between loyalty and retention too.
2. It is found that the CRM practices in the consumer durable white goods are still
in its infancy, yet to get a firm foothold. Consequently, the impact of CRM on retention
of customers is also weak. The industry has to move beyond the level of satisfaction and
strive to create loyalty by adopting appropriate strategies like cross selling, up selling
which will have a positive impact on retention
3. It is observed from the findings; customers are highly dissatisfied with loyalty
programs of audio, washing machine and refrigerator brands. Audio brands marketers
may concentrate more on improving loyalty programs like, buy back offers, promotional
schemes, personalized greetings, reminder of spouse wedding days offer gifts. Washing
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Volume 2, Number 1, Dec - Jan (2011), © IAEME
machine brands marketers may concentrate more on loyalty programs by special offers,
new schemes. Air conditioner brands marketers may concentrate more on loyalty
programs like, service enhancement by offering more number of years extended AMC.
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