A PROJECT REPORT

ON

“CUSTOMER LOYALTY”

SUBMITTED IN PARTIAL FULFILLMENT OF

BACHELORS DEGREE IN BUSINESS ADMINISTRATION

(Industry Integrated – III Semester)

BY

K.Praneeth

Reg. No. C3612C15020

SUN INTERNATIONAL INSTITUTE FOR TECHNOLOGY AND MANAGEMENT

(AFFILIATED TO PRIST UNIVERSITY)

HYDERABAD, 500048

CERTIFICATE

This is to certify that Mr. K.PRANEETH with Reg. No. C3612C15020 carried out the project titled "REWARD SYSTEMS AND STRATEGIES" under my guidance Miss Arshiya Jabeen which is in the partial fulfilment of the award of Bachelors Degree in Business Administration by PRIST University.

The project work has to the best of my knowledge and belief, been carried out originally adhering to the norms and conditions prescribed by PRIST University.

I wish him all the success in his future and his bright career.

HEAD OF THE DEPARTMENT PROJECT GUIDE

Shekhar Sir Miss Arshiya Jabeen

EXAMINER CERTIFICATE

THE PROJECT REPORT OF

K.PRANEETH

ON

“CUSTOMER LOYALTY”

IS APPROVED AND IS ACCEPTABLE IN QUALITY AND FORM

INTERNAL EXAMINER EXTERNAL EXAMINER

CERTIFICATE OF THE ORGANIZATION

This is to certify that Mr. K.PRANEETH who is pursuing BBA (Industry Integrated) course of PRIST University at Sun International Institute for Technology And Management has undergone management training at our organization from to and Carried out the Project titled "customer loyalty" .

His performance during the training period was found to be

We wish him all success for his future endeavors.

Authorized Signatory

VANI MADAM

Director SIITAM

HYDERABAD

STUDENT DECLARATION

I K.PRANEETH, student of Sun International Institute For Technology And Management, affiliated to PRIST University, pursuing Bachelors Degree In Business Administration course, hereby declare that the project titled “CUSTOMER LOYALTY” is an original work carried out by me availing the guidance of Miss Arshiya Jabeen Assistant Professor at SIITAM.

No portion of the project work is copied down from any similar works nor bears resemblance with any report submitted to PRIST University for the award of any degree or diploma.

Place: K.PRANEETH

Date: (Reg.no.C3612C15020)

ACKNOWLEDGEMENT

I extend my profound gratitude to my project guide Miss Arshiya Jabeen Assistant Professor , SIITAM, for rendering the valuable suggestions and guidance without which the study would not have been a successful one.

I would like to take this opportunity to thank Mr. Shekhar Sir, Head of Department, Sun Institute for Technology and Management, for his cooperation and encouragement.

I would like to thank Mr. Y. Susheel Kumar, of Good Morning News Paper for giving me an opportunity to work with them and giving me live training, helping me understand real time situations.

I would like to express my deep gratitude to our Director, Mrs. Vani , for giving permission to do the project.

I would like to thank all the faculty members of Sun International Institute for Technology and Management for encouraging me throughout my endeavors.

I would like to thank all those who supported me directly and indirectly in accomplishing this project successfully.

(K.PRANEETH)

Contents

Chapter-1

Sr.No Chapter Particulars

1. 1. Introduction

2. 2. Introduction to Company

3. 3. Students Work Profile

4. 4. Introduction to project

5. 5. Conclusion

6. 6. Bibliography

Customer loyalty

Introduction:

The loyalty business model is a business model used in strategic management in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed. A typical example of this type of model is: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability.

In it, customer satisfaction is first based on a recent experience of the product or service. This assessment depends on prior expectations of overall quality compared to the actual performance received. If the recent experience exceeds prior expectations, customer satisfaction is likely to be high. Customer satisfaction can also be high even with mediocre performance quality if the customer's expectations are low, or if the performance provides value (that is, it is priced low to reflect the mediocre quality). Likewise, a customer can be dissatisfied with the service encounter and still perceive the overall quality to be good. This occurs when a quality service is priced very high and the transaction provides little value.

This model then looks at the strength of the business relationship; it proposes that this strength is determined by the level of satisfaction with recent experience, overall perceptions of quality, customer commitment to the relationship, and bonds between the parties.

This model then examines the link between relationship strength and customer loyalty. Customer loyalty is determined by three factors: relationship strength, perceived alternatives and critical episodes. The relationship can terminate if: 1) the customer moves away from the company's service area, 2) the customer no longer has a need for the company's products or services, 3) more suitable alternative providers become available, 4) the relationship strength has weakened, 5) the company handles a critical episode poorly, 6) unexplainable change of price of the service provided.

Objective of the Study:

The primary goal of conducting customer loyalty measurement research is to benefit from the use of focused, customized and personalized research tools that meet the organization’s specific information needs and requirements in a comprehensive, concise, statistically valid, timely and actionable manner.

Scope of the Study:

This study is significant in much respect. First, the findings of this study will help organizations to know how best to reward their hardworking employees.

Secondly, it will assist organization, to relate reward system on the productivity of staff; employers would be assisted to adopt the most appropriate reward scheme that would engender better performance of staff in this era of democracy. It is also expected that by this effort every individual performance will be rewarded accordingly to his environment. In other words, reward should be glanced toward achieving productivity.

A situation whereby employees are given reward irrespective of the performance breed frustration and lack of commitment on the part of employees. This study shall endeavor to establish fully reward shall be based on individual performance and achievements rather than any other factions.

Research Methodology:

In research methodology we talk about how the data (information) is collected for study.

Data is also known as information.

Data is of two types:

1. Primary Data

2. Secondary Data

In my project data is collected from the employees by questionnaire,observation, interview

and discussion with management.

Chapter-2

Introduction to Company

 

ABOUT THE COMPANY- GOODMORNING

INTRODUCTION:

The company Good morning News is located at SR Nagar ,Vengal Rao Colony

and its function is to provide newspapers for the general good of the public.

Its newspapers are provided on a weekly basis for public use.

Its major focus is on political issues and market welfare.

The company holds as a good source for advertising and various departments

based on its various functions.

It is an emerging newspaper company that intends to open up on a daily basis.

MISSION AND VISION:

The mission of the Good morning news to emerge as one of the leading local newspaper

in Hyderabad, Vijayawada and Chithoor.

Its vision is to connect the city with its daily informative news and to serve the general

public efficiently.

Its objectives are more social oriented as it serves the people of the state who have

always been a part of any news.

Being a newly emerging newspaper company it hopes to grow more in terms of its

service and strives to attain the general interest of the public.

BOARD OF DIRECTORS:

The list of the Board of Directors of the Good morning News is stated below:

DIRECTOR: Mr. Susheel Kumar

MANAGER: Mr. Suresh Kumar

TEAM MANAGER: Mr.Kishore

Chapter-3

Students Work Profile

Company Name: Good Morning News.

Students Name: K.PRANEETH

No. of Working Days: 45 days

Roles and Responsibilities:

I worked in the company as a marketing employee to promote advertisement for the good

morning newspaper.

It helped me to convince the clients in the market and thereby helped to increase my

communication skills.

One of the major responsibilities was to manage my time correctly and finish my work as

per the daily schedule.

KEY LEARNING:

I learned how to move around in a city and manage my time

It helped me to communicate to my clients more effectively.

It made me a more responsible person and improved myself on the basis of the job profile

It helped develop some very essential leadership skills.

Chapter-4

Customer loyalty

Introduction:

The loyalty business model is a business model used in strategic management in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed. A typical example of this type of model is: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability.

In it, customer satisfaction is first based on a recent experience of the product or service. This assessment depends on prior expectations of overall quality compared to the actual performance received. If the recent experience exceeds prior expectations, customer satisfaction is likely to be high. Customer satisfaction can also be high even with mediocre performance quality if the customer's expectations are low, or if the performance provides value (that is, it is priced low to reflect the mediocre quality). Likewise, a customer can be dissatisfied with the service encounter and still perceive the overall quality to be good. This occurs when a quality service is priced very high and the transaction provides little value.

This model then looks at the strength of the business relationship; it proposes that this strength is determined by the level of satisfaction with recent experience, overall perceptions of quality, customer commitment to the relationship, and bonds between the parties.

This model then examines the link between relationship strength and customer loyalty. Customer loyalty is determined by three factors: relationship strength, perceived alternatives and critical episodes. The relationship can terminate if: 1) the customer moves away from the company's service area, 2) the customer no longer has a need for the company's products or services, 3) more suitable alternative providers become available, 4) the relationship strength has weakened, 5) the company handles a critical episode poorly, 6) unexplainable change of price of the service provided.

Definitions:

Customer loyalty can be said to have occurred if people choose to use a particular product, rather than use or buy products made by other companies. customers exhibit customer loyalty when they consistently purchase a certain product or brand over an extended period of time. As a example many customers stick to a certain travel operator due to the positive experiences they have had with their products and services.

Objective of the Study:

Customer loyalty is the key objective of the customer relationship management and describes the loyalty which established between a customer and companies, persons, product or brand. The individual market segments should be targeted in terms of developing customer loyalty.

Significance of the Study:

The economic benefits of high customer loyalty are measurable. When you consistently deliver superior value and win customer loyalty, market share, revenues and profitability all go up, and the cost of acquiring new customers goes down. 

A clear and structured new customer induction scheme will boost customer loyalty and retention, increase the frequency of purchase and raise the dollar value of each transaction and increase referrals.

Customer induction schemes are a vital step in business growth as they deliver higher yielding customers and drive up profits by reducing the need to spend money attracting new customers.

Creating an induction scheme does not replace the imperative of delivering excellent customer service at each and every transaction, it merely supports it. It is very much about long term retention marketing and is purely created through exemplary customer service.

Research Methodology:

In research methodology we talk about how the data (information) is collected for study.

Data is also known as information.

Data is of two types:

1. Primary Data

2. Secondary Data

In my project data is collected from the employees by questionnaire, observation, interview and

discussion with management.

Under Methodology, Data Presentation & Analysis, it describes the methodology used in

analyzing job satisfaction, research results presentation and analysis. Through this chapter

anyone can get vast knowledge about how psychological factors, physical factors and

environmental factors influence to the job satisfaction and dissatisfaction.

1. Data Collection Method: 

The researcher used scheduled interview method using questionnaire for   primary data, secondary data are collected from different sources. 

2. Sources of Data: 

Primary data were collected through questionnaire from employees.

 Secondary data were collected from company profile, brochures and past reports. 

3. Tools of Data Collection: 

The data collection method adopted for the project is prepared through a set of questionna

ire. Their responses and feedback is noted down in the questionnaire.

According to Fornell extensive literature suggests that both market share and customer satisfaction leads to profitability but it is not certain that market share and customer satisfaction have a positive connection. Fornell states that “Loyal customers are not necessarily satisfied customers, but satisfied customers tend to be loyal customers.

Defensive Strategies

Companies’ relationship to their customers can be divided into two separate business strategies, offensive and defensive. The offensive strategy deals with attracting new customers and the defensive with trying to keep already existing customers, this is shown in figure .

Figure : Offensive and Defensive Strategies.

Business Strategy

OFFENSIVE

DEFENSIVE

(New Customers)

(Present Customers)

Increase

Capture

Build

Increase

Market Share

Market Share

Switching

Customer

Barriers

Traditionally companies have devoted more resources to acquiring new customers but today most companies apply a combination of both offensive and defensive strategies.The objective of the defensive strategy is to minimize customers switching and maximize customer retention by protecting the brand and its market from competitors and by having highly satisfied customers.

Building and Sustaining Profitable Customer Loyalty.

According to Kumar and Shah the main goal of every company is profitability and one method to achieve this for a company is to gain and maintain loyal customers. If a company invests resources to build customer loyalty without focusing on profitability it may lead to failure in the long run. Kumar and Shah further states that there are two types of loyalty; behavioral and attitudinal loyalty. Customer loyalty becomes important to a company when it results in purchase behavior. This generates for a company in direct and tangible returns which attitudinal loyalty does not. Behavioral loyalty is important for a company in order to generate profitability, attitudinal loyalty on the other hand is important for a company, because it helps the company to build up an exit barrier for their customers. This is especially true in non-contractual situations where there are low switching costs. Attitudinal loyalty can be a commitment or trust to a company, which do not have to result in any purchase. This because, even though the customer has a positive attitude towards a company or a brand, they might have an even more positive attitude towards another company or another brand. The attitudes that customers have are best measured through surveys, other types of methods to obtain data are focus groups and feedback from the customers. (ibid)

Figure : Building and sustaining customer loyalty.

Customer Loyalty Programs

The adaptation of customer loyalty programs among companies has increased over the last couple of years, and the customers have become the focus of attention. Customer loyalty programs offer financial and relationship rewards to customers with the purpose of making the customers’ brand loyal. (Uncles Dowling & Hammond, 2003) The authors further states two aims of customer loyalty programs, the first is increased sales of revenues through increasing purchases.

The second aim is to build bonds between the brand and the existing customers to maintain the existing customer base. According to O´Malley loyalty programs are developed to reward loyal customers, generate information about the customers and manipulate their behavior. Yi and Jeon states that loyalty programs are usually introduced to build customer loyalty through a reward scheme. The goal of loyalty programs is to establish a high level of customer retention by providing satisfaction and value to certain customers. These programs can also increase brand loyalty by creating switching costs and profits by avoiding price competition. The customers’ value perception is a necessary condition for the developing of brand loyalty through loyalty programs. The loyalty program has to be perceived as valuable for the customer, as well as convenient and generate in cash value to be able to entice the customers into the program.

Dowling and Uncles describes a psychological benefit of belonging to a program and the accumulation of points. The authors found that the accumulated points and being qualified for a reward could be regarded as psychological rewards in loyalty programs. Yi and Jeon states that this value perception might also be related to the different type of rewards, customers prefer luxuries as rewards and value them more than necessity rewards.

According to Butscher the primary aim of loyalty programs is to build up emotional relationships that generate benefits. The benefits need to be valuable and capable of creating an emotional connection between the customers and the company.Liang and Wang (2004) states that the concept of benefits relies on the idea that the customers select brand on the basis of their desire.

Butscher further states that before customers consider to join a loyalty program they weight their input such as membership fees and obligation against the output they will receive from the program such as benefits, image and special customer status. The balance between the input and the output has to be favorable for the loyalty program to be able to establish relationships with the customers. This balance deals with selecting the right benefits for the customers.

Brand Loyalty

According to Aaker the key consideration when placing value on a brand is brand loyalty, this because a highly loyal customer base can generate a very predictable sales and profit stream. The impact of brand loyalty on marketing costs is often substantial because it is much less costly to retain customers than to attract new ones. Many companies make the mistake of seeking growth by enticing new customers to the brand and neglecting already existing ones. (ibid)

The challenge with these customer groups is to improve the brands loyalty profile by decreasing the number of price switchers, strengthen fence sitters and the committeds ties to the brand and increase the number of customers who would pay more for the brand.

Aaker further states that the committed often are objects of underinvestment and taken for granted although there is a significant potential in increasing the business with the loyal customers. Another aspect is the risk of loyal customers being enticed away by competitors if the performance of the brand is not improved. Companies should therefore avoid utilizing resources from the group of committed to the non-committed customers or price switchers.

Aaker further suggest an approach to enhance the loyalty of the fence sitters and the committed. This approach is to develop or strengthen their relationship with the brand through brand awareness, perceived quality and a clear brand identity. Brand awareness reflects the presence of the brand in the mind of the consumer, perceived quality is the brands associations, and brand identity provides direction, purpose and meaning for the brand. Programs that can build this type of loyalty are frequent–buyer programs and customer clubs which are becoming more common. Frequent-buyer programs are being adopted by many different brands in a variety of product classes, the program provides direct and tangible reinforcement for a customer’s loyal behavior.

Benefits of Maintaining Customer Loyalty

According to Kumar and Shah it is difficult to build and sustain customer loyalty. It is more economical for a company to keep customers loyal than if the company have to replace them . Kumar and Shah states that a company that gains loyal customers receives different types of benefits, the most known are:

• Loyal customers are less price sensitive.

• Loyal customers spend more time with the company.

• Loyal customers pass on their positive feeling about

the company or the brand to others.

Economical and Non-economical Benefits

In general the end goal of companies marketing efforts is to generate profit. From the relationship marketing’s perspective, a successful company is according to Ahmad and Buttle a company “which manage to turn their customers into clients and from prospects into partners. The most common argument for customer retention is that it is less costly to retain customers than to acquire new customers.

Economic Benefits

Savings on customer’s acquisition or replacement costs.

Guarantees of base profits as existing customers are likely to have a

minimum spend per period.

Growth in per-customers revenue as, over a period of time, existing

customers are likely to earn more, have more varied needs and spend more.

A reduction on relative operating costs as the firm can spread the cost over

many more customers and over a longer period of time.

Free of charge referrals of new customers from existing customers, which

would otherwise be costly in terms of commissions or introductory fees.

Price premiums as existing customers do not usually wait for promotion or

price reduction before deciding to purchase.

Relational Benefits For the Customer

Marzo-Navarro, Pedraja-Iglesias and Riviera-Torres states that to be able to maintain a relationship, promises must be kept in order to expand the relationship and new promises must be established as long as the previous has been kept. The benefits of a stable relationship that a customer can obtain are for example an increase in confidence, reduction of risk, economic advantages, increase and simplification of efficiency in the decision process. These benefits are determined by the established relationship and can be divided into two primary categories; functional benefits and social benefits.

The functional benefits include time saving, convenience, making the best purchase decision etc., and the social benefits include how pleasant and comfortable the relationship might be. The authors further states that by establishing stable relationships, customers themselves will reduce the problems associated with the purchase choice and thereby improve the efficiency of the decision-making process.

Relational Benefits For the Company

The business strategy of retaining customers by making them brand loyal is done because it is more profitable to retain existing customers than to attract new customers. Customer loyalty leads to improved business due to the effect of the loyal customers. The loyal customers provide a communication route for strengthen the brand image, makes if difficult for competitors to entice customers and allows setting higher prices. Another factor that loyal customers generate is a decrease in marketing costs since the loyal customers have knowledge about the company, their standpoint and know the quality of their products.

The authors further states that no customer can be made brand loyal if they are not satisfied, which drives the companies to improve customer satisfaction. The concept of loyalty can be interpreted in two ways; affective loyalty and behavior loyalty. Affective loyalty has a positive attitude towards a brand or a company, which is generated through an internal evaluation process, the behavior loyalty reflects the degree of purchase repetition that an individual makes. There are also other determinants than satisfaction to create loyalty for example; brand capital and management of communication with the

customers. This indicates that satisfaction is a feeling that generates a higher rate of customer retention and wider spread positive word of mouth. In order to make customers brand loyal the companies must act both effective and affective in their relationships to create both social and personal bonds with their customers. These bonds along with the financial bonds are the most significant elements for achieving brand loyalty.

Chapter-5

Conclusion

Above is a research done based upon analyzing the impact of physical, psychological and environmental factors on job satisfaction

Questionnaires were distributed among these employees in gathering data with based on physical, psychological and environmental factors affecting their job satisfaction.

The findings of this study indicate that psychological, physical, and environmental factors are affected to the job satisfaction of non managerial level employees

- Management should pay their attention on providing satisfying salary for

employee contribution.

- Also they should be concerned about providing additional benefits (especially

financial benefits) to its employees.

- Employees are interested in having friendly environment. Therefore management

must get more acquainted with this employees and make employees see them as a

leader, not as a boss.

- Since employees are interested in having good cooperation with colleagues,

management should make sure to have a working environment where good

cooperation and mutual respect exist.

Chapter-6

Bibliography

The information is collected from different websites. They are as follows:

Slideshare Wikipedia www.qualtrics.com www.businessdictionary.com businesscasestudies.co.uk