Customer Loyalty and Retention

The Importance of Customer Satisfaction in Relation to Customer Loyalty and Retention by Harkiranpal Singh

May 2006

UCTI Working Paper WP-06-06

The Importance of Customer Satisfaction in Relation to Customer Loyalty and Retention
Harkiranpal Singh Asia Pacific University College of Technology & Innovation Technology Park Malaysia Bukit Jalil, 5700 Kuala Lumpur, Malaysia May 2006 [e-mail] Abstract
To be successful, organizations must look into the needs and wants of their customers. That is the reason why many researchers and academicians have continuously emphasized on the importance of customer satisfaction, loyalty and retention. Customer satisfaction is important because many researches have shown that customer satisfaction has a positive effect on an organisation’s profitability. Due to this, the consequences of customer satisfaction and dissatisfaction must be considered. There is also a positive connection between customer satisfaction, loyalty and retention. Therefore, customer satisfaction, loyalty and retention are all very important for an organization to be successful Keywords: Customer satisfaction, customer loyalty, customer retention

Introduction
The importance of customers has been highlighted by many researchers and academicians. Zairi (2000) said “Customers are the purpose of what we do and rather than them depending on us, we very much depend on them. The customer is not the source of a problem, we shouldn’t perhaps make a wish that customers ‘should go away’ because our future and our security will be put in jeopardy”. That is the main reason why organisations today are focusing on customer satisfaction, loyalty and retention. According to Hansemark and Albinsson (2004), “satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfilment of some need, goal or desire”. Customer loyalty, on the

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