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Unisa online - Client loyalty a myth in the 21st century?

Prof Mari Jansen van Rensburg

In the good old days, when the people of central Johannesburg needed to borrow money, they went to see their friend, the local bank manager, at the local branch where he greeted them by name. Those names were written down in a book, and they were given a slip of paper along with their cash to remind them of the debt. It is quaint to look back on it now, but banking was once that simple – money in, money out; interest paid, interest collected. Relationships were built on good personal service, sound advice and trust, and friendship often followed.

During her inaugural lecture, Prof Mari Jansen van Rensburg of the Department of Business Management raised a sobering thought that true loyalty in the 21st century could be a myth. Whilst this statement might raise controversy amongst businesses, companies can no longer assume that clients’ reasons for staying are positive or conscious choices. Clients have become much more powerful and are willing to switch and experiment.  The reality is however, that the continuing effects of the economic crunch, increasing competitive pressures and diminished customer loyalty call for more interactive, collaborative and long-lasting approaches to relationships between companies and their clients. This volatile business environment has, as a result, placed customer retention and customer relationship management at the forefront of management concerns.

“We cannot ignore the fact that customer retention can yield several economic and non-economic benefits.  The overwhelming argument for customer retention is, in fact, that it is cheaper to retain than to acquire new customers,” she said. Despite this emerging consensus about the importance of retention, the discipline remains divided by the critical factors that can help a firm maintain and enhance customer retention.

In a quest to uncover the antecedents of client retention, Jansen van Rensburg focused on relationships between advertising agencies and their clients.  She found this industry most suitable, as relationships between advertisers and clients are close and enduring. In most cases, agencies serve only a few clients and the daunting reality is that the loss of any major account would have a significant influence on both the reputation and revenue of an agency.

Prof Jansen van Rensburg deliberately focused on renewal decisions of agency contracts to explain retention. She argued that “unlike the decision to appoint a new agency, a client’s renewal decision is much less likely to depend on contract specifications, marketing communications or other competitive offerings. Given the history and existing relationship between clients and their appointed agencies, an investigation of inter-organisational behaviour could be used to explain client retention.”

She concluded her lecture by presenting a multi-dimensional model of retention that was tested within the South African advertising industry. This model highlighted that “agencies are naive to think that clients will be retained once a contract is signed. The South African advertising industry is considered to be a buyers’ market and clients expect nothing but the best.”

Although clients are well aware of the uncertainty, effort and time involved in switching agencies, she found that clients are willing to make such sacrifices if they are not satisfied with the services provided. True to the nature of services, she argued that clients are retained on the basis of evaluative as well as relational factors. “Clients are retained if they are satisfied with the services provided by the agency, the quality of those services and the agency’s ability to manage their accounts within budget limitations.”

In addition, she advocated that the working relationship between the staff members from the agency and those from the client is fundamental to explain why clients retain agencies. She emphasised that collaboration between these parties was the factor that displayed the largest effect on retention propensity. “Client retention is not only an outcome based on agency effort and performance, but rather the result of interactional effort”. She also suggested that commitment to the relationship, clear communication and conflict resolutions were further requirements for retention.

She cautioned academics and practitioners that retention can and should not be measured by single dimensions. “To measure, manage and improve business relationships, advertisers and agencies need to consider a spectrum of factors”. It is her opinion that a holistic perspective can improve the business relationship for both parties and can be used to strengthen and build long-term relationships.

Click here for Prof Jansen van Rensburg’s  full lecture.

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