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    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) Volume 4, Issue 5, September - October (2013) ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 4, Issue 5, September - October (2013), pp. 92-97 © IAEME: www.iaeme.com/ijm.asp Journal Impact Factor (2013): 6.9071 (Calculated by GISI) www.jifactor.com IJM ©IAEME CUSTOMER LOYALTY MANAGEMENT – CURRENT DIMENSIONS OF CLIENT RETENTION AMONG STOCK BROKERS IN INDIA K. Giridhar1, Dr. J Clement Sudhahar2 1 Ph. D Scholar, School of Business Leadership and Management, Karunya University, Coimbatore, Tamil Nadu, India. 2 Professor in Marketing Area, School of Business Leadership and Management, Karunya University, Coimbatore, Tamil Nadu, India ABSTRACT Customer is always the key to any successful long term business model. In today’s highly competitive environment, loyalty of the customer towards the service provider is considered as a key element and all concerted efforts needs to be undertaken in this direction. This paper attempts to throw light on the dimension of client retention that stock brokers in India need to undertake in managing customer loyalty and how the expectations of customers have evolved over a period of hundred years in this industry. Key words: Customer, Loyalty, Relationship, Retention, Stock broker INTRODUCTION Stock Broking in India is more than 135 years old with the earliest known Stock Exchange being the Bombay Stock Exchange currently known as BSE Ltd. which was the first ever stock Exchange to be established in Asia in 1875. For any customer to execute a transaction on a stock Exchange, an intermediary popularly known as Stock Broker (in recent times aka Trading Member) is required. Till about mid 1990’s stock broking was a broker driven market wherein clients did not have much say in execution of trades or price discovery and were left to the mercy of the Stock Broker. But with the advent of screen based automated trading launched first by the National Stock Exchange of India Ltd (NSE) it has completely turned the manner in which brokers operate and it can be said beyond doubt that today’s customer has an unparallel advantage than before in choosing the broker and the rate (price) at which transactions can be executed. Thus, under the changed circumstances, it has become highly imperative for the Stock broker to retain customer and ensure their loyalty. 92
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 5, September - October (2013) CUSTOMER LOYALTY Customer satisfaction and loyalty provide a foundation for high levels of customer lifetime value, they support a range of customer behaviors with widely varying values, characterized by mere loyalty (repeat purchase), commitment (willingness to refer others to a product or service), apostlelike behavior (willingness to convince others to use a product or service), and ownership (willingness to recommend product or service improvements) (James L Heskett, 2002). In stock broking, word of mouth is one the primary mode of client acquisition and this can happen only based on existing customer being loyal to the broker and upon satisfaction of the service level, they would continue/ refer the services to others. Research provides ample evidence regarding the impact of word-ofmouth (WOM) communication on recipients. Service providers increasingly attempt to harness this power of WOM by introducing referral reward programs and other marketing instruments that aim to stimulate positive WOM. It is demonstrated that providing a recommendation influences the senders’ attitudinal and behavioral loyalty. The effect is found to be stronger for customers with low expertise in the service category and little experience with the provider. This means that encouraging customers in the early stages of their customer life cycle to give recommendations is specifically effective in increasing loyalty to the provider (Ina Garnefeld, Sabrina Helm & Andreas Eggert, 2011). Word of mouth is a very important avenue in stock broking. It can be measured whether this word of mouth advertisement for a stock broker is coming more from a customer in the initial stage of this relationship or does it continue even at a later stage. Customer loyalty is viewed as the strength of the relationship between an individual's relative attitude and repeat patronage. The relationship is seen as mediated by social norms and situational factors. Cognitive, affective, and conative antecedents of relative attitude are identified as contributing to loyalty, along with motivational, perceptual, and behavioral consequences. Implications for research and for the management of loyalty are derived (Alan S. Dick & Kunal Basu,1994). How the customers are going to have patronage with the stock broker is purely based on the individual customer’s relative attitude. Another interesting facet to loyalty can be to find out if customers are loyal to the service provider or to the markets itself (Bob Mckercher & Bazak Denizci Guillet,2011). In stock broking this would be an interesting area to be explored since it would be interesting to find if customers are more loyal to stock brokers or whether they are more loyal to the secondary markets itself by re-investing in this rather than any other asset class. Brand specific-repeat purchase drivers value for money, brand trust and brand affect have positive and significant effect on probability of repeat purchase made by consumers. In case of consumer demographics age, income, education and occupation significantly affect the repeat purchase probability (Bikran Jit Singh & Rashmi, 2010). It would be interesting to note whether the stock broker as a brand would make a customer loyal to him by doing repetitive business & whether the stock broker’s brand would make an impact. Another aspect to the loyalty factor would be the switching costs between brokers. As customer-organization relationships deepen, consumers increase their expertise in the firm’s product line and industry and develop increased switching costs (Simon J. Bell, Seigyoung Auh & Karen Smalley, 2005). Once the relationship between customer and stock broker deepens, the customer gets used to the delivery style of the broker and also contributes to the industry. Whether this would tend to increase the switching costs for a customer among stock brokers needs to be identified. Research also suggests that consumers may vary in the degree to which they wish to engage in a relationship with their service providers. Depending on the service type, either two or three segments of customers emerge, i.e., ranging from customers who are keen to have a relationship to those who are indifferent about relationships, down to those who are averse to forming relationships with service providers. Although there are always customers who are keen to form a relationship with their service provider, there is no “hard core” group of customers keen on relationships with all 93
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 5, September - October (2013) service providers (Peter J. Danaher, Denise M. Conroy & Janet R. McColl-Kennedy, 2008). It is pertinent to note that in stock broking as well customers may be indifferent to loyalty. However, irrespective of all these factors, even during the pre 1990’s, stock brokers were doing business based on customer loyalty towards them and in the current circumstances as well their business exists because of customer loyalty. CUSTOMER RELATIONSHIP Relationship marketing (RM) was conceived as an approach to industrial and service markets and considered to be inappropriate in other marketing contexts. Recently, however, the domain of RM has been extended to incorporate innovative applications in mass consumer markets. Much has changed in recent years. Recent applications of RM in consumer markets have been facilitated by developments in direct and database marketing within an increasingly competitive and fragmented marketplace (Ashish Gupta, 2011). Relationship marketing-establishing, developing, and maintaining successful relational exchanges-constitutes a major shift in marketing theory and practice (Morgan and Hunt, 1994). Successful relationship with customers is possible only if there is commitment and that originates from trust. There are also been studies that has aimed to explicate why customers stay in service relationships, while additionally examining how different forms of commitment to these relationships affect customers' voice, both within and outside of the relationship. Social balance theory, social influence theory, and escalation of commitment provide important theoretical bases for why individuals stay. Seven notable links relative to staying reasons and commitment that have been observed are relational benefits and resistance to change to calculative commitment; subjective norms and sunk costs to affective commitment; procedural switching costs, avoidance of conflict, and resistance to change to normative commitment (Sharon E. Beatty, Kristy E. Reynolds & Mary P. Harrison, 2012). It is important to note as to why does a customer stay in a service relationship with a stock broker and how does a customer’s voice is heard by the broker and what are the various reasons for the commitment of the customer to the broker. Customer management (CM) research has evolved and has had a significant impact on the marketing discipline. In an increasingly networked society where customers can interact easily with other customers and firms through social networks and other new media, customer engagement is an important new development in CM. Customer engagement is considered as a behavioral manifestation toward the brand or firm that goes beyond transactions (Peter C. Verhoef, Werner J. Reinartz & Manfred Krafft, 2010). In Stock broking it would be interesting to note that how does customer engagement would result in continued relationship in terms of loyalty and commitment to the stock broker. Part of this would also be successful complaint management which primarily depends on customers' willingness to voice their complaints and on stock brokers ability to adequately deal with these complaints. Affectively committed customers display little change in their post recovery behavior, even after a service failure followed by an unsatisfactory recovery attempt. It seems that these customers are tolerant and want to help the provider improve their business. Affective commitment seems to amplify willingness to help the service provider by means of voicing dissatisfaction despite considerable efforts in doing so. Moreover, affective commitment buffers the negative effects of service failures on post recovery behavior (Heiner Evanschitzky, Christian Brock & Markus Blut, 2011). Whether customer complaints in stock broking are affecting the commitment and what are the various measures taken by stock broker in resolving the same would have a lasting impact on the relationship between the customer and stock broker. Another study has investigated the effects of customer contact frequency and relationship duration on customer-reported relationship strength (CRRS). It was observed that both contact frequency and relationship duration have a positive effect on CRRS, and that duration moderates the 94
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 5, September - October (2013) effect of frequency. Specifically, a relationship-maturity effect: for shorter-duration relationships, contact frequency enhances CRRS, but for longer-duration relationships, contact frequency has no effect on CRRS. Furthermore, those with longer duration are perceived to be stronger, while those with greater contact frequency are not (Tracey S. Dagger, Peter J. Danaher & Brian J. Gibbs, 2009). Whether the contact frequency and relationship duration between customer and stock broker would have an impact on the relationship strength and during shorter duration of relationship whether frequent interaction helps and as the relationship becomes longer whether the contact frequency really matters is something which needs to be monitored to ensure the relationship continues uninterrupted. Over period of several decades of research it has been proved time and again beyond doubt that customer relationship is key and there are numerous tools available in the form of database, software etc. But it is imperative today to move on from analysis to taking feedback on the experience the customer has had with the service provider which can possibly be a more cohesive approach. This may help in finding out what the customer finds as an value add in the relationship than how valuable the customer is to the firm (Chandrashekhar R. Suryawanshi, 2013). CUSTOMER RETENTION Customer retention refers to a customer’s slated continuation of a business relationship with the firm (Timothy et al., 2007). Retaining clients implies keeping them active with you through a good customer service that is built on’’ a understanding of their needs, preferences and want’’ (Oyenihi and Abiodun, 2008). It is not only a cost effective and profitable strategy (Reichheld, 1996), but is imperative in fostering customer satisfaction, considering the fact that clients are becoming increasingly aware of their rights and privileges, expecting more values for their money, better quality services and products, even at a higher cost. The key for the stock broker would be to ensure that customer trades on regular interval through him. STOCK BROKER Today the stock broker is not any more a mere service provider for buying and selling of equity products. He is expected to be a one stop shop financial service provider for all customer needs. Many of the corporate stock brokers have diversified and are providing multiple products to their clients apart from equities such as Insurance, mutual funds, currencies, commodities, depository services etc. There are certain essential parameters that need to be captured and monitored for client retention. Periodic measurement of client feedback Whether client trade’s with other stock brokers Frequency of client transactions Stock brokers perceived brand image in the market Complaints against the broker, compliance to regulatory norms Providing multiple products as offered by competitors in the industry Providing all possible technological tools in a cost effective manner Offering platform of multiple Exchange’s to trade Periodic engagement in terms of product awareness, promotional activities Competitive brokerage Whether the client engages in brand promotion through word of mouth advertising Customer accessibility to the branch in-charge at the place of trade Zero default on payment to the customer Prompt communication and timely support for any customer queries or problems 95
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 5, September - October (2013) CONCLUSION Customer retention in today’s market conditions are really challenging since the cost of acquiring new client is multi fold and hence stock brokers would take efforts to retain clients through loyalty by providing all relevant facilities and services that would keep customers satisfied and also ensure that the customer also values the relationship with the stock broker as much as the stock broker valuing the customer’s relationship. REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Alan S. Dick & Kunal Basu “Customer Loyalty: Toward an Integrated Conceptual framework”, Journal of the Academy of Marketing Science, Spring 1994, Vol. 22 no.2, 99-113. Ashish Gupta, “A study on Customer Relationship Management in Consumer Markets: Grandiosity or Reality?” Asia-Pacific Journal of Management Research and Innovation April 2011. Bikran Jit Singh & Rashmi, “Predicting Repeat Purchase Behavior: An Indian Experience”, Asia-Pacific Journal of Management Research and Innovation October 2010 Vol.6 no. 4, 64-73. Bob Mckercher & Bazak Denizci Guillet “Are Tourists or Market Destination Loyal?”, Journal of Travel Research, March 2011, Vol. 50 no.2 121-132. Chandrashekhar R. Suryawanshi “Customer Experience Management: A new dimension to customer retention”. International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 224 - 226,ISSN Print: 0976-6502, ISSN Online: 0976-6510. Clement Sudhahar J, Selvam M, (2008), “Customer Loyalty Management in Banking”,I edition, Pallavi Publications. Heiner Evanschitzky, Christian Brock & Markus Blut,” Will You Tolerate This? The Impact of Affective Commitment on Compliant Intention and Post recovery Behavior, Journal of Service Research, November 2011 Vol. 14 no.4 410-425. Ina Garnefeld, Sabrina Helm & Andreas Eggert, ”Walk Your Talk: An Experimental Investigation of the Relationship between Word of Mouth and Communicators Loyalty”, Journal of Service Research, February 2011 Vol. 14 no. 1 93-107. James L Heskett, “Beyond Customer loyalty”, Emerald vol 12, issue 6, 2002. Oyenihi O, Abiodun A (2008). “Customer service in the retention of Mobile phone users in Nigeria’’. J. Bus. Manage., 2(2): 26-31. Peter C. Verhoef, Werner J. Reinartz & Manfred Krafft, “Customer Engagement as a New Perspective in Customer Management”, Journal of Service Research, August 2010 Vol.13 no.3 247-252. Peter J. Danaher, Denise M. Conroy & Janet R. McColl-Kennedy, “Who Wants a Relationship Anyway? Conditions When Consumers Expect a Relationship With their Service Provider, Journal of Service Research, August 2008 Vol. 11 no.1 43-62. Reichheld FF (1996). “Learning from customer defections’’. Harv. Bus.Rev., 74(2); 56-69. Robert M. Morgan & Shelby D. Hunt “The commitment – Trust Theory of Relationship Marketing”, Journal of Marketing, Vol 58 (July 1994), 20-38. R. Thiru Murugan and Dr. J Clement Sudhahar, “Predictors of Customer Retention in Online Health Care System (OHCS) - Structural Equation Modelling (SEM) Approach”, International Journal of Management (IJM), Volume 4, Issue 1, 2013, pp. 243 - 257, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 96
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 5, September - October (2013) 16. Sharon E. Beatty, Kristy E. Reynolds & Mary P. Harrison, “Understanding the Relationships between Commitment and Voice Hypothesis, Empirical Evidence and Directions for Future Research”, Journal of Service Research, August 2012 Vol.15 no.3 296-315. 17. Simon J. Bell, Seigyoung Auh & Karen Smalley, “Customer Relationship Dynamics: Service Quality and Customer Loyalty in the context of Varying Levels of Customer Expertise and Switching Costs”, Journal of the Academy of Marketing Science April 2005 Vol.33 no.2 169183. 18. Timothy LK, Bruce C, Lerzan A, Tor WA, Jaw W (2007).” The value of different Customer satisfaction and loyalty metrics in predicting customer retention, recommendation and share of wallet.” J. Serv.Q., 17(4): 361-384. 19. Tracey S. Dagger, Peter J. Danaher & Brian J. Gibbs, “How Often Versus How Long: The Interplay of Contact Frequency and Relationship Duration in Customer-Reported Service Relationship Strength”, Journal of Service Research, May 2009, Vol. 11 no.4 371-388. 20. Dr. Sandip Ghosh Hazra, Prashant Piyush and Tapan Kumar, “Customer Loyalty in Indian Banking Sector: A Comparative Study”, International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 236 - 243, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 21. A.R.Krishnan, “Determinants of Customer Loyalty Factors and its Impact in Consumer Durable White Goods Market in Chennai City, Tamilnadu-A Study”, International Journal of Management (IJM), Volume 2, Issue 1, 2011, pp. 15 - 29, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 22. Vani Haridasan P and Dr. Shanthi Venkatesh, “Impact of Service Quality in Improving the Effectiveness of CRM Practices Through Customer Loyalty – A Study on Indian Mobile Sector”, International Journal of Management (IJM), Volume 3, Issue 1, 2012, pp. 29 - 45, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 23. www.bseindia.com 24. www.nseindia.com 97