Quantitative Modeling of Customer Retention in Context of Indian Retail Market

Abstract

The short term strategies like low cost items and frequent sale put heavy burden on retailers’ operating costs resulting in shrinkage of their profits. Thus, Customer retention and Customer lifetime value has become an issue of prime concern in Indian retail market. The purpose of the study is to identify the underlying factors responsible for Customer retention, propose and test a quantitative model of the same for Indian retail market. In order to find variables of Customer retention, the study commences with review of extant literature and appreciative inquiry. It assumed a linear relationship between Customer retention and Customer satisfaction, Customer trust and switching barriers. The underlying factors were derived employing factor analysis. A theoretical framework was devised with pragmatic approach and tested using statistical techniques. The study findings confirm that Customer satisfaction, Customer trust and switching barriers are positively related to the overall Customer retention in retail market. Wherein, Customer satisfaction has a positive effect on Customer trust but unlike traditional belief Customer trust has emerged as more prominent factor than Customer satisfaction. The study reveals prominent role of Customer trust this paradigm shift is helpful for Indian retail sector to devise improved strategies for Customer retention. Though the study findings are in-sync with the findings of prominent studies but the same needs to be further validated for another socio-demographic setup in India. The study ventures into new domain, it tests whether traditional approaches are relevant for Indian retail segment in today.