Understanding customer loyalty through system dynamics

Abstract

PurposeThe aim of this paper is to propose a model for understanding a complex management issue – the customer loyalty in a public sports service.Design/methodology/approachCustomer loyalty is discussed through the methodology of system dynamics. The proposed model considers the dynamic, non‐linear, asymmetric, and reciprocal relationships between its elements, and permits the analysis of the evolution of the system under hypothesized conditions.FindingsThe model reproduces historical data of abandonment and consumers' attitude toward the service (ATS). The achieved simulations showed how the future entry of new competitors can severely threaten public service performance. Furthermore, it was also found that the consumers' ATS was not a very good predictor of the consumers' behavior.Research limitations/implicationsSystem dynamics methodology can also be applied to understand the loyalty in the remaining services offered by the public institution. Other services, such as fitness, aerobics, martial arts, can be analyzed by considering their respective different competitive environments.Practical implicationsThe new competitive environment can dramatically affect the number of consumers per year if a public institution does not differentiate its service. In addition, the entry of new competitors will affect the evolution of the system, as the customer satisfaction rates will be modified.Originality/valueUnderstanding customer loyalty is one of the most important concerns for academics and practitioners in the areas of management and marketing. The system dynamics approach is an under‐utilized methodology in the field of sports management, which overcomes simplistic linear approaches. The paper shows how system dynamics can provide attractive insights into the field of sports management.