CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

A multitude of companies today has already identified the need to create a loyal customer base and acknowledges that maintaining existing customers and extending business with them is significantly less expensive than acquiring newcustomers.

Customer loyalty gained importance when the classic marketing paradigm with its instrumental and transactional orientation proved unsuitable in the context of longer-term business relationships. Instead, the relationship marketing approach, which is specifically concerned with the study of relational ex-changes, gained importance within research, serving as a conceptual foundation for the majority of customer loyalty researchers.

The question of how loyalty develops has been subject to an abundance of research, leading to an expansive body of literature on loyalty determinants. The extant literature exploring different factors and their constituent effects on loyalty, however, reveals a strong focus on consumer goods and industrial equipment settings,while industrial services have received relatively little attention so far. In addition, the majority of articles incorporates merely a few potential determinants and thus fails to draw a comprehensive picture of the mechanisms of customer loyalty formation.

Just like other businesses, logistics service providers (LSPs) are faced with increasing competitive pressure that urges them to concentrate not only on operational business processes, but also on an efficient and effective customer management.

One way to meet this challenge of rapid growth and expansion, according to Langley et al. (2005) is to focus on establishing, maintaining, and developing relationships with customers.

An often proposed driver of logistics outsourcing is the need to develop and maintain competitive advantage, which customers of LSPs intend to achieve through concentrating on core competencies and re-engineering. 

I also discover another important driver is the ongoing globalization, which several authors regard as the most important challenge that companies are facing.

Companies that outsource logistics activities increasingly try to consolidate the number of LSPs they use globally. Therefore, LSPs do not only have to devise sustainable growth strategies, but also have to develop intercultural management competencies, a challenge hardly addressed in LSP management literature.While intercultural management deals with the influence of culture on management styles in different countries, it is also arguable whether a one best way management paradigm is applicable even within national confines. LSPs’ customers are extremely diverse and similarly, relationships between LSPs and their customers can be expected to exhibit momentous differences. As such, it is a crucial management issue for LSPs to design their customer loyalty efforts in a manner that accounts for both cultural context and different relationship characteristics.

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