Customer loyalty is vital for modern-day businesses for two
main reasons. For one thing, customers are a scarce resource it is far easier to obtain a purchase from an old customer than
from a new one (Rosenberg and Czepiel 1983). Second, customer
loyalty has a positive effect on the profitability and revenues
of the company, as demonstrated empirically by
Edvardsson et al. (2000) and Naidu et al. (1999). Customer
loyalty translates into benefits, such as: a rise in profits from
cross-selling and up-selling, the gaining of new customers by
word of mouth communication, cost reduction and price
insensitivity in the customer (Reichheld 1996).