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Introduction

To succeed in business, it is imperative that firms identify the threats and opportunities that exist, and meet these with appropriate competitive methods (Olsen, 1996). Daly (2001) asserts that in the on-line arena to date, competitive advantage has been derived mainly through aggressive customer acquisition strategies with little attention placed on building long and loyal customer relationships. Mackey (2001) adds that “an appreciation of customer loyalty will represent the next frontier in e-business” (p.1). The impact of this new outlook will present new challenges for managers, as they manage the emerging technologies to draw closer to their customers. Successful firms will be those that can identify what drives their customers to value their service, and ultimately, to become loyal in the face of growing competition.

However, knowing what needs to be done and knowing how best to go about achieving it are very different things. Recent research has revealed that on-line loyalty is very low. A study by Digital Idea (Mackey, 2001) indicated that less than 15% of on-line consumers exhibit any real commitment to a nominated e-business. Another study by Georgidis, Singer, Harding and Lane (2000) has also found that while firms are managing to attract eyeballs and turn the occasional on-line transaction, they have a hard time getting people to come back. They add that this situation is further complicated by the finding that most firms spend more on customer acquisition than they are likely to make in profit during the buying life of a typical customer.


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