Answer :
High cost occurs with high new customer acquisition and low customer loyalty as companies expend resources without retaining customers or recouping investments. Efforts like transition costs and loyalty programs are used to maintain loyalty, while customer-intimate companies invest heavily in customized experiences despite initial expenses. Hence, option a) High new customer acquisition and low customer loyalty. is the correct answer.
High cost occurs when a company experiences both high new customer acquisition costs and low customer loyalty. Companies in such a scenario tend to spend more on attracting new customers due to high competition or market entry costs but fail to retain them, which does not allow recovery of those upfront investments through repeat purchases.
Additionally, when customers are highly suspicious of cheating or deception, they may avoid paying premium prices for perceived high-quality offerings, leading to a market where only low quality prevails, known as the 'lemons problem'.
The costs of transition and establishment of loyalty cards are examples of efforts made by firms to maintain customer retention, which can be expensive but are essential to preventing customers from switching to competitors. On the other hand, customer-intimate companies make heavy investments in tailoring products and services to fit customers' needs, aiming to achieve high customer loyalty though it entails high initial costs. Hence, option a) High new customer acquisition and low customer loyalty. is the correct answer.
