Final answer:
The statement is true. Customer relationship management strives to build customer loyalty and a strong reputation which in turn fosters repeat business and referrals, proving the worth of CRM efforts.
Step-by-step explanation:
The statement that the proof of a customer relationship management effort is seen in higher levels of customer loyalty in existing customers is true. Customer relationship management, often abbreviated as CRM, is a business strategy to manage a company's interactions with current and potential customers. It involves using data about customers' history with the company to improve business relationships, focusing on customer retention, and ultimately driving sales growth.
One of the main reasons firms adopt customer relationship management strategies is to foster customer loyalty. Businesses understand that customer loyalty goes beyond repeat purchases. A loyal customer not only continues to buy but also acts as an advocate for the company, recommending it to others and thus potentially increasing the customer base. Firms also aim to establish a strong reputation to assure customers of the quality of their products or services. A good reputation reduces buyers' concerns about quality and increases their willingness to pay a premium for the assurance of quality and reliability.
For instance, a well-established grocery store known for its quality and customer service can command higher prices than a temporary stand at a farmer's market. This is because customers trust the established store and believe in the consistency and quality of its products, bolstering their loyalty to the store. Through effective CRM, a firm can maintain a positive relationship with its customers, ensuring repeat business and referrals which are crucial to the store's lasting success.