Submitted By: Ananya Srivastava Chetan Prakash Neeraj Tripathi Pankaj Tiwaskar Rashmi Sareen Shagun Madan Sunita Sandhu

Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. A company‘s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace. Customer retention is more than giving the customer what they expect, it‘s about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts ‗customer value rather than maximizing profits and shareholder value at the center of business strategy‘. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service. The customer retention process is as follows:

Customer acquisition

Customer retention

Customer loyalty

Brand advocacy

The customer retention process actually begins during acquisition, which creates customer expectations, including perceptions of product value and uniqueness. Initial product usage determines whether these expectations are met. Then other factors, such as ease of exit, ease of purchase, and customer service, come into play. Together these factors affect long-term customer behavior and determine the relationship between seller and buyer. As brands become increasingly commoditized and competition fiercer, keeping and expanding customer relationships depends on the ability to create loyalty and customer retention by delivering a customer experience tailored to changing customer needs and values and consistent with the brand promise.

Providers must retain the ability to react quickly to changing customer needs and market conditions. channels—these and many other factors have grown exponentially more complex in recent years. . develop and manage more than one kind of customer loyalty: conditional. service bundles. many organizations should take a fresh look at their strategies and methods for retaining customers—and if necessary renew their commitment to customer centricity:  Begin at the Beginning—The factors that create and influence customer loyalty begin to take effect even before a customer becomes a customer. Analysis and decisions concerning such factors as offers. Companies need to recognize. Achieving high performance in customer retention means aligning activities throughout the relationship lifecycle—including acquisition—and using econometric and return-on-investment analytics to study and maximize conversion rates and other customer behaviors across channels and throughout the lifecycle. service delivery—all dimensions of the customer experience—should include all the trading partners who contribute to the customer experience. and comparatively little about the factors influencing acquisition and retention.To survive and even thrive in today‘s difficult economic environment. Know What to Look For—Most companies know a lot about their customers. Every Kind of Loyalty—Loyalty is not necessarily an emotional connection to the brand. making customer loyalty more complex to manage as well. True brand evangelists—or even potential evangelists—are at best rare and possibly non-existent. emotional and passive—using more than one kind of strategy.  Manage Complexity—Products.  View the Entire Value Chain—Third-party channels and routes to market also affect customer loyalty—and can destroy unless they are managed effectively. pricing. sales incentives. The relationship a customer develops with the brand during the acquisition stage strongly  Recognize influences customer value and retention.

To him. TYPES OF LOYALTY Different customers have different buying habits. the basis for our desire to understand our clientele.g. in turn. Establishing and managing cross-functional key performance indicators throughout the customer lifecycle helps prevent the loss of current and potential customer value. better salespeople and better retailers overall. He rarely goes to the same place two consecutive times. so long as it costs him INR50 or less and he doesn‘t have to wait. in many ways. Know What to Measure—Companies often measure the wrong things when trying to measure customer profitability and loyalty—loyalty indicators are far more involved than customer satisfaction scores. This relationship – or relative attachment – is. by our relationship with the retailer and its products. a manager of a travel agency who goes anywhere in town to get a haircut. It is. His low . influenced by our general need for the retailer‘s goods or services. a haircut is a haircut regardless of where he receives it. For example. family situation. some customers do not develop loyalty to certain products or services. lifestyle) and second. understanding individuals‘ buying habits helps us be better marketers. Our buying habits as consumers are determined first by our circumstances (e. No Loyalty: For varying reasons. financial status. geographic location. the opinions of our friends and family and by our past experiences with the product or the retailer. The four distinct types of customer loyalty are: 1.

Generally speaking.attachment toward hair services combined with low repeat patronage signifies an absence of loyalty. For example. It is possible to turn inertia loyalty into a higher form of loyalty by actively courting the customer and increasing the positive differentiation he or she perceives about your product or service compared to others available. Dry cleaning from the store down the block and shoe repair from the nearby cobbler are some examples of such a type of loyalty. a business can devise a strategy to combat them. or at least no real dissatisfaction. His wife. they add little to the financial strength of the business. Latent Loyalty: A high relative attitude combined with low repeat purchase signifies latent loyalty. situational effects rather than attitudinal influences determine repeat purchase. This buyer feels some degree of satisfaction with the company. This is the . Premium Loyalty: Premium loyalty. This customer buys out of habit. the most leverageable of the four types. It‘s the ―because we‘ve always used it‖ or ―because it‘s convenient‖ type of purchase. In other words. 2. The challenge is to avoid targeting as many of these people as possible in favor of customers whose loyalty can be developed. The Chinese restaurant might consider adding a few all-American dishes to its menu to pacify reluctant patrons. 4. non attitudinal. If a customer has latent loyalty. a dry cleaner that offers home delivery or extended hours could make its customers aware of this fact as a way to differentiate its service quality from that of competitors. This loyalty is most typical for frequently bought products. businesses should avoid targeting noloyalty buyers because they will never be loyal customers. 3. a person is a big fan of Chinese food and has a favorite Chinese restaurant in his neighborhood. This buyer is ripe for a competitor‘s product that can demonstrate a visible benefit to switching. is less fond of Oriental food. prevails when a high level of attachment and repeat patronage coexist. however. and so despite the person‘s loyalty he patronizes the Chinese restaurant only on occasion and generally they go to restaurants they both enjoy. Inertia Loyalty: A low level of attachment coupled with high repeat purchase produces inertia loyalty. situational factors are the primary reason for buying. By understanding situational factors that contribute to latent loyalty. E g.

These are: 1. These customers become vocal advocates for the product or service and constantly refer others to it. At the highest level of preference. – – – – Systemic mass personalization. product upgrades. and recognize the importance of each customer. different types of customer retention strategies need to be pursued. Management Cultivation. a week or a month. mutual affection Interpersonal interactions expand the link 3. and how often they have used it in a day. incentives – – – Frequent flyer/reader/buyer/visitors. Rewards. Structural-interaction or functional strategies Use system design to solve problems. Discounts. and ties. reinforce purchases. 2. Increased customer loyalty to the organization – – – Connections Personal insight. simulation Artificial intelligence continues the connections . Loyal Swiss Army Knife users are constantly telling friends and neighbors how valuable the knife is. prizes Related products or providers expand the net Relationships concentrating exclusively on incentives tend to be weak. TYPES OF CUSTOMER RETENTION In order to cater to different types of customers. recognition. awards. Social Bonding or emotional strategies Refers to a friendly companionship. people are proud of discovering and using the product and take pleasure in sharing their knowledge with peers and family.preferred type of loyalty for all customers of any business. Financial or discount strategies: Increased customer loyalty to price. how many handy uses it has. trust.

Also note that There are times that if you don‘t give discounts. Companies also offer the assurance of stable prices or lower price increase than those paid by new customers to retain their customers. telecom and internet services in which customers can buy other services provided by the same provider or someone else at a lower cost. Different ways of using discount strategy are:  Offering discounts Giving discounts is one way of applying your customer retention strategy. Frequent flyer programs. whose bonds were getting redeemed. It can also help your company increase its sales on the products and services that you offered. Customers are grateful when they are given discounts on the items that they need. Then they have more room in their budget. . Thus financial bonds are the weakest bonds. if they invested the redemption amount in a fixed deposit is an example of stable prices in a situation where the interest rates were going down. your customers can turn to another store that may provide the same service. Also. FINANCIAL STRATEGIES The financial bonds tie in the customer primarily through financial incentives. That can be important if you want them to buy more of your products. 1. lower prices for volumes or for customers who have been patronizing the firm over time. credit cards. rewards program of hotels and credit cards are examples of financial bonding through volume and frequency rewards. The option of earning a higher interest rate given to ICICI Bond holders. it attracts a lot of price sensitive customers who switch to a cheaper option at the first opportunity. Bundle and cross selling is seen in the case of magazine subscriptions. One of the biggest disadvantages of the financial bonds is that they can be easily imitated.Increased customer loyalty to the experience.

 Buy one get one "Buy one. they are more likely to enjoy shopping at your store. While rarely presented to customers in acronym form. or "Buy one. you can also increase customer loyalty retention. this marketing technique is universally known in the marketing industry by the acronym BOGOF. get one free". ―free samples‖ and Debbi Field‘s is one of such successful entrepreneurs that leveraged the power of free samples.  Freebies Freebies are items that are given to the customers for free. Customers can also benefit from the freebies you give because they get stuff for free!  Charge lower price to customers who buy large supplies This method is especially used in modern retail and in fact has been the best performing tactic of modern retail. How? If you give free stuff to your customers. This can be profitable both for the company and for customers. and it is regarded as one of the most effective forms of special offers for goods. That means you make more money in the long run. Offering discounts for regular customers as well as giving discounts for purchase of a certain value has motivated people to visit the same store over and over again thereby increasing customer retention. Price discounts have the effect of reducing margins. but so do ―better service‖ ideas like ―VIP phone lines‖ and loyalty programs. get one" is a common form of sales promotion. business empires have been built on this single customer retention strategy.  Give your customers free samples Giving your customers free samples is an effective strategy to creating a lasting impression in the mind of your customers. So you can take your discount on the top line . In fact.only cheaper. When you give discounts.

What screws people up is not offering them at the right time to the right customers with the right value of the discount or operational expense. The best – meaning most profitable – way to reward loyal customers is with nondiscount aspirational offers that drive loyalty. Many best customers start out buying in one category and then switch to another. Company have to understand subsidy costs and how to measure them or you get burnt very quickly. let alone measure correctly. The real question is this – can a company make money doing it. Problem is.e. in excess of what it lose on a discount. Company can also take advantage of known LifeCycle purchase transition behaviors. a rebate program. a lead management system. a special room. what‘s the $10 million you spent on a CRM system? Choose your poison. But if you know there is a ―likelihood‖ of the transition and help it along a bit. you can run a simple analysis to discover these patterns. then I made money. Many moderate value customers simply never make the transition.. it costs money to retain customers. most people don‘t know how to *measure* any of this properly. very quickly. One can lose money very. a newsletter. These offers could be anything from simply thanking them for their business (surprising how well this can work if done correctly) to highly specialized services or access to the company. the fact is it costs money to provide good service to best customers in hopes of keeping them. Discounting to best customers can be very dangerous – something most people don‘t know. . If by giving a customer a discount a company increase their overall profitability. you can turn a moderate customer into a best customer with a well-timed category discount. Discounts aren‘t bad by themselves. i. Same with the costs of a loyalty program. etc.or the operational line.

and so are very effective. Today it is rated as one of the best retail chains in India with an extremely efficient supply chain and a host of private labels of its own. when. How has that been possible? The answer is simple. and what of using them. So yes. it will look something like this: Discount strategy breaking the mould. They are the ultimate motivator. When it first started the concept of discount retailing in India. Traditional strategy trajectory Perceived product performance Competitive position of traditional players Price --- . you are using the LifeCycle to manage margins by applying discounts very precisely. you continue to refines segments and discounts until you optimize the entire system for maximum profitability. You just have to know the who. it was perceived to be supplying defective products. Example of this can be found here: The Discount Ladder. the Indian discount retail chain. But they can be very good.Over time. Big Bazaar. discounts can be bad. If we tend to compare graphically the strategy of traditional vs discount focused on its priority: Delivering at the lowest price to the end consumer.

whereas for a discount player the focus is on increasing performance with no increase in price. However. What else? – you already have permission with an existing customer. Surprise your customers every once in a while. be they impulsive for the one off small purchase. Sort mistakes – quickly and without fuss. so why don‘t you develop something exclusive with them. 2. How easy are you to do business with? –when did you last try to contact your own business?   What makes your product or service really different. We should be aware of the potential lifetime value of customers and the use of financial dynamics surrounding our business decisions.The traditional players in the market normally tend to increase perceived performance with an increase in price. That is the major difference in approach in the two strategies. absolutely not to be forgotten is the power of the emotional behaviour. The benefits of the products and services we offer to our customers can be measured in rational terms – they are based on sound reason. Say thank you. or indeed the emotional rationale in the justification of a major purchase behind the often used saying ―I awarded X the contract because I liked the people‖ So when you are re-evaluating your customer:   Increase your engagement – when did you give them a good listening to? What is it that your customers really value? – chances are you do not know. EMOTIONAL STRATEGIES Customer Retention – don’t forget the emotional! When we look at our customer retention strategies it needs to be done rationally. This is particularly true when it comes to our purchasing decisions.    .

. ―but you need to build bridges for when they do. whose Williamsburg. consider offering a scaled-down service. ask them to post a review on sites like Yelp or Angie‘s List.– based customer relationship marketing firm Madigan Pratt & Associates works with hotels. Kate Zabriskie of Business Training Works in Port Tobacco. be sure to act on it. you stand a better chance of continuing the relationship with customers who feel a need to tighten their budgets. Offer loyalty rewards. Madigan Pratt.‖ 3. Expand your offerings. especially if your customers perceive real value in the reward. ―Your customers might not be able to afford your offering right now. Here are four key customer retention strategies to help you keep your customers coming back: 1.‖ Schmidt says. Ask for feedback. consider a more affordable selection. You don‘t need to break the bank to offer rewards like frequent-buyer discounts or a punch card good for free service after 10 visits. author of Building Customer Loyalty from the Inside Out. ―When people feel like they‘re being listened to.The current climate also provides opportunity for businesses that know how and when to act. 2.‖ If a customer has fallen by the wayside. If they respond well. You can offer a mini treatment. Or if you‘re a bakery that does high-end wedding cakes. Once you receive feedback. suggests following up with customers to ask about their experience and invite them back. If you can expand your product or service line. Md.‖ Pratt adds.‖ says Debra Schmidt. That‘s why it‘s essential to be proactive about getting feedback. Va. Most dissatisfied customers will simply walk away from a business rather than make their displeasure known. ―Send them an email with a link to make it easy for them. they‘ll trust you more and be more engaged with your business. This tried-and-true technique remains powerful. . provides this example: ―Say you have a beauty salon.

Pratt cites a hotel client that invited guests to participate in an online photo contest. though. he or she may deal with that business less often or not at all. It takes more than just putting up a company page. with a prize of a coupon for cocktails on the next visit. someone will start an account about you. an auto shop could create an online photo forum for local car enthusiasts. and among the results you‘ll find hundreds of pages created by disgruntled consumers targeting companies large and small. ―If you don‘t get out there. however. and reward a random winner with a tune-up. search the word ―sucks‖ on Facebook. The most lasting way of retaining customers. Effective use of online communications tools is essential for owners of growing businesses. .‖ Indeed. If a consumer has a negative shopping experience with a company. Cusick stresses the importance of showing there‘s a human being behind the interaction: ―You have to have individuals that people can feel like they‘re communicating with. If the firm sincerely apologizes and takes the time to have a polite representative telephone the customer occasionally to see how they can meet his or her Chicago. is through conscientious service that includes following up on any issues or complaints. for example.‖ If you connect with your customers through Twitter.‖ says Bill Cusick. Lead the conversation. the consumer may reconsider and keep dealing with that company despite any past unpleasantness. Activities like these can also help foster a sense of community around a business. an outdoors store could create a forum for sharing camping and wilderness photos. however. CEO of the customer experience consulting firm Vox Inc. 4. use your first name and your company name as your handle. ―The companies that aren‘t out there in social media are missing out on conversations their customers are having about them. For example. That approach can be adapted to just about any business.

such as holding a customer appreciation day or remembering client birthdays. brand equity Company attachment Establish feelings of closeness. Companies who regularly monitor their daily operations as well as make any needed improvements are the most likely to have success in retaining their customers. can help a business find areas of improvement that may help it retain customers. . and respect. as well as a store's products. affection. help in creating consumer loyalty. thoughtful surveys that ask for the customer's opinion can be seen by consumers as a sign that the business does care about the people it serves. it can lead to successful customer retention. Of course. trust. Emotional Bonding    Brand affect.Satisfaction surveys about customer service. Even smaller strategies. Studies show that it's much less expensive for a company to spend money on customer retention than on acquiring new clients. no strategy can make up for a poor product or consistently bad service. When companies really listen to their clients and are willing to make changes to please them. Short.

friendships. Trust      Willingness of customer to rely on the organization. chats. variations. and risk History with the company     Corporate Image Contacts and purchase history Service experience Intergeneration influence Multi-faced loyalty Customer loyalty to:        Brand: promotion Product: production Company: public relations Customers: meeting. and personal interactions are critical elements. Personal contacts. coupons Places: sounds. fair. IT may limit emotional bonds. money. and responsible Choice reduction and habit People have tendency to reduce choice. There can be a switch cost associated with change to the unfamiliar. non-verbal signals. . Reduces uncertainty/risk Honest. reunion Price: discounts. excitement Variety: new options. untried. There may be cost in time. or the new.

these are emotions normally evoked by marketing. If you evoke the emotions in the attention. These are emotions like cared for. Once your customers are with you how do you get them to stay? How do you get them to want to stay because of their emotional bond? Well it is simple. trusted and valued. Finally. by evoking the recommendation cluster of emotions. The emotions here are happy and pleased — emotions demonstrated in the research model to be the real drivers of advocacy and loyalty. These have a proven link to short term increases in revenue. If you evoke the destroying cluster of emotions. There is a destroying cluster of emotions. Marketing evokes these emotions to make people pay attention to and be attracted to a particular company. This only has two emotions. These are the emotions that have a mathematical link with customer loyalty and retaining customers. at the top of the pyramid we have the advocacy cluster of emotions. which if evoked in customers during their experiences with you will cause declines in both business value and customer retention. Now we get into the heart of the matter—the upper half of the pyramid. recommendation and advocacy . by themselves. there are twenty that drive and destroy value. which shows how strong these emotions are. interested and exploratory.There are hundreds of emotions humans feel. They are emotions like stimulated. you will reduce retention. These emotions form into four clusters. retain customers. but will not. We then move into the attention cluster.

Therefore. Interactions that evoke negative feelings. The first in creating strong customer retention is to engage management by asking whether it has deliberately designed a customer experience. you can start to focus on evoking the emotions that will retain customers. Once you know your emotional profile.‖ then the next step is to evaluate the delivery. And while there are a few notable exceptions. Why are you measuring customer satisfaction if satisfaction does not drive value or retention? It is even more surprising when we already know that satisfied customers still leave organizations. In such cases. The emotions evoked by a customer experience act as a chief mediator for customer retention. consistency and overall effectiveness of this customer experience. customer loyalty is impossible. stress or manipulative tactics negate trust. Without the emotional bond necessary to retain customers. If the answer is ―yes. like satisfied and delighted. there are three questions we now need to answer. Where are you today? How are we doing against all these emotions? What is our level of emotional engagement with customers?‖ All organizations have an Emotional Signature. you will increase retention. As Marketing has undertaken their role in attracting customers through the attention cluster. we need to focus on limiting the destroying cluster and building on the attention and advocacy cluster to retain these customers.cluster of emotions. It is also worthy of note that there are a number of emotions that people talk about and employ as key performance indicators. most companies do not intend to negate trust. accuracy of measurements has been the most significant challenge to evaluate the effectiveness customer experience design. Customer emotions are the chief determinant of customer retention. When combined with an organization‘s strong reputation and recognized expertise. Failure to craft a deliberate customer experience puts organizations at risk for doing just that. a level of emotional engagement. . they have no proven link to drive or destroy value or retention. This means that despite their widespread use in business today.

can involve a substantial amount of personal investment and expense. Hedonic experiences while enjoyable. They need you to be an empathetic. like listening to music or going out to dinner. Products designed to delight increase customer loyalty. not merely a person who completes the transaction. Hedonic Consumption identifies hedonic consumption as involving product experiences that stimulate consumers‘ feelings and imaginings. are not necessarily productive or goal directed. Utilitarian benefits are defined as those pertaining to instrumental and functional benefits that are closer to necessities than luxuries. customer loyalty and customer retention. the aim here is to explore the value consumers derive from pursuits of pleasure. for example. Increasingly. and gratifying.The services we offer help organizations in designing deliberate customer experiences that improve customer acquisition. Empathy Why does customer empathy work? These days. trusted advisor who understands their point of view. it is intriguing as to why consumers devote so much to such apparently frivolous and momentary activities. In the context of cell phones. the phone‘s battery life and network coverage are utilitarian benefits. such as leisure travel. Some hedonic pursuits. As such. Traditional consumer research has tended to neglect such experiential aspects of behavior. while others. resulting in limited understanding of the importance of hedonic benefits. more so than simply satisfying them. require relatively little mental or physical effort. Hedonic pleasure Hedonic benefits are defined as those pertaining to aesthetic and experiential benefits that are often labeled as luxuries. the world is so complex customers need you to ease their fears about buying your products and services. whereas aesthetic appeal from its shape and color are hedonic benefits. consumers are engaging in activities simply because they are inherently interesting. pleasurable. .

The basis of deep and meaningful closeness in a relationship is empathy.Key training points: 1. you can build empathy into your business and your team. not Service. this is the foundation of the experience of ―we‖ rather than just ―I‖ or ―you. STRUCTURAL/FUNCTIONAL STRATEGIES FOR CUSTOMER RETENTION This strategy believes in making long term ties with the customers such that he is retained with the brand / product / company for a longer time. and motives. 3. Fundamentally. charging lower prices or turning the service into long term. A common definition of empathy is being able to ‗walk a mile in someone else‘s shoes‘. Spending time understanding the world from our customers perspective can be key to being able to build a long-term relationship with them. closer and more trusting. 4. empathy is a skill. stressed. Show Extreme Interest. Sub strategies might including tying up for a longer time with the customer. 2. like any other. that can be learnt and that we can all get better at. they can feel less anxious. feelings. And much the same. Customers Want Empathy. . Eliminate the Fear of Doing Business With You. They Give You More Money. Perform Like a Talk Show Host. In dictionary terms it is also defined as: Identification with and understanding of another‘s situation. 3. When People Love You. It‘s also key in building empathy into our business.‖ If your customer senses that you really feel how it is for them.

For repeat customers and large accounts. the more rewards and recognition he gets. several pharmaceuticals as well as electronics companies provide support to their distributors who are their internal customers to increase purchase and thereby distribution. customer retention is becoming more and more important and therefore these strategies are increasingly being used by major organizations to retain customers. Stay in Touch: No matter how happy your customers are with your business. An Internet service provider can have varying packages for customer retention. A cable network can offer 6 months plans for retaining the customers. the personal touch is best. Similarly. For example. Similarly benefits can also be provided to customers via referral programs wherein the primary customer is motivated to bring more and more secondary customers to the company. The frequent flier miles concept is used widely in airlines to retain customers for a long time. Thus you have made a structural tie with your primary customer. Thus it has retained a one time customer for a whole year. if the customer flies a certain set of miles he is offered a reward and recognition. Thus the service is by itself turned into long term for the customer and he would like to take as much advantage of the service as he can. Customer retention mainly means that the customer should be ready to repurchase the brand. Make sure you maintain your relationships by staying in touch with your customers. structural ties with the customer can ensure that repurchases happen frequently.With increasing competition in each sector. the more miles he flies. Three prominent ways to make strong structural ties with customers include: Creating Long term contracts: If you take a yearly subscription of a magazine or a newspaper. In such scenarios. In this strategy. You can use newsletters or e-mail lists to stay in touch and to let customers know about your new products or sales. Call and e-mail to check in to find out if your company can provide any services or to find out if past purchases are living up to expectations. a personal dinner is a . they can be courted by more aggressive salesman and special offers. For very high-end clients. it is ensured that you will be a customer for the company for a minimum of 1 year.

However. These do not have to be significant discounts or expensive gifts: Even small gestures make a big impression.nice touch. Charge lower price to customers who buy large supplies: This method is especially used in modern retail and in fact has been the best performing tactic of modern retail. Offering discounts for regular customers as well as giving discounts for purchase of a certain value has motivated people to visit the same store over and over again thereby increasing customer retention. Welcome Complaints Customer complaints might seem like a death sentence that means you have lost their business forever. Loyalty Programs Many businesses offer loyalty and rewards programs to entice customers into repeat business. Customers appreciate the ongoing communication and businesses that are also willing to listen. complaints are really an opportunity to win your customer‘s loyalty by showing them that you are committed to customer service and to providing the best product. . You don‘t have to keep in touch just to try to sell them something. or even a special gift. Other value-added options for your customers include special promotions for repeat customers. These can be discounts or point accrual programs based on the amount purchased or the quantity of items purchased. Always welcome complaints and other feedback as a chance to grow. Complaints also show you how can improve your product or service so that you can win over new customers.