You are on page 1of 27

Table of contents

Acknowledgmen.1 Introduction2 Literature Review...3 Problem Statement.8 Research Objectives & Questions..9 Theoretical Framework9 Methodology..10 Data Analysis.10 Limitaton of the study.17 Definitions of the Key Words.17 References..18 Appendix.21 Questionnaire.22

Acknowledgment:
l have taken efforts in this project. However, it would not have been possible without the kind support and I help of many individuals and organizations. I would like to extend my sincere thanks to all of them. I am highly indebted to (customer retention in management) for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. I would like to express my gratitude towards my parents & member of (customer retention in management)for their kind co-operation and encouragement which help me in completion of this project.I would like to express my special gratitude and thanks to industry persons for giving me such attention and time. My thanks and appreciations also go to my colleague in developing the project and people who have willingly helped me out with their abilities.

Customer Retention ManagementProcesses


1: INTRODUCTION:
The sole purpose of a business Peter Drucker (1973) once famously claimed was tocreate a customer. However, keeping the customer has become regarded as equally, ifnot more important, since Dawkins and Reichheld (1990) reported that a 5 per centincrease in customer retention generated an increase in customer net present value ofbetween 25 per cent and 95 per cent across a wide range of business environments. This finding generated a huge amount of interest and activity in academic andbusiness communities, as researchers and consultants attempted to examine and verifythese claims. There
2

was a growing recognition that customers, like products, have alife-cycle that companies can attempt to manage. Customers are acquired, retained andcan be grown in value over time. They climb a value staircase (Gordon, 1998) or valueladder (Christopher et al., 1991) from suspect, prospect and first-time customer, tomajority customer and ultimately to partner or advocate status. A number of marketing scholars have begun to explore the link between the practicesof customer management and shareholder value (Doyle, 2000; Payne et al., 2001; Guptaet al., 2004). In particular, the connections between customer retention and shareholder value have been subject to scrutiny. Gupta et al. (2004), for example, found that a 1 percent increase in customer retention had almost five times more impact on firm value thana 1 per cent change in discount rate or cost of capital. As a result of this research, thebusiness case for marketers to focus on the management of customer retention isbecoming more clearly established. However, the mainstream marketing literature offersvery little guidance on specific managerial practices that are associated with high levelsof customer retention (DeSouza, 1992). This gap is the focus of our research.

2: LITERARTURE REVIEW:
Relationship marketingAlthough a number of authorities have suggested that relationship marketingrepresents a paradigm shift (Christopher et al., 1991; Sheth and Parvatiyar, 1995) froma longer established transactional orientation to customer management, Gronroos(2000, p. 23) noted that the relational perspective on marketing is in fact older than thetransaction perspective in marketing and is probably as old as the history of tradeand commerce. Gronroos (2000, p. 22) concluded that the management of customerrelationships in business is not a new phenomenon although the term relationshipmarketing was only recently introduced to marketers by Berry (1983). For over 20 years there has been growing interest in relational aspects of customermanagement. Conventionally, relationship marketing has been seen to be particularlyrelevant to industrial (Hakanss, 1982; Ford, 1997) and service markets (Berry, 1983;
3

Gronroos, 1990). For example, business-to-business relationships have been found to berelatively stable and enduring, and to exhibit adaptation to the other partys requirements (Ford, 1980). Adaptations act as structural bonds, and serve as investments in arelationship, which may or may not be recovered when a relationship breaks down (Turnbull and Valla, 1986). In many service environments there is face-to-face interactionbetween service providers and customers from which social bonds may develop. Arelational perspective fits well within these contexts, where there is an opportunity forcompanies to promote longer customer tenure, and gain the associated economic benefits. However, research by Nicole Coviello and her colleagues has called into question these conventional beliefs about relationship marketing. Coviello et al. (1997, 2001,2002) have developed an empirically-derived taxonomy of marketing practices thecontemporary marketing practices (CMP) framework which generally supports theidea that relational aspects of marketing are implemented in all types of firms(Coviello et al., 2002, p. 42, emphasis added). Of the five forms of marketing identified intheir research, four database marketing, network marketing interaction marketingand e-marketing have a strong relational component. The fifth form is transactionalmarketing which is more widely practise in manufacturing firms than service firms,and consumer rather than business-to-business firms (Coviello et al., 2002). The CMPresearch program confirms the ubiquity of relational approaches to customermanagement across all commercial environments: business-to-business,business-to-consumer, manufacturers and service producers. Customer retention Customer retention has been shown to be a primary goal in firms that practicerelationship marketing (Gronroos, 1991; Coviello et al., 2002). While the precisemeaning and measurement of customer retention can vary between industries and firms (Aspinall et al., 2001) there appears to be a general consensus that focusing oncustomer retention can yield several economic benefits (Dawkins and Reichheld, 1990; Reichheld, 1996; Buttle, 2004). As customer tenure lengthens, the volumes purchasedgrow and customer referrals increase. Simultaneously, relationship maintenance costsfall as both customer and supplier learn more about each other. Because fewercustomers churn, customer replacement
4

costs fall. Finally, retained customers may payhigher prices than newly acquired customers, and are less likely to receive discountedoffers that are often made to acquire new customers. All of these conditions combine toincrease the net present value of retained customers. Lindgreen et al. (2000, p. 295), forexample, compute that it can be [up to] ten times more expensive to win a customerthan to retain a customer and the cost of bringing a new customer to the same levelof profitability as the lost one is up to 16 times more.. Given the opportunity afforded by the four relationally-oriented forms of marketingidentified by the CMP research team, and the economic arguments in favor of customerretention, we became interested in examining how companies actually managed theircustomer retention processes. A number of organizational processes can be associatedwith customer retention, including the following: customer satisfaction measurementprocess, customer retention planning process, quality assurance process, win-backprocesses and the complaints-handling process. Our research, however, focuses on twoof these processes: the customer retention planning process and thecomplaints-handling process, for reasons explained below. We investigate which ofthese two processes is more strongly associated with excellent customer retentionoutcomes. Customer-retention planning process. The notion that companies should engage inplanning if they want to achieve desired business outcomes is deeply embedded inmodernist management literature. Kotler (2003), forexample write that successful companies. . . practice the art of market-oriented strategic planning, with the clearimplication that failure can be traced to artlessness in planning disciplines. Mostmarketing management texts contain material on the development aimplementation of marketing plans. Although critics of the strategic planning schoolsuch as Mintzberg (2000) promote a more fluid and emergent approach to strategy, Miller and Cardinals (1994) review of management research finds that formal planningprocesses involving executive responsibility and budgeting are generallyassociated with better business performance.There has been very little specific research into the development and content ofcustomer retention plans, per se (DeSouza, 1992). However, there have been somereports indicative of the relative weight attached to customer retention budgets. According to Weinstein (2002, p. 259) most companies spend a majority of their time,energy and resources chasing new business. He suggests that 80% or more ofmarketing budgets are
5

often earmarked for getting new business (Weinstein, 2002, p. 260) Thisis in line with Payne and Frown (1999) finding that only 23 per cent ofmarketing budgets in UK organizations is spent on customer retention. Aspinall et al.(2001), in contrast, found that 54 per cent of companies reported that customerretention was more important than customer acquisition. Our research tests three hypotheses grounded on these modernist principles ofmanagement. We specify these later, but broadly we expect companies that have adocumented customer retention plan, or a dedicated budget or an executive with Customer-retention planning process. The notion that companies should engage inplanning if they want to achieve desired business outcomes is deeply embedded inmodernist management literature. Kotler (2003), for example, writes thatsuccessfulcompanies. . . practice the art of market-oriented strategic planning, with the clearimplication that failure can be traced to artlessness in planning disciplines. Mostmarketing management texts contain material on the development andimplementation of marketing plans. Although critics of the strategic planning schoolsuch as Mintzberg (2000) promote a more fluid and emergent approach to strategy, Miller and Cardinals (1994) review of management research finds that formal planningprocesses involving executive responsibility and budgeting are generallyassociated with better business performance. There has been very little specific research into the development and content ofcustomer retention plans, per se (DeSouza, 1992). However, there have been somereports indicative of the relative weight attached to customer retention budgets. According to Weinstein (2002, p. 259) most companies spend a majority of their time,energy and resources chasing new business. He suggests that 80% or more ofmarketing budgets are often earmarked for getting new business (Weinstein, 2002, p. 260). This is in line with Payne and Frows (1999) finding that only 23 per cent ofmarketing budgets in UK organizations is spent on customer retention. Aspinall et al.2001), in contrast, found that 54 per cent of companies reported that customerretention was more important than customer acquisitionOur research tests three hypotheses grounded on these modernist principles ofmanagement. We specify these later, but broadly we expect companies that have adocumented customer retention plan, or a dedicated budget or an executive with specific responsibility for customer retention
6

management to generate better customerretention outcomes than companies that have none of these characteristics. Thus, weexamine the impact of fundamental planning structures and processes on customerretention outcomes. Customer retention metrics and segments. Despite the scarcity of research intocustomer retention planning, investigators and commentators have begun to reporton a number of related questions, such as how to define and measure customerretention, how to segment customers for customer retention efforts, and whatstrategies to employ to recover at-risk or lost customers. We review some of thatresearch now, and later we report some of our own descriptive data connected to thisbody of knowledge.Aspinall et al. (2001) investigated the issue of definition and measurement ofcustomer retention. They found that customer retention was particularly an issue inlarger companies, and those serving business-to-business markets, but that relativelyfew respondents [whatever their served markets] claimed to have an agreed definitionof customer retention (Aspinall et al., 2001, p. 83). Nonetheless, more than half therespondents in their survey stated that they measured customer retention. Clearly theabsence of measurable indicators makes it harder to gauge the impact of strategyimplementation. Buttle (2004) found that companies can employ one or more of severaltypes of retention-related KPIs raw, salesadjusted, or profit-adjusted customerretention metrics. Companies that adopt raw customer retention metrics focus on theretention of a given percentage or number of customers, regardless of value. Companies that use sales- or profit-adjusted retention metrics will focus their efforts oncustomers that generate higher levels of sales or profit. Coyles and Gorkeys (2002)research also notes the significance of focusing on the retention of profitable customers,than all customers. They suggest that it may be more important for companiesto focus on managing the overall downward migration of customer spending thancustomer retention in its own right. They note that many more customers change theirbehavior than defect, so the former typically account for larger changes in value(Coyles and Gorkey, 2002, p. 80). They report the case of one bank that lost 3 per cent ofits total balances when 5 per cent of checking account customers defected in a year, butlost 24 per cent of its total balances when 35 per cent of customers reduced the amountsdeposited in their checking accounts. The need to manage migration rather thandefection is particularly true when customers engage in portfolio purchasing bytransacting with more than one supplier.
7

Another question that researchers have attempted to answer concerns the focus of customer retention efforts (Koch, 1998; Ganesh et al., 2000). Shouldretention of every customer be the goal, or should retention efforts be focused onsubsets or even individuals? A report by PricewaterhouseCoopers (2002) observes thatpoor management of customer churn is a major value destroyer and that the key toprevention is to predict and avert attrition of the right customers. The rightcustomers are those that contribute most significantly to the achievement of thecompanys objectives. The implication of there being right and wrong customers toretain is that companies are advised to segment their customer base for retentionefforts in much the same way that they would segment the market for acquisition efforts (Weinstein, 2002). Evans (2002) suggests that the right customers are those withthe highest residual lifetime valu

Problem statement:
Statistics released by the Life Offices Association (2007), indicated that in the second half of 2006, surrenders of policies increased. Lapsed premiums also increased by 18% compared to the previous half-year, and by 31%compared to the corresponding period in 2005. The purpose of CRM is to increase customer satisfaction, improve customer perception of service quality and increase customer loyalty (Baran et al., 2008: 397). CRM applied correctly leads to customer loyalty, and loyal customers are usually more profitable (Grnroos, 2003: To retain existing customers in the current economic climate where customers acancelling their short-term insurance policies because of the unsure economic future, short-term insurance organisations will have to understand how two-way communication and conflict handling through the application of CRM can contribute to customer loyalty. Larger portions of long-term customers than short-term customers exhibit high profitability, therefore the theory of an overall positive connection between customer loyalty and profitability cannot be rejected (Leverin and Liljander, 2006: 235). Short-term insurance organisations will not be able to survive for much longer in the competitive short-term insuranceindustry, battling the global recession, if they do not understand the importance of these two variables influencing their CRM and how they can improvecustomer loyalty. The article will focus on the importance for short-term insurance organisations, to better understand the need for CRM and how that will lead tocustomer loyalty.

3: RESEARCH OBJECTIVE
1)There was a growing recognition that customers, like products, have alife-cycle that companies can attempt to manage. Customers are acquired, retained andcan be grown in value over time. 2)Thebusiness case for marketers to focus on the management of customer retention isbecoming more clearly established

Theoratical Frame Work


Independent variable Incentive Packages Benifits

Dependent variable
CUSTOMER RETENTION

METHODOLOGY
Our methodology involved gathering data by mail-administered survey of a stratifiedrandom sample of companies. Details of the sampling strategy, data collectionmethods, instrument development and analysis follow.

Data Analysis:
Sampling
Since all companies in all sectors have been found to implement relational aspects ofmarketing (Coviello et al., 2002), our population of interest was the full range ofprimary, secondary (manufacturing) and tertiary (service) sectors of industry. Astratified random sample of 732 companies was selected from the Dun and Bradstreetdatabase of the top 1,000 companies in Australia. The population was stratified intothree annual turnover groups: $50 to $99 million, $100 to $500 million, and above $500million.

Data collection methods:


A mail questionnaire was developed. Following an initial telephonesolicitation to participate, the instrument was mailed to the sample. Follow-up calls andreminders were issued after one month. The invitation to participate was addressed tothe person in charge of customer relations, customized by name where this was known. We encouraged response by offering a summary report of the study. This has nowbeen distributed to respondents.

Instrument
Items in the instrument were developed from the literature review, andpiloted and refined over several versions of the questionnaire. The majority of thequestions measuring the independent
10

variables were nominal in nature, and requiredyes, no, or do not know responses. These questions investigated the presence orabsence of a range of customer retention management practices, objectives and tactics. As is clear in the hypotheses, we wanted to identify management practicesassociated with excelling at customer retention. In the questionnaire, this dependentvariable, excellence at customer retention, was operationalized thus: In the last 12company metyour expectations? This variable was measured on a seven-point metric scale,anchored at three points. The point 1 anchor read greatly under-performedexpectations, the mi point (point 4) read met expectations and the point 7 anchorwasgreatly exceeded expectations. When a company reported that their expectationshad been exceeded, this was recoded as excellent at customerretention. Even though the dependent variable was measured on an interval scale (17),non-parametric procedures were used throughout because all the independent variables were measured on nominal scales (yes, no, do notknow);

Table no 1:
Reliability Statistics Cronbach's Alpha .408 12 N of Items

Table no 2:
ANOVA Model Regression 1 Residual Total Sum of Squares 24.103 34.880 58.983 Df 7 52 59
a

Mean Square 3.443 .671

F 5.133

Sig. .000
b

11

a. Dependent Variable: Overall retention in getting the job done. b. Predictors: (Constant), Your age ( if you want to mention), In your opinion,
how have Retention satisfaction ratings changed at your organization in the past year?, What sector of do you believe needs the most improvement in retention and satisfaction satisfaction?, Going beyond what is expected of me to make employees happy, How often does your organization take steps for retention?, In your opinion, how important is retention at your organization?, The overall quality of service that employees provide is:

Table no 3:
Correlations Organization Pearson Correlation organiztion Sig. (2-tailed) N Pearson Correlation retention Sig. (2-tailed) N 64 .298
*

retention .298
*

.017 64 1

.017 64 64

*. Correlation is significant at the 0.05 level (2-tailed).

12

Table no 4:
Item Statistics Mean In your opinion, how have Retention satisfaction ratings changed at your organization in the past year? Has your organization initiated programs to improve Retention satisfaction within the past year? we meet the target rtentionqoutas and goals. Overall retention in getting the job done Going beyond what is expected of me to make employees happy The overall quality of service that employees provide is: In your opinion, how important is retention at your organization? Does your organization have managers/staff dedicated to patientretention matters? How often does your organization take steps for retention? What sector of do you 2.6667 4.44509 48 2.0417 .79783 48 2.4167 1.02798 48 2.7917 1.23699 48 2.5208 1.12967 48 2.4167 1.04847 48 2.0417 .87418 48 3.3125 1.07498 48 Std. Deviation N

1.8750

.98121

48

believe needs the most improvement in retention and satisfaction satisfaction? 2.3750 1.02366 48

13

What is the most compelling reason for your organization to improve retention? In your opinion, has retention of employees been shown to have a direct effect on your organization's bottom line? 1.7708 .75059 48 2.6042 1.10588 48

Table no 4:

Model Summary Model R R Square Adjusted R Square 1 .639


a

Std. Error of the Estimate

Durbin-Watson

.409

.329

.81900

1.869

a. Predictors: (Constant), Your age ( if you want to mention), In your opinion, how have Retention satisfaction ratings changed at your organization in the past year?, What sector of do you believe needs the most improvement in retention and satisfaction satisfaction?, Going beyond what is expected of me to make employees happy, How often does your organization take steps for retention?, In your opinion, how important is retention at your organization?, The overall quality of service that employees provide is:

14

b. Dependent Variable: Overall retention in getting the job done

Table no 5
Statistics Gender: Your age ( if you want to mention) Valid N Missing Mean Median Mode 0 1.6250 2.0000 2.00 0 2.2917 2.0000 1.00 0 2.3750 2.0000 1.00 48 48 Your Pay if you want mention 48

Table no 6
Gender: Frequency Percent Valid Percent Cumulative Percent male Valid female Total 18 30 48 37.5 62.5 100.0 37.5 62.5 100.0 37.5 100.0

Your age ( if you want to mention) Frequency Percent Valid Percent Cumulative Percent 20year 25year Valid 30year more than 40year Total 16 10 14 8 48 33.3 20.8 29.2 16.7 100.0 33.3 20.8 29.2 16.7 100.0 33.3 54.2 83.3 100.0

15

Your Pay if you want mention Frequency Percent Valid Percent Cumulative Percent Rs20000 more than Rs30000 Valid Rs35000 Rs50000 Total 15 10 13 10 48 31.3 20.8 27.1 20.8 100.0 31.3 20.8 27.1 20.8 100.0 31.3 52.1 79.2 100.0

16

Limitation of the study:


There are two notable limitations to this study. First, it was conducted in a singlegeographic region, and the results therefore may not transfer into a differentgeography. Second, it employs self-reports from executives charged with responsibilitymanaging customer relationships.Their self-reports have not been objectivelycorroborated. Given the significance that this research attaches to documented customercomplaints handling processes, there is potential for future research into theeffectiveness of ISO 10002. with ISO 10002) achieve better customer retention outcomes than companies that either

Definition of key word:


Customer retention, Complaints

17

References:

.Aspinall, E., Nancarrow, C. and Stone, M. (2001), The meaning and measurement of customerretention, Journal of Targeting, Measurement and Analysis for Marketing, Vol. 10 No. 1,

pp. 79-87. Berry, L.L. (1983), Relationship marketing, in Berry, L.L., Shostack, G.L. and Upah, G.D.(Eds), Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, IL, pp. 25-8. Brown, S.W., Cowles, D.L. and Tuten, T.L. (1996), Service recovery: its value and limitations as aRetail strategy, International Journal of Service Industry Management, Vol. 7 No. 5, pp. 32-46.

18

Buttle, F. (2004), Customer Relationship Management: Concepts and Tools, Elsevier, Oxford. Christopher, M., Payne, A. and Ballantyne, D. (1991), Relationship Marketing, Butterworth-Heinemann, Oxford. Coviello, N., Brodie, R.J. and Munro, H. (1997), Understanding contemporary marketing: development of a classification scheme, Journal of Marketing Management, Vol. 13 No. 6, pp. 501-22. Coviello, N., Milley, R. and Marcolin, B. (2001), Understanding ITenabled interactivity in contemporary marketing, Journal of Interactive Marketing, Vol. 15 No. 4, pp. 8-33. Coviello, N.E., Brodie, R.J., Danaher, P.J. and Johnston, W.J. (2002), How firms relate to their markets: an empirical examination of contemporary marketing practices, Journal of Marketing, Vol. 66 No. 3, pp. 33-46.

19

Coyles, S. and Gorkey, T.C. (2002), Customer retention is not enough, McKinsey Quarterly, No. 2, pp. 80-9. Dawkins, P.M. and Reichheld, F.F. (1990), Customer retention as a competitive weapon, Directors and Board, Vol. 14, Summer, pp. 42-7. DeSouza, G. (1992), Designing a customer retention plan, Journal of Business Strategy, Vol. 13 No. 2, pp. 24-8. Dowling, G. and Uncles, M. (1997), Do customer loyalty programs really work?, Sloan Management Review, Vol. 38 No. 4, pp. 71-82.

20

Appendix:

clients, on a good volume-client-product combination, and a good distribution approach

-sell

ciency and the effectiveness of the sales -channel approach

to a 'single view' and profitable client identification oach and thus better client segmentation How, if at all, does the CRM program influence the different channels and products that are at the client's disposal?

ication of the eventual incompatibility between the channels How, if at all, does the CRM program influence the technological and organizational infrastructure of the bank business?

global group will choice the final software for the CRM data support

21

Questionnaire Customer Retention In Management


Employees Retention in an organization With due respect I am
SaqibRazzaq student of (Mba) BZU campussahiwal I want to ask you some question and assure you that it might not cause any harm to your worth I shall be thankful to you
1 Your name please write down

Gender: Female Male

Your age ( if you want to mention)


a)20 years b)25 years c)30 year or above d)more than 40 years

22

Your Pay if you want mention


a) Rs 20000 b) More than Rs 30000 c) Rs 35000

d) Above Rs 40000

Productive time spent working on the tasks assigned to me. Almost all of the time Most of the time Half of the time 1/4th of the time less than 1/4th of the time

In your opinion, how have Retention satisfaction ratings changed at your organization in the past year? Improved considerably Improved somewhat Has remained about the same Has declined somewhat Has declined considerably Don't know

Has your organization initiated programs to improve Retention satisfaction within the past year?

23

Yes No Don't know

we meet the targetrtentionqoutas and goals.

Strongly Disagree Somewhat Disagree Neutral Somewhat Agree Strongly Agree N/A

Overall retention in getting the job done

Excellent Good Average Below average Poor N/A

24

Going beyond what is expected of me to make employees happy

Yes, I always do so Yes, occasionally I work as much as is expected of me I work less than what is expected of me

I respond quickly and courteously to fulfill organization' needs

Strongly Disagree Somewhat Disagree Neutral Somewhat Agree Strongly Agree N/A

The overall quality of service that employees provide is:

Excellent Good Average Below average Poor

25

In your opinion, how important is retention at your organization? It's a high priority It's a mid-level priority It's a low priority Don't know

Does your organization have managers/staff dedicated to patient-retention matters? Yes No Don't know

How often does your organization take steps for retention? Daily basis for each patient Monthly or more often Quarterly Semiannually Yearly or less often We don't

What sector of do you believe needs the most improvement in retentionand satisfaction satisfaction? Hospitals Physicians Managed-care plans Insurers Nursing homes

26

What is the most compelling reason for your organization to improve retention? Fear of losing patients to competitors Fear of losing employer contracts Fear of increase regulation Fear of damage to organization's reputation Other

In your opinion, has retention of employees been shown to have a direct effect on your organization's bottom line? Yes No Don't know

27

You might also like