CUSTOMER

RETENTION
ITS NOT A TOOL ITS AN ART
Dr. Poonam Madan
Customer Retention: Objectives
• Discuss why the concept of customer retention has
become increasingly important.
• Master successful tactics for retaining existing customers.
 
• Describe emerging customer retention programs
Customers Don’t go….Come back!
Reicheld on Customer Retention
• Service companies must retain the best personnel to win
and keep good customers.
• It’s impossible to build a loyal bank of customers without a
loyal employee base
• On average , all corporations lose half of their customers
in 5 years
• A typical company has a customer defection rate of 10-
30% per year
• Raising the customer retention rate by 5% can increase
the value of an average customer (lifetime profits) by 25-
100%
Philips Kotler on Customer Retention
The key to customer retention is customer
satisfaction

Satisfied Customers
a) Stay loyal longer
b) Talk favorably about the organization
c) Pay less attention to the competition Are less price
sensitive
d) Offer service ideas to the organization
e) Cost less to serve than new customers
Customer Retention
• In simple words Customer Retention is
• ……………….to maintain existing
customers
• Customer’s deeply held commitment to using a preferred
product or service consistently in the future, despite
situational influences and marketing efforts having the
potential to cause switching behaviour
Customer Retention- Meaning
• Customer retention is the activity that a service organization
undertakes in order to reduce customer defections.
• Successful customer retention starts with the first contact an
organization has with a customer and continues throughout the entire
lifetime of a relationship.
• 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.
• To retain customers over the long term, organizations must turn them
into partners and proactively seek their input rather than waiting for
and reacting to feedback provided after a problem has occurred.
Customer Retention: Definition
• a strategy whose objective is to keep a company·s
customers and to retain their revenue contribution.
Primarily it aims to prevent customers from going to the
competitor.
• Customer retention is how well the customer STAYS and STAYS
ENGAGED with the organization OR with specific products and
services ‡ Break-down of the definition ‡ STAYS - Customer
being active and user of your product and service- This is
mainly relevant to the products and services, having an existing
contract. This includes banking, telecommunication and
maintenance contracts. ‡ STAYS ENGAGED - Customer who
maintain OR increase the level of relationship
Customer Retention

• Managing customers and retaining them has become one

of the most important dimensions of enterprise strategy in
this age of fiercely competitive environment
Why Customer Retention?
• Do I really need it?
Reasons for Increased Importance of Customer
Retention
• Markets are stagnant
• Increase in competition relative parity
• Rising costs of marketing
• Increase in the cost of advertising loss of “share of voice”
• Changes within the channels of distribution distance
marketing
• Customers have changed more informed increasingly
skeptical
Benefits of Customer Retention
• Retained customers tend to buy other services from same company.
• Retained customers are known to be less price/cost sensitive
• Positive Word of Mouth – Free Marketing 24/7.
• The probability of selling to an existing customer is 60-70%
• Declined migration rates
• (Remember it's more expensive to acquire a new customer than to retain
an old one)

• Profits derived from sales Reducing defections by 5% can boost profits

25% to 85% depending on the industry
• Profits from reduced operation costs It is 3 to 5 times cheaper to keep a
customer than to recruit a new one
• Profits from referrals Positive word-of-mouth advertising generated by
satisfied customers
Emerging Customer Retention Programs
• Frequency Marketing
Primary goal is to encourage existing customers to
purchase more often from the same provider.
• Relationship Marketing
Marketing technique based on developing long-term
relationships with customers
• After marketing
Emphasizes the importance of marketing efforts after the
initial sale has been made
Managing the customer life-cycle: customer retention and development

• 3 stages of the customer lifecycle

• 1. Customer acquisition
• 2. Customer retention aims to keep a high proportion of
current customers by reducing customer defections
• 3. Customer development aims to increase the value of
those retained customers to the company
Contents of a customer retention plan
• 1.Which customers should be targeted for
retention?
• 2.What customer retention objectives
should be set?
• 3.What customer retention strategies will
be used?
• 4.How will the performance of the retention
plan be measured?
Tips for Succeeding at CR
Find out what customers want & what causes them to
stay or leave?
Proactively collect and promote customer feedback.
Analyze customer feedback to gain valuable insights and
ensure the right people hear it.
Take action and Measure the Results
Actively measure and monitor your customers’ loyalty and
engagement
Keep Asking, Listening, Analyzing and Improving