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Customer Retention Strategies Explained

The document discusses the importance of customer retention for business profitability. It proposes a three stage strategy for customer retention: 1) Measuring customer retention, 2) Identifying causes of customer defection, and 3) Taking corrective action. Retaining existing customers is more beneficial than acquiring new customers as satisfied customers will purchase more, remain loyal longer, and cost less to serve. The document also defines customer retention, outlines retention stages, discusses exit barriers and methods to measure retention such as the profit impact method.

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Prashant
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34 views9 pages

Customer Retention Strategies Explained

The document discusses the importance of customer retention for business profitability. It proposes a three stage strategy for customer retention: 1) Measuring customer retention, 2) Identifying causes of customer defection, and 3) Taking corrective action. Retaining existing customers is more beneficial than acquiring new customers as satisfied customers will purchase more, remain loyal longer, and cost less to serve. The document also defines customer retention, outlines retention stages, discusses exit barriers and methods to measure retention such as the profit impact method.

Uploaded by

Prashant
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

CUSTOMER

RETENTION:IMPORTANCE,STA
GES & MEASUREMENT
NEED
 Impact on Profitability
 Present era need-with higher focus on Customer care
after selling

 Three Stage Strategy Proposed:


 1. Customer Retention Measurement

 Identification of Causes of Defection

 Corrective Action
 Focus has always been on attracting new customers rather than
retaining and improving relationship with existing customers.

 Quick Facts
 A highly satisfied customer would stay loyal for a longer
period
 Buy more when a company introduces new products and
upgrades exisiting products
 Talk favourably about the company

 Pay less attention to competing brands

 Offer product and service ideas to the company

 Cost less to serve than the new customers


DEFINITION
 “The capability of the business firm’s offer to its
customers to purchase or patronage its product
or service over a specified period of time”
STAGES
 Welcome Cycle
 Upselling

 Cross Selling

 Renewal

 Lapsed Customers

 Inactive Customers
EXIT BARRIERS
 One strategy for increasing retention
 Eg: Programmes that reward continuous use

 Product design characteristics that make it difficult to


change suppliers
 Product learning curves that make it costly to switch
suppliers
 Attrition(Defection) occurs when the customer has
decided not to use the product or service any longer and
has communicated the same to the firm.
 Silent Attrition
MEASUREMENT
 Profit Impact Method
 Survival Analysis
PROFIT IMPACT METHOD

 Helps to obtain a quick feel of the retention value of a


customer
 1. Determine the average retention rate of the cohort of
customers
 2. Compute the average expected relationship duration of
a customer with this retantion rate
 3. Determine the average per period margin and the costs
that are associated with retaining these customers
 [Link] the period net profits by the number of
periods the relationship lasts.

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