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
 4.Multiplying the period net profits by the number of
periods the relationship lasts.