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Customer Retention - 5 Guidelines [9]

[I behave as if every IBM customer were on the verge of leaving and that I’d do anything to keep them from bolting.  Buck Rodgers]
Given the opportunity, dissatisfied customers will tell 5 to 20 other people about the source of their service or product-related frustrations. However, if you make a prompt effort to resolve the issue, 85% of those customers are likely to remain customers (service recovery must be a key strategy).

Why, then, do most companies spend a majority of their time, energy and resources chasing new business? While it’s important to find new customers to replace lost business, to grow the enterprise and to expand into new markets, a smart company’s main objective should be to keep customers and enhance customer relationships. With the passage of time, it is getting easier, because newer and better CRM systems help you track, sort, and analyze meaningful customer data to make better marketing decisions.
What is your current retention rate? What is the cost of a lost customer to your business? What percentage of your marketing budget is spent on customer retention activities? Do you develop retention programs for key target markets? Is customer win-back a priority?  These are some of the major questions that must be addressed if you want to maximize customer retention and minimize the amount of money you have to spend on customer acquisition. Here's my 5-point customer retention plan.
1. Measure Customer Retention   It is surprising that many companies do not know the annual percentage of customers that leave (defection rate) or stay (retention rate). There are many ways to measure customer retention, including annual and targeted retention rates, weighted rates (accounts for usage differences); segmented indicators (sub-group analysis); share-of-customer; customer lifetime value (CLV); and recency, frequency, and monetary value (RFM analysis). Choosing appropriate measures provides a starting point for assessing a firm’s success in keeping customers. 

2. Keep Customers from Disappearing    You have to analyze the defection problem. Step two is a three-pronged attack. First, identify disloyal customers. Second, understand why they left. There are 6 types of defectors - customers seek: lower prices, higher quality products, better service, alternative technologies, market changes, or "political/social" considerations. An analysis of switching motives is insightful. Third, develop strategies to overcome non-loyal purchase behavior.
3. Establish New Customer Retention Objectives    Customer retention objectives should be based on organizational capabilities (strengths, weaknesses, resources, etc.); customer and competitive analyses; and benchmarking the industry/sector, comparable firms, and high-performing units in your company. Say that your company retains 75%  of its customers. A realistic stretch goal may be to increase client retention by 3%, bringing your company to 78% next year, and to aim to keep 85% of your clients over 4 years.

4. Invest in Targeted Customer Retention Initiatives   The cost (potential lifetime value) of a single lost customer can be substantial. This is magnified when we realize the overall cost of lost business. Consider the impact of a 25% defection rate for a health care center caring for 15,000 patients annually. A revenue loss of about $9.4 million [assuming $2,500 average patient revenue and a 5 percent profit margin] results in a dive of nearly $500,000 on the bottom line. A $100,000 investment in patient retention training and follow-up initiatives can dramatically improve profitability. Targeted retention means that organizations segment customers by relevant dimensions, such as geodemographics, psychographics/behavioral factors, and usage patterns.

5. Evaluate the Success of the Customer Retention Program   Lexus and Subaru have the highest loyalty rates in the automotive industry by consistently providing superior ownership experiences. The final phase in building a strong customer retention plan is to ensure that it is working. Careful scrutiny is required to assess the program’s impact on keeping existing customers and, where possible, upgrading current customer relationships. Gather information to determine if your customer retention rate improved. You may need to revisit benchmarks and probe isolated causes of defection. Strategies and tactics over a short to medium-term span should be closely monitored in order to assess which methods worked best and those with little or no impact on keeping customers.
This blog post is the 9th in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information contact Art Weinstein at, 954-309-0901, 


  1. Although gaining new customers is important, if there is no focus on customer retention the company is going to plateau. For every new customer gained is only replacing the customer that left, the company would just be breaking even not increasing their amount of customers. Additionally, having two life long customers is better than 6 non-loyal, because loyal customers bring CLV. Moreover, many different customer retention measurement are mentioned. Is there one that is superior or more beneficial over the others, or does it depend on the type of business being done?

    1. Melina, Nice job applying your knowledge of Customer Value and Relationship marketing. Yes, there are numerous ways to measure Customer Retention which will depend on numerous factors such as type of business, CRM system in place, expertise of the marketing team, resources, and marketing objectives. AW

  2. I think that this blog post explains perfectly why is it so important to keep customers as well as bringing new customers in. Also, Investing in retention incentives improves exponentially profitability, but it the program should be evaluated to to see the impact on customers.

  3. Too often businesses focus on new customers as opposed to the customers they already have. Rather than fixing a problem which perhaps has the simplest of solutions, they would rather let the customer leave with disgruntled feelings than spend a little bit of time or resources to solve the problem and retain the customer. This is extremely bad for business because negative feedback always has a more powerful voice that lingers on far longer than positive feedback. One avenue I have found particularly annoying is offering special deals to obtain new customers such as great pricing on package bundles for individuals signing up while loyal customers for years end up paying fifty dollars more per month. This then drives the loyal customers away in search of better pricing. This is yet another solution to customer retention in addition the great ideas posted in this blog.

  4. Referring to the type of defectors, are these listed in order of importance. That would help to explain how few people actually stopped dealing with Chic Fil A after their apparent opposition to what the LGBT+ community stands for even the members of said community. The quality of the product made them able to basically overlook their hateful views.

  5. I agree with concept that keeping customers should be one of the main goals of a company. Not only to develop a sense of loyalty from them towards your business, but to make them happy with what your company offers. This will help in the future because those customers will talk about your company in a positive manner. Whereas if you let them leave with a bad experience then negative comments will hurt you. Also, nowadays companies focus so much in bringing new costumers that they don't realize that they are just replacing one costumer with another. This is a huge problem because companies just keep on spending money on advertisements instead of the experience and quality of the products they should focus on in order to keep costumers happy and loyal.

  6. I find it interesting that even though keeping a high customer retention should take top priority, it is often overshadowed by the pursuit of reaching a new consumer base. The only businesses that tend to care about customer retention are the pharmaceutical companies and other buisinesses that require consumer trust, as that often results in follow up appointments.

  7. I agree that it is quite shocking how many businesses don't know how many customers they lose each year, then they wonder why they are losing business too late. Keeping track of how many customers you lose is so crucial to a successful organization especially after making a change in the business to see how your customers are reacting. Another aspect that businesses need to think about is even if they are not losing a crazy amount of consumers, they are still losing the potential business of others that the lost consumers would have brought in. I also feel that the term "disloyal" customer is incorrect because if a consumer chooses to leave your business, that is not them being disloyal, it is you because you did not provide the service or product quality you promised. A business needs to be just as loyal to their customers as they are to them in order to be successful.


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