STUDENTS' CORNER - 214

Customer Retention

While talking about free customer, that is, non-profitable customer,  it is said those customers may be tactfully discouraged in case it is not possible to make them buy more products; that is, the efforts to change a non-profitable customer into a profitable one prove a defeat. Even then, experts point out the company should not offend them in their attempts to discourage them.

Perhaps, you may be aware of the fact that in Customer Relationship Management (CRM) the experts also talk about two other subjects: Partner Relationship Management( PRM) and more significantly Customer Experience Management (CEM).

Without going into details, it may be pointed out that the so-called non-profitable customer may have a vast network of relationship in which his words matter and the network may contain some of your profitable customers in close relationship with him.

 From the commonsense point of view, this idea seems to exaggerate the significance of the non-profitable customer. A business has much more important issues to deal with rather than the issue of non-profitable customer.  Of course, the experts discuss it while probing into customer experience.  Customer experience is quite an elusive topic for discussion. And it is being discussed for years on end.  Let us not spend time on it; but the fact remains customer experience cannot be totally neglected by the company when it is on plan to evolve a strategy for marketing.

Let us wrap up the discussion on customer retention after a brief look into the benefits and extraordinary significance of customer retention.

It is a known fact that acquiring new customers costs the company five times more, it is said, than retaining a customer.  It is said on an average a company loses about 10 percent of its customers annually. Analysts point out that if a company can reduce 5% of defection rate, the company stands to gain about 25 -80% of more profit depending on the nature of the company.  And finally, profit rate to the company from the customers’ purchases is likely to increase through the increased repeat purchases of the customer and also due to company’s continuous efforts towards reduction in operating cost.

 All these facts do heavily underscore the point that a company cannot afford to neglect the integral part of its marketing strategies, customer retention.