| Definition |
Customer Retention grows a business revenues by extending the average length of customer relationships. The central premise of retention management is that even small shifts in retention rates can yield significant changes in revenue and income. Quantifiable financial results are linked to changes in rates of retention. Customer Retention is improved by methodically eliminating drivers of defection and reinforcing drivers of loyalty. Retaining the employees who possess the knowledge, skills, and critical relationships can be a key driver for retaining customers. |
| Implementation |
Execution of retention management requires diagnosing, prioritising, and then addressing the drivers of defection and loyalty. This is generally accomplished using extensive customer (and employee) research regarding the root causes for recent purchases or defections. To address the areas where change is required, companies often must reorient their information systems, performance incentives, training systems, hiring policies, complaint handling processes, organisational structures and cultures.
Implementing Customer Retention strategies drives executives to address eight key questions with their management teams:
- What are the best ways to measure the loyalty of customers in each line of business?
- What are the business current retention rates for customers?
- How do current retention rates compare to those of previous years?
- How do current retention rates compare to those of the competition?
- What would happen to revenue and profits if retention rates could be increased by five percent?
- What root causes are driving the most customer defections?
- What are the right retention rate targets?
- How should retention targets be built into the companys incentive, planning and budgeting systems?
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| Purpose |
Customer Retention is used by firms that want to understand and improve:
- The measurement of customer satisfaction - the success they have at satisfying and retaining customers
- The profit impact of increased retention
- The root causes of customer defections
- The methods of addressing root cause defection drivers by realigning business processes
Firms can use this knowledge to create a system which attracts and keeps the most profitable and valued customers. |
