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.
