Retaining customers can be a viable strategy as some estimates value existing customers 5xs more than new customers. The cost of retaining a customer is 1/4th that of obtaining a new one.
Simmerman, 1993 showed companies will boost profits 100% by retaining existing customers.
Customer Life Cycle
- Acquisition: Prospect -> customer; high cost.
- Retention: Keep them; 1/4 acquisition cost.
- Attrition: Customer enthusiasm fades, dissatisfaction creeps in.
- Over 60% of dissatisfied customers are so tired of poor service but find it useless to complain.
- Defection: Losing the customer.
- Reacquisition: regain the customer at a higher cost.
Types of Customers
- Apostle: net favorable, happy; will help troubleshoot and are your best source of new product ideas.
- Unhappy customer: a customer you are in danger of losing due to poor service.
- Defector: a customer who has been lost.
- Terrorist: actively and broadly spread bad messages.
- A customer-driven company must meet the needs of the customer.
- Must understand the customer via product analysis or service performance.
- Cost reductions may be part of the equation, but is not always necessary.