Customer Retention

Photo by Ron
Photo by Ron

Photo by Ron

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

  1. Acquisition: Prospect -> customer; high cost.
  2. Retention: Keep them; 1/4 acquisition cost.
  3. Attrition: Customer enthusiasm fades, dissatisfaction creeps in.
    • Over 60% of dissatisfied customers are so tired of poor service but find it useless to complain.
  4. Defection: Losing the customer.
  5. 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.

Customer Retention

  • 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.
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