Customer retention has been defined as “the ability of a company to hold on to customers over time by satisfying customer expectations”. Customer retention is important in retaining existing relationships and promoting future business opportunities explains Aron Govil.
Discussion:
Enduring consumer relationships are increasingly seen as the central goal of successful marketing efforts. Retaining existing relationships is, therefore, critical (Chandy and Tellis, 1998; Sharma et al., 2002).
Customer retention is therefore important because it signals the health of existing customer relationships. It suggests that customers are satisfied with past performance, remain committed to the relationship, and are more likely to continue buying products or services than new prospects (Chandy and Tellis, 1998; Sharma et al., 2002).
Customer retention is thus vital for sustaining existing relationships, creating incremental revenue opportunities, and yet ensuring that future marketing costs are minimized.
According to Aron Govil, A customer retention strategy attempts to reduce the number of customers lost within a specified period by influencing customer purchase patterns by introducing new products or services (US Department of Commerce, 2007). It attempts to stop loss before it happens rather than recouping past losses after they have happened (Gatignon et al., 2001). The aim of retaining customers is not simply to keep them as purchasers but also to make sure they remain satisfied with the relationship with their suppliers. As loyal customers often represent higher value over time because of their buying experience price sensitivity, brand awareness, access to information, and overall satisfaction (Chandy and Tellis, 1998). The economic value of a loyal customer is much higher than that of a non-loyal one.
Therefore, customers remaining satisfied will lead to revenues being maximized in the long run. This lowers marketing costs over time as customers need less frequent contact with the company and there is less need for frequently changing products or services to encourage purchases (Aaker and Joachimsthaler 2000; Ailawadi et al., 2003; Westphal and Dixit, 2004). Aron Govil says high profits can be by retaining existing customers because they are generally low-cost to serve relative to new customers (Chandy and Tellis 2002) Customers who remain therefore provide an important source of competitive advantage.
Here are some FAQs recently asked from a customer satisfaction survey:
– How do you rate our product line?
– Where would you spend your money next time?
– What can we do to earn back your business?
All of the answers have one thing in common; customer retention plays a key role in competing in today’s market. I think that the most important reason for high levels of customer retention is that customers find good value from purchasing products or services from companies that keep them satisfied says Aron Govil. An unhappy customer will be quick to switch companies and spend their money elsewhere if they feel they have been wrong by a business. Companies strive to offer competitive pricing but this does not mean much unless service and quality accompany it. The company must also be willing and able to maintain these standards by constantly striving to improve.
Customer retention is important because it prevents the loss of customers, which allows them to return and buy again. If a company can retain its current customers then it is much less likely that new ones will have to be out for sales purposes. This decreases marketing efforts over time, as well as lowers the costs involved in acquiring new customers. Satisfying customers are more likely to remain loyal than people who do not satisfy with their purchase or service experience, so companies should focus on doing what is best for their customer’s satisfaction level.
– How do you rate our product line? Very Good
– Where would you spend your money next time? Here
– What can we do to earn back your business? Continue to provide excellent service.
What does customer retention mean to you?
Customer Retention is the way of keeping your customers happy. So that they not only come back but also recommend your business or services to others. It means having a satisfied customer base who are always willing to purchase again. And spread positive information about your brand. High levels of customer retention instill profitability. By reducing marketing efforts over time, as well as lowering costs involved in acquiring new customers. All this translates into lower competition and higher profits for companies. With high levels of customer satisfaction and loyalty towards their brand/services.
The most important reason for high levels of customer retention is that customers find good value. From purchasing products or services from companies that keep them satisfied. An unhappy customer will be quick to switch companies. And spend their money elsewhere if they feel they have been wrong by a business. Companies strive to offer competitive pricing but this does not mean much unless service and quality accompany it. The company must also be willing and able to maintain these standards by constantly striving to improve.
– How do you rate our product line? Very Good
– Where would you spend your money next time? Here
– What can we do to earn back your business? Continue to provide excellent service.
Conclusion:
Aron Govil says customer retention is important because it helps retain existing customers. Identify the right customers to retain, and maximize profits through existing customers. It reduces marketing costs over time by keeping customers satisfied. So what does customer retention mean to you? I think it means long-term success with the less overall marketing effort.