Page 83 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes Perhaps we need to rethink our marketing and sales strategies, after all many experts will tell
you that it’s five times more profitable to spend marketing and advertising dollars to retain
current customers than it is to acquire new customers. In years past the importance of focusing
on customer retention was not as important, stickiness came naturally. We shopped in our
neighbourhood shops and our corner grocery stores. We had a personal connection with our
service providers and the thought of shopping at another store would have never crossed our
minds.
That has all changed now. Our stores our larger, the majority of the sales personnel don’t know
that you even exist. Not to mention that now we have the convenience of the Internet and do a
large portion of our shopping online, where you are known by your email address. As a result,
customer loyalty has disappeared and large corporations and virtual storefronts are unable to
ask the millions of disloyal customers what caused them to stray.
However, there is a solution. Sophisticated technology and database equipment has made it
possible for specialized firms to make attempts at customer retention through database marketing
programs. Establishing a detailed client database will allow these companies to keep track of
personal information and individual preferences of all their customers. This enables them to
provide better service and value. Just like the corner grocery store owner kept information on
200 customers in his head, the large superstore can now keep track of 20,000 customers through
its customer database. With effective implementation of customer databases, companies will be
able to re-establish contact with customers, and will be able to work successfully towards
increasing customer retention, repeat sales, and customer referrals.
To achieve the objectives of the database and customer retention programs, the entire campaign
should be designed and carried out with the customer in mind. The exercise will only be effective
if the customer recognizes and associates some value with being part of your database. If they do
not perceive value in your program all of your communications, coupons, special offers, and
newsletters will be discarded. Your customers have been inundated with meaningless “junk”
mail and email spam, so embed your campaign with value.
A few values-add strategies that you can use include:
1. membership cards and programs that entitle your customers to special offers, discounts,
or preferential treatment;
2. welcome, acknowledgement, sales recognition, thank you statements;
3. after sales satisfaction and complaint inquiries and surveys;

4. event oriented communications in which the customer is genuinely interested; and
5. enhanced and empowered customer, after sales, and technical support.
Everyone wants to retain their existing customers. Few companies, however, are implementing
positive strategies aimed at retention. Most companies are organized for acquisition. Their
advertising and sales programs are designed to find and promote their products and services to
new customers. The companies are organized on a product or brand basis, not on a customer
segment basis. While they all have customer service departments, and most have a customer
service toll free number, they lack an integrated marketing strategy that is directed at retention,
and that defines retention as the measurement of success. In this unit, we will explore the
meaning of a retention strategy, showing how it can be set up, and how lifetime value can be
used to measure it.
You have often heard it said that “It is five times more profitable to spend your marketing
dollars to retain the customers that you have than to use the dollars to beat the bushes for new
customers.” Most people would agree with this statement, even though they have no way of

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