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Unit 6: Customer Retention

A company’s ability to attract and retain new customers, is not only related to its product Notes
or services, but strongly related to the way it services its existing customers and the
reputation it creates within and across the marketplace.
Negative customer retention strategies impose high switching costs on customers,
discouraging defection.

It is a fundamental precept of modern customer management that companies should
understand customers, then acquire and deploy resources to ensure their satisfaction and
retention.
Retaining and developing customers has long been a critical success factor for businesses.
In facing the competitive threats, such as new entrants, pricing pressures, technology
along with the related costs and also including the time lags in procuring, maintaining
and strengthening one’s market, more and more organizations are realizing that the
traditional marketing model is no longer effective.

TQM is aimed at improving quality and reducing costs. The TQM philosophy has been
prevalent in many companies, which find it necessary to involve both suppliers and
customers for implementing TQM at all levels of the value chain.
Building customer loyalty is the basic platform of relationship formation. Customer loyalty
is a company’s ability to retain satisfied customers.

A customer loyalty program is based on a simple premise: as a company develops stronger
relationships with their best customers, those customers will stay with the company
longer and become more profitable.

6.7 Keywords

Customer Delight: The result of delivering a product or service that exceeds customer expectations
is known as customer delight.
Customer Loyalty: A customer’s feeling or attitude of attachment to the company is referred to
as customer loyalty.
Customer Retention: The act of keeping your customers and not losing them to competitors,
usually by performing a valuable service is known as customer retention.
Exit Penalties: This is the charge applied by a financial institution when you cash in an investment
within a set number of years or before a specific maturity date.

Relationship Marketing: Relationship marketing refers to the benefits that ongoing relationships
with key customers can bring to an organization.
Standing Orders: Standing order is an order or rule governing the procedures of a society,
council, or other deliberative body.
Total Cost of Ownership: In addition to the initial cost of a purchase, all long-term and indirect
costs resulting from that purchase is referred to as total cost of ownership.
Zero Defects: Zero defects is a quality philosophy based on the idea that a level of perfect quality,
as in zero defects, is achievable and should be a company-wide goal.

6.8 Review Questions

1. What do you mean by customer retention strategy?
2. What are the different types of customers?

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