Customer retention management (MC, unit 4)

keeping customers satisfied (basic definition)

More comprehensive research by (Peck et al '99)
80% retention = 5yrs loyalty
90% retention = 10yrs loyalty

6 reasons long-term established customers are more profitable:

1. Regular customers place frequent, consistent orders, therefore usually cost less to serve
2. Satisfied customers may sometimes pay premium price
3. Long-established customers tend to buy more
4. Retaining customers makes it difficult for competitors to enter a market or increase their share
5. Satisfied customers often refer new customers to the supplier at no extra cost (advocates)
6. The cost of acquiring and serving new customers can be substantial. A higher retention rate implies fewer new customers need to be acquired, and they can be acquired more cheaply

In B2C markets

• Focus mainly around loyalty schemes (although having a loyalty card is not always an indication of loyalty as research shows many consumers carry multiple cards)
• Became increasingly popular in late 90s when intensity of competition rose in supermarket wars
• Based on accessing information from customer databases and using direct response media
• Those without schemes use product-based sales promotions
• Examples: Nectar, Clubcard, Barclays & Oyster
  

In B2B markets
5 basic principles to consider:

1. Resource support - ensure range of versatile resources available to support the relationship. Should be cost-effective & efficient - may ultimately lead to alliance if business opportunities are presented.
   
2. Reduction of risk - giving as much insight into the product proposition as possible through exhibitions, trial use and product delivery guarantees.
   
3. Service levels - increasingly important. Consider time, delivery and product quality.
   
4. Technical support - providing added value to clients in industrial markets.
   
5. Technical expertise - providing expertise in design & engineering can be unique USP

Not-for-profit
Focus on 3 client groups; donors, volunteers, clients
Segment target markets exactly (retention characteristics will be very diverse due to diverse reasons for their charitable involvement)
Key issues:

• Analyse acquisition and retention costs
• Manage customer retention and customer acquisition activities concurrently
• Recognise how emphasis needs to be placed on all markets in order to meet objectives
• Get adequate information about each of the customer groups