Sunday, February 19, 2012

How do we have to retain customer? Why do we need to retain customer? As a manager do we have to focus on customer retention ?

Ultimate objective of a firm is to create value and that is acomplished only when the revenue generated by the firm is greater than the cost incurred in generating that revenue.

It is hard to attract a customer, but it is even harder to retain a customer. In today’s competitive world, every company tries to attract customers by low cost hosting price and high quality tactics, but cannot give as promised.

When we are working on any customer project we have to give utmost focus on customer satisfaction and customer value generation. We have to look for continuous business generation. We have look for customer retention. 
Let us look into few points on customer....

  • Customer perceived value = benefits – cost of an offering to the customer.
  • Customer satisfaction depends on the products perceived performance in relation to expectations
•Track satisfaction through complaints, ghost shopping, lost customer analysis and surveys.
–Measure used in surveys is the difference between performance and expectations 
  • Cost of new customer= 5 times cost of retaining customer
  • Profit increases with life of retained customer
  • Customer lifetime value: Present value of future profits expected over the customer’s lifetime purchases
  • Customer retention through value (objective assessment of utility), brand (intangible assessment of brand) and relationship programs (adding financial benefits, social benefits, structural ties).
To attract the right kind of customer, we have to sell the value of our service. Make them think about what they are getting rather than what they are paying. 

Keep loyal customers, once acquired, we need to communicate with them often.

For the communications to work they have to be personalized based on information in the database. Typically, the first step is to create customer segments based on their spending habits and demographics. Successful communications to senior citizens are usually different from those sent to college students, or families with children.

One of the most productive ways of boosting retention is to sell a second product. Such a cross sale not only returns a profit from the second product, it typically increases the retention rate of the first product.

The more our customer knows about our products or services, then the more likely they are to make a good educate them. 

Customer satisfaction to be high, promises and expectations must be met. This involves the organization's ability to understand customer expectations and to do it right the first time (DIRTF). The ability to deal with problems as they arise is a key ingredient to success. Also, the organization needs to consider complaints as a gift! Why?
  • Customers who have an issue dealt with to their satisfaction have a 95% likelihood of repurchasing and telling 5 people about their experience; if they don't complain (as 96% of people do) they will tell at least 10 other people about their problem.
  • The occurrence of problems can cause a 15-to-30-point drop in high-satisfaction responses and in loyalty indicators. This puts revenue at risk to the average tune of 11%.
 If Organization does not have money, budget is tight; there are many ways to do this when on a tight budget. Think about how we communicate - for example, we should:
  • talk to our customers and focus on their needs and wants
  • be specific, honest and clear about what we can offer
  • keep in touch - send email updates or a newsletter
  • get to know our competitors and what they are offering
Think creatively about your selling techniques. For example, you could:
  • encourage people to 'buy now' by offering lower prices for immediate/bulk purchases or bookings
  • use coupons or e-vouchers that are easy and cheap to design and distribute
  • offer gifts, free trials and tasters
  • reward customers with loyalty schemes
 and many more.....

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