Essay on Customer Retention

8/20/2019 Essay on Customer Retention

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U NIVERSITY OF CANBERRA

D i v i s i o n o f C o m m u n i c a t i o n a n d

E d u c a t i o n S c h o o l o f P o f ! s s i o n a lC o m m u n i c a t i o n

I NTE"RATEDCO##UNICATION

CA#PAI"NS #

E s s a $ o n

Customer Retention“Many recent books on Marketing Communication stress

the importance of customer retention. Explain why this is

important and the strategies available to achieve this goal”

Lecturer Rav!!na Sin%h !resented by &aivich &aisintu ID'((')*+"ubmission date ,)st Octo-! ,((.


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Customer Retention/ its im0otanc! 1 stat!%i!s


#$t boils down to this %hen you build a plant& it starts depreciating the day it opens. 'he

well(served customer& on the other hand& is an appreciating asset. Every small act on her

or his behalf ups the odds for repeat business& add(on business and priceless word(of(

mouth referral.) Tom Peters

#'oday)s smart companies do not see themselves as selling products* they see themselves

as creating profitable customers. 'hey not only want to create customers. 'hey want to

“own” them for life.) Philip Kotler

“M+,-& one of the world)s largest credit card companies& found that an increase by /

in retention rate contributed to 01/ increase in company)s retained earnings within five

years2.”

R!%adl!ss of !conomic condition/ lo$al custom!s a! al2a$s of vital im0otanc! to th!

com0ani!s/ !v!n non30ofit o%ani4ations 2ould find it in!vita-l! to !tain th!i -and

-!li!v!s and conti-utos to thiv! and succ!ss in toda$5s fast30ac!d ma6!t

!nvionm!nt/ 2h!! consum!s a! -!comin% had! to 0l!as!/ th!$ a! smat!/ mo!

d!mandin%/ l!ss fo%ivin%/ and th!$ a! a00oach!d -$ man$ com0!titos 0ovidin%

!7uival!nt o -!tt! off!in%s,/ as a !sult/ th! chall!n%! is not 0oducin% satisfi!d

custom!s/ -ut d!li%ht!d and lo$al custom!s8

) 9o$alt$: Put a N!2 9!ns of 9o$alt$ to #a%nif$ Pofita-ilit$ ;Thai Edition/ Octo-! ,((=/ E?0!N!t, #a6!tin% #ana%!m!nt/ El!v!nth Edition/ &otl! P8/ Pa%! >'/ ,(('/ P!ntic! @all

,


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So what is customer retention #an$ Int!%at!d #a6!tin% Communications -oo6s

focus u0on Custom!s and Custom! R!t!ntion as it is th! c!nt! of a Custom!3C!ntic

int!%at!d o%ani4ation/ 2hich is on! of th! !i%ht %uidin% 0inci0l!s of I#C'/

su0isin%l$ v!$ f!2 of th!m hav! d!fin!d Custom! R!t!ntion/ d!s0it! th! 2od

its!lf -!in% so %!n!ic and could s!!m !as$ to und!stand/ ( of th! custom! !t!ntion

0o%am fail!d=8 Th! d!finitions of custom! !t!ntion a! as follo2:3

3“Customer retention is the marketing goal of keeping your customers from

going to the competition”

Adobe Systems Incorporated

3“'he philosophy of treating customers so well that they lack any reason to go

anywhere else. 'he philosophy of building your business on the basis of repeat

sales& past customers and word(of(mouth recommendations”

H. Gerard Gaudet

-“Customer 3etention is a tactically driven approach based on customer

(behavior. $t is the core activity going on behind the scences in 3elationship

Marketing& Loyalty Marketing& 4atabase Marketing& !ermission Marketing and

so forth”

Anonymous

' I#C Th! N!?t "!n!ation/ Schult4 D8 1 Schult4 @8/ Pa%! .(/ ,(('/ #c"a2 @ill= E?0!i!ntial R!lationshi0 #ana%!m!nt/ D!G6ian6ai6ul C8/ &ana2un N8 1 Sa!tun% T8/ Pa%! )>/ ,((,/Amain Pintin% 1 Pu-lishin%

'


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Th! fist and s!cond d!finition/ -$ Ado-! S$st!ms Inco0oat!d and @8 "!ad "aud!nt

!s0!ctiv!l$/ do not thoou%hl$ cov! 2hat custom! !t!ntion !all$ do!s/ it is not onl$ to

0!v!nt custom!s fom tunin% to com0!titos

Arument! Customers are not “only” leaving to competitors or anywhere else, they

have other reasons to go

Th!! a! si? t$0!s of custom!s 2ho l!av!/ Price" Product" Ser#ice de$ectors a! thos!

l!avin% to com0!titos/ 2h!!as %ar&et 'e$ectors/ 2ho a! lost -ut not to an$ oth!

-usin!ss as th!$ ma$ %o out of -usin!ss o to anoth! ma6!t/ Technoloical 'e$ectors/

2ho s2itch to 0oducts off!!d -$ com0ani!s outsid! th! indust$ and/ (rani)ational

'e$ectors/ 2ho s2itch du! to int!nal o !?t!nal 0olitics./ a! l!avin% fo oth! !asons8

B!sid!s/ most d!finitions oft!n stat! that custom! !t!ntion is to 6!!0 custom!s

!m0hasis on 0ast sal!s o !0!at 0uchas!/ 2hich could not -! tu! ho2!v!/ such

actions can onl$ -! im0l!m!nt!d aft! a sal!/ in this !v! chan%in% ma6!t

!nvionm!nt/ 2ith so fi!c! com0!tition li6! n!v! -!fo!/ focusin% onl$ on 0ost3

0uchas! !t!ntion mi%ht no lon%! -! !nou%h8

Proposition! Customer Retention should start even before the business acquires a

customer

. Custom! !t!ntion: a 0ot!ntiall$ 0ot!nt ma6!tin% mana%!m!nt stat!%$/ Ahmad/ Ri4al/ Buttl!/ Fancis/Hounal of Stat!%ic #a6!tin%/ */ ,(()

=


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Custom! !t!ntion should stat !v!n -!fo! th!$ -!com! custom!s/ that is to d!liv!

th! total -and !?0!i!nc! -!fo!/ duin%/ and aft! sal!s fo th! utmost custom!

satisfaction+8 @o2!v!/ accodin% to Phili0 &otl!/ as 0o0os!d in his -oo6 &otl! on

#a6!tin%/ not !v!$ custom! should -! !tain!d>/ this issu! 2ill -! discuss!d lat! in

th! follo2in% s!ssion8

Fom th! a-ov! a%um!nts/ th! d!finition of custom! !t!ntion has -!!n !d!fin!d8 Th!

n!2 0o0os!d d!finition is as follo2s:3

Proposed 'e$inition o$ Customer Retention! Customer Retention is to establish

endless relationships between the company and “worthwhile” customers which

primarily aims at delivering customer experience that starts from acquiring, keeping

and always delighting them in such a way that they will, under any circumstances,

never leave and always stay loyal to the company.

Althou%h th!! mi%ht -! n!2 conc!0ts of custom! !t!ntion and th! stat!%i!s to achi!v!

that !v!$da$/ th!$ all !l$ on th! -ottom lin! that

“- highly satisfied customer stays loyal longer& buys more as the company introduces

new products and upgrades existing products & talks favorably about the company and its

products& pays less attention to competing brands and is less sensitive to price& offers

product or service ideas to the company& and cost less to serve than new customers

because transactions are routine.” And fom all of th!s!/ it finall$ com!s to on! of th!

+ E?0!i!ntial R!lationshi0 #ana%!m!nt/ D!G6ian6ai6ul C8/ &ana2un N8 1 Sa!tun% T8/ Pa%! =,/ ,((,/Amain Pintin% 1 Pu-lishin%> &otl! on #a6!tin%: @o2 to c!at!/ 2in and dominat! ma6!ts/ &otl! P8/ Pa%! ),/ )***/ Th! F!! P!ss

.


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-ottom lin!s fo !v!$ -usin!ss th! com0an$ can ma6! mo! 0ofits/ !duc! o0!atin%

cots and inc!as! consum! s2itchin% cost as a !sult of !tainin% custom!s8

Aft! !d!finin% custom! !t!ntion/ it could -! h!l0ful to 6no2 what customer

retention has been" be$ore decidin what it should be in the $uture8 Sinc! th!

Industial R!volution/ most manufactuin% com0ani!s hav! us!d 0oduction3oi!nt!d

o0!ations8 Th!$ hav! taditionall$ focus!d on ma6in% 0oducts and th!n 0omotin% thos!

it!ms to custom!s/ ho0in% that !nou%h 0!o0l! 2ill -u$ th!m to cov! costs and %ain

0ofits8 Th! sh!lv!s of local %oc!$ sto! sho2 ho2 a 0oduct oi!ntation aff!cts th!

ma6!t0lac!8 Accodin% to a stud$/ a num-! of n!2 0oducts found in %oc!$ sto!s

!ach $!a has %o2n fom l!ss than '/((( a $!a in )*( to mo! than )>/((( a $!a

toda$8

Th! !m0hasis on 0oduction mad! th! fims focus on individual sal!s o tansactions/

2hich involv!s -u$! and s!ll! !?chan%!s chaact!i4!d -$ limit!d communications and

littl! o no on%oin% !lationshi0s -!t2!!n t2o 0ati!s8 In such tansaction3-as!d

ma6!tin%/ th! 0ima$ %oal is to !ntic! a -u$! to ma6! a 0uchas! -as!d u0on !asons

such as lo2 0ic!/ conv!ni!nc!/ 0ac6a%in%/ o simila induc!m!nts8 This activit$ s!v!s a

shot3t!m %oal/ 2hich is c!atin% a sal! no28 hil! this st$l! of ma6!tin% is still

2id!s0!ad/ man$ o%ani4ations a! t$in% a n!2 a00oach/ th!$ hav! found that c!atin%

lon%3t!m !lationshi0s 2ith custom!s/ that is to -! a-l! to !tain th!m/ 0a$s off in

inc!as!d sal!s and d!c!as!d ma6!tin% costs8

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Tansaction3-as!d ma6!tin% 2as th! nom fo d!cad!s/ -ut no2 -usin!ss!s und!stand

that th!$ must do mo! than sim0l$ c!atin% 0oducts and th!n s!llin% th!m8 Th!$ stat!d

to focus u0on custom! lif! tim! valu! and !lationshi0 ma6!tin%/ and custom!

!t!ntion is a 6!$ to achi!v! that8

9!t5s no2 %o stai%ht into th! !ssa$5s to0ic/ why customer retention" and how is it

important* Th!s! a! som! int!!stin% facts a-out custom! !t!ntion5

3Ac7uiin% n!2 custom!s can cost fiv! tim!s o mo! than th! cost involv!d in

satisf$in% and !tainin% cu!nt custom!s8 It !7ui!s a %!at d!al of !ffot to

induc! satisfi!d custom!s to s2itch a2a$ fom th!i cu!nt su00li!s8

3Th! av!a%! com0an$ los!s )( 0!c!nt of its custom!s !ach $!a8

3A . !duction in th! custom! d!f!ction at! can inc!as! 0ofits -$ ,. 0!c!nt

to . 0!c!nt/ d!0!ndin% on th! indust$8

3Th! custom! 0ofit at! t!nds to inc!as! ov! th! lif! of th! !tain!d custom!8

-If th! com0an$ 2!! to -! sold/ th! ac7uiin% com0an$ 2ould hav! to 0a$ not

onl$ fo th! 0lant and !7ui0m!nt and th! -and nam!/ -ut also fo th! d!liv!!d

custom! -as!/ nam!l$/ th! num-! and valu! of th! custom!s 2ho 2ould do

-usin!ss 2ith th! n!2 fim8

Th! follo2in% a! !conomic -!n!fits of custom! !t!ntion as 0o0os!d -$ Ahmad/ Ri4al/

Buttl! and Fancis in Hounal of Stat!%ic #a6!tin%8 Th! !ason 2h$ this 0o0osition is

us!d is -!caus!/ com0a!d to oth! 0o0ositions/ it 0ovid!s ad!7uat! th!o!tical

Cont!m0oa$ #a6!tin% i!d/ Ninth Edition/ Boon! 98 1 &ut4 D8/ Pa%! ''=/ )**/ Th! D$d!n P!ss* Th! custom! !volution/ Pi0atsa!!!thum &8/ Pa%! .+/ ,((./ #atichon P!ss

>


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0!s0!ctiv!s/ at th! sam! tim! it could -! v!$ 0actical too8 @o2!v!/ s!v!al a%um!nts

2!! mad! !%adin% th! -!n!fits of custom! !t!ntion8

+. Sa#ins on customer ac,uisition or replacement costs

#ost ma6!tin% and ma6!tin% communication -oo6s oft!n said that ac7uiin% n!2

custom! 2ould cost l!ss than !tainin% th! !?istin% on!s/ in 2hich th! atio/ 2h!th! it is

.:)/ o >:)/ d!0!ndin% u0on th! indust$ 2h!! th! -usin!ss is in8 Th! follo2in% is a

0oof/ -$ Phili0 &otl!:3

$s the ,E% customer worth getting621

9!t5s hav! a loo6 at this follo2in% !?am0l!/

Th! cost of ac7uiin% n!2 custom! is as follo2s

)8 Annual cost of a sal!s0!son J)((/(((

,8 Num-! of annual calls -$ a sal!s0!son ,((

'8 Cost of an av!a%! sal!s call ;)K,< J.((

=8 Av!a%! num-! of sal!s calls to conv!t a

Pos0!ct into a custom! ? =

.8 Cost of attactin% a n!2 custom! ;CAC< ;'?=< J,/(((

Th! J,/((( cost is actuall$ an und!!stimat!/ -!caus! 2! a! omittin% th! cost of I#C

and o0!ations as 2!ll as th! fact that not all 0os0!cts 2ill -! conv!t!d into custom!s8

)( &otl! on #a6!tin%: @o2 to c!at!/ 2in and dominat! ma6!ts/ &otl! P8/ Pa%! ),/ )***/ Th! F!!P!ss


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No2 su00os! this com0an$ !stimat!s av!a%! custom! lif!tim! 0ofit:

)8 Annual custom! !v!nu! J)(/(((

,8 Av!a%! num-! of lo$al $!as ? ,

'8 Com0an$ 0ofit ma%in ? 8)(

=8 Custom! lif!tim! 0ofit ;C9P< ;)?,?'< J,/(((

Ev!n thou%h th! !stimat! of C9P is ov!stat!d as it omits th! cost of maintainin% th!

account thou%h sal!s0!son visits/ ads and man$ mo!8 Th! conclusion is that th!

com0an$ is 0a$in% mo! to %!t a n!2 custom! than th! custom! hims!lf is 2oth8 As a

!sult/ th! com0an$ must find a 2a$ to !duc! CAC and inc!as! its C9P8 Th! !duc!

CAC/ th! com0an$ must !duc! som! o0!atin% costs and inc!as! th! !ffici!nc$ of

0os0!ct conv!sion/ 2h!!as to inc!as! C9P/ th! com0an$ must s!ll mo! to !ach n!2

custom!/ &eep them $or more years/ and s!ll th!m mo! 0ofit it!ms8

D!s0it! th! fact that th! cost of ac7uiin% n!2 custom!s/ 2hich has al!ad$ -!!n 0ov!n/

is hi%h! than th! cost of !tainin% !?istin% on!s/ it do!s not n!c!ssail$ m!an that th!

-ud%!t fo custom! ac7uisition could -! !duc!d 2h!n th! !t!ntion at! a00!as to -!

hi%h!/ !s0!ciall$ if th! -usin!ss is n!2 and still lac6s of solid custom! -as!/ as a !sult/

th!s! t2o a! com0l!t!l$ s!0aat!d -ud%!ts8

Arument! he rate of customer retention does not necessarily imply savings on

customer acquisition

*


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Hypothesis! he relationship between customer retention and customer acquisition

rate is not always directly proportional, th!! could -! som! oth! factos/ fo !?am0l!

sta%! of com0an$ d!v!lo0m!nt o co0oat! stat!%$ that could aff!ct this !lationshi0

Futh!mo!/ accodin% to th! 0o0os!d d!finition of custom! !t!ntion/ custom!

!t!ntion stats !v!n -!fo! 2! ac7ui! th!m/ this could as 2!ll aff!ct ac7uisition cost/

accodin% to th! follo2in% 0o0osition

Proposition! !part from customer retention, business should also focus upon customer

acquisition, not number of customers acquired, but the quality of how a particular

customer is acquired, to deliver a great brand experience using "ntegrated #arketing

Communication from the day a customer first meets the brand.

9oo6in% fom this 0o0osition5s 0!s0!ctiv!/ it is n!!dl!ss to sa$ that th! com0an$ should

!tain custom!s than ac7ui! n!2 on!s it is an int!%at!d function in 2hich !ach of th!m

su00ots on! anoth!8 But can th! -usin!ss still sav! cost fom custom! !t!ntion Y!s/ as

stat!d in th! 0o0osition/ th! -usin!ss should not focus u0on num-! of custom!s

ac7ui!d/ -ut th! 7ualit$ of ho2 a 0aticula custom! is ac7ui!d/ as a !sult/ custom!

!t!ntion can still cut costs associat!d 2ith ac7uiin% n!2 custom!s8 @o2!v!/ th!!

could -! a cost fo im0ovin% custom! ac7uisition/ -ut consid! th! 0ossi-l! inc!as! in

C9V ;Custom! lif!tim! valu!


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. A uarantee o$ base pro$its as eistin customers are li&ely to ha#e a minimum

spend per period.

Consid! th! follo2in% dia%am:3

/iure +! Customer 3etention 4iagram ;source: Custom! E7uit$ #ana%!m!nt/ Ro-!t Sha2<

Fi%u! ) 0ov!s a %uaant!! of -as! 0ofits -$ !tain!d custom!s/ !v!n thou%h no/ o

v!$ f!2 n!2 custom!s a! ac7ui!d/ th!! a! still !v!nu!s fom !0!at 0uchas!s/ in

oth! 2ods/ !t!ntion has its o2n !conomic valu!8

0. Growth in per customer re#enue o#er time

h!n 2! tal6 a-out %o2th in 0! custom! !v!nu! ov! tim!/ man$ -oo6s su%%!st this

follo2in% fomula to m!asu! Custom! 9if!tim! Valu! ;C9V< as follo2:3

Calculatin% ou%h Custom! 9if!tim! Valu!))/ as 0o0os!d -$ Pof!sso Phili0 &otl!

)) &otl! on #a6!tin%: @o2 to c!at!/ 2in and dominat! ma6!ts/ &otl! P8/ Pa%! ),/ )***/ Th! F!!P!ss

))


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)8 Annual custom! !v!nu! J)(/(((

,8 Av!a%! num-! of lo$al $!as ? ,

'8 Com0an$ 0ofit ma%in ? 8)(

=8 Custom! 9if!tim! Valu! ;C9V< ;)?,?'< J,/(((

This fomula is omittin% ac7uisition cost as 2!ll as !t!ntion cost8 Som! -oo6s hav!

includ!d such costs into fomula/ som! oth! -oo6s 0o0os! a com0l!? math!matic

!7uation/ -ut still th!! is no 0ossi-l! add3on sal!s and add3on s!llin% costs/ 2hich is

conti-ut!d -$ data-as! ma6!tin% in I#C

Proposed /ormula!

Customer $ifetime %alue & !verage profit margin x '(!nnual Customer revenue x

!verage number of loyal years) * (acquisition cost per customer+ retention cost per

customer) + (add*on sales per customer * add*on selling costs per customer)

Each vaia-l! in th! a-ov! fomula can -! su-stitut!d -$ !ith! a ou%h !stimat!d num-!

o a com0l!? math!matical !7uation fo th! ma?imum accuac$8

1. A reduction in relati#e operatin costs as $irms can spread the cost o#er many

more customers and o#er a loner period

Consid! th! follo2in% %a0hs:3

),


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/iure : Customer 'rends ;source: Custom! E7uit$ #ana%!m!nt/ Ro-!t Sha2<

/iure 0: 7inancial 'rends ;source: Custom! E7uit$ #ana%!m!nt/ Ro-!t Sha2<

Fom Fi%u! ,/ this com0an$ o-viousl$ us!s custom! !t!ntion as a 6!$ stat!%$/ th!$

a! t$in% to inc!as! th! num-! of !tain!d custom!s at th! sam! tim! ac7ui! n!2

custom!s at a d!c!asin% at!/ fom Fi%u! ,/ su0isin%l$/ du! to custom! !t!ntion/

)'


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!v!nu!/ %oss conti-ution and n!t 0ofit %o28 #o!ov!/ th! %a0 -!t2!!n !v!nu! and

%oss conti-ution is %!ttin% 2id!/ im0l$in% that th! com0an$ !ans mo! conti-ution

ma%in ;R!v!nu! minus costs


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/iure 1! Th! !lationshi0 #a6!tin% ladd! of Custom! 9o$alt$

;Souc!: Pa$n! and Ric6ad L)**'M<

Thos! 2ho a! tal6 favoa-l$ a-out th! com0an$ a! most li6!l$ in th! sta%! of advocat!

and su00ot!/ -ut !tain!d custom!s should -! som!2h!! -!t2!!n custom!s tunin% to

cli!nts/ to advocat!/ as a !sult/ c!tainl$ onl$ a 0atial of !tain!d custom!s 2ill !f! to

oth! 0!o0l!8

3. Price premiums as current customers usually do not wait $or promotions or price

A stud$ !v!als that sal!s 0omotions 2hich focus u0on 0ic! !duction onl$ %!t '(

n!2 custom!s/ th! !st a! lo$al custom!s 2ho 2ill still -u$ 2ithout an$ sal!s

0omotions),8 As a !sult/ th!! is no !ason to un sal!s 0omotion and com0!t! in 0ic!

2as if th!! custom!s a! lo$al !nou%h8

), E?0!i!ntial R!lationshi0 #ana%!m!nt/ D!G6ian6ai6ul C8/ &ana2un N8 1 Sa!tun% T8/ Pa%! ,,/ ,((,/Amain Pintin% 1 Pu-lishin%

).


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Proposition! -ales promotions should be the last way for the company to boost the

sales, if customers are so well treated, retained and are loyal to the company, the

switching cost should be increased, and there is then no reason for the company to go

into the price*war battle.

A0at fom !conomic -!n!fits/ th!! is also non-economic bene$it/ 2hich is/ Increased

customer trust" commitment" loyalty and cooperation/ 2hich a! all th! !sults of

custom! !t!ntion ho2!v!/ th!! a! mo! of non3!conomic -!n!fits 2hich a! to -!

0o0os!d in th! n!?t f!2 lin!s8

4ew Proposed 5ene$its!

5ene$its $or customer-centric orani)ation implementin I%C

Custom! insi%hts a! of vital im0otanc! fo o%ani4ations im0l!m!ntin% I#C/ as a

custom! c!ntic o%ani4ation us!s outsid!3in 0lannin%/ 2hich stats fom custom!s8 Th!

mo! th! com0an$ is a-l! to !tain custom!s/ th! mo! th!$ 6no2 a-out custom!s as

th!$ hav! mo! tim! to l!an fom custom!s and -uild th!i solid custom! data-as!8

5etter o$$erins and treatments $or customers

This is simila to th! fist 0o0os!d -!n!fit B!n!fits fo custom!3c!ntic o%ani4ation/

-ut loo6in% fom th! vi!20oint of custom!s/ as th! com0an$ 6no2s mo! a-out

custom!s/ th!$ could -! a-l! to d!liv! -!tt! off!in%s 2hich -!tt! suit custom!s5

0!f!!nc!s8 #o!ov!/ th! data-as!/ alon% 2ith Int!%at!d #a6!tin% Communication

)+


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0lan/ !na-l! th! com0an$ to 6no2 2hat custom!s li6! and disli6!/ and th! 2a$ to t!at

and 0l!as! th!m individuall$8

6mployee Retention

Fom th! o0!nin% cas! #BNA/ on! of th! 2old5s la%!st c!dit cad com0ani!s/ found

that an inc!as! of . in !t!ntion at! conti-ut!d to +( inc!as! in com0an$5s !tain!d

!anin%s 2ithin fiv! $!as8

This is a continuin% sto$/ th! mana%!m!nt of #NBA said custom! R!t!ntion is not

onl$ th! 6!$ to ma6in% hu%! 0ofits/ -ut it is also a maGo 0at of th! 0ofit ma6in%

!n%in! in th! com0an$/ 2hich !nhanc!s custom!5s lo$alt$ as 2!ll as !m0lo$!!5s

lo$alt$8)'

This is ho2 it 2o6s/ favoa-l! !t!ntion at! -in%s a-out hi%h! sha!/ lo2! cost of

ac7uiin% n!2 custom!s and s!vic!/ th! com0an$ is th!n a-l! to %iv! mo! inc!ntiv!s to

its !m0lo$!!s/ 2hich !duc!s tunov! at!s/ and 2h!n th!$ 2o6 lon%!/ th!$ -!com!

mo! !?0!i!nc!d/ as th!$ -!com! mo! !?0!i!nc!d/ th!$ can -!tt! s!v! th! custom!s/

th! !t!ntion at!s fo -oth a! thus hi%h!8

B!fo! %oin% to th! stat!%$ 0at/ it 2ould -! v!$ h!l0ful to 6no2 i$ all customers are

worth retainin/ as th! 0o0os! d!finition su%%!sts that onl$ 2oth2hil! custom!s

should -! !tain!d8 hil! all custom!s a! im0otant/ som! a! mo! im0otant than

)' 9o$alt$: Put a N!2 9!ns of 9o$alt$ to #a%nif$ Pofita-ilit$ ;Thai Edition/ Octo-! ,((=/ E?0!N!t

)>


18/30


oth!s du! to !c!nc$/ f!7u!nc$ and mon!ta$ valu!8 Com0ani!s usuall$ thin6 th!i

la%!st custom!s a! th! most 0ofita-l! on!s and th!i small!st a! th! l!ast 0ofita-l!

on!s/ -ut th!$ s!!m to dis!%ad th! fact that com0an$5s la%!st custom!s a! most li6!l$

to %!t th! hi%h!st discounts and d!mand th! most s!vic!s 2h!!as m!dium3si4!d

custom!s t!nd to d!mand l!ss8

Th!!fo!/ com0ani!s must fin! th! 2a$ to m!asu! individual custom! 0ofita-ilit$/ and

that is 2h$ th!$ a! statin% to a00l$ activit$3-as!d costin% ;ABC< to d!t!min! th! actual

cost of s!vic!s d!liv!!d to !ach custom! so that th! custom! 0ofita-ilit$ can -!

d!t!min!d8

Th! ,(K( ul!/ 2hich sa$s that ,( custom!s conti-ut! ( to com0an$5s total

!v!nu!s/ has -!!n modifi!d !c!ntl$ into th! ,(K(K'( ul!)=/ th! 0oo!st '( of th!

com0an$5s custom!s cuts th! com0an$5s 0ot!ntial 0ofits in half has -!!n add!d/

!s0!ciall$ in Ban6in% indust$/ som! -an6s !0ot that th!$ lost mon!$ on =( 0!c!nt of

th!i 2!a6!st !tail custom!s8 Th!! a! t2o 2a$s to do 2ith thos! '(/ som!

com0ani!s sa$ fi! th!m th! oth! sa$ @o2 can 2! tun th!m into 0ofita-l! on!s

So/ a! all custom!s 2oth !tainin% No/ at l!ast not thos! 2ho can not -! tun!d to

0ofita-l! on!s8).

)= I#C in Action/ 9ohton%6um T8/ Pa%! )'+/ ,((,/ Ti00in% Point P!ss). &otl! on #a6!tin%: @o2 to c!at!/ 2in and dominat! ma6!ts/ &otl! P8/ Pa%! )'/ )***/ Th! F!!P!ss

)


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9!t5s no2 hav! a loo6 at th! strateies to achie#e the oal/ -ut du! to th! 0o0os!d

d!finition of custom! !t!ntion and a%um!nts discuss!d !ali! in th! -!%innin% of this

!ssa$/ Customer Retention is to establish endless relationships between the company

and “worthwhile” customers which primarily aims at delivering customer experience

that starts from acquiring, keeping and always delighting them in such a way that they

will, under any circumstances, never leave and always stay loyal to the company.

This d!finition us!s custom! !?0!i!nc! as a main stat!%$ to achi!v! th! %oal/ so

stat!%i!s to achi!v! this must totall$ -!!n !d!fin!d too/ unfotunat!l$/ most I#C and

custom! !t!ntion -oo6s onl$ su%%!st aft! sal!s s!vic! as th! 2a$ to 6!!0 custom!s/

-!sid!s/ most of th! su%%!st!d stat!%i!s loo6 mo! li6! ti0s than stat!%i!s/ 2hich loo6

in a -oad! t!m so that !ad!s can us! th! 0o0os!d stat!%i!s as a %uid!lin! and

im0l!m!nt in th!i o2n 2a$s to suit th! indust$ that th! -usin!ss is in and mo!

im0otantl$ th! custom!s that th!$ hav! as a !sult/ th! follo2in% stat!%i!s a! all m$

0o0ositions/ 2hich a! -ac6!d -$ som! oth! souc!s

At !v!$ sta%! of th! follo2in% stat!%i!s/ custom! !?0!i!nc! should -! d!t!min!d/

2h!th! th!$ should f!!l satisfi!d/ 2am/ confid!nt and !tc8 to c!at! -and valu! and to

!fl!ct Custom! E?0!i!nc! Platfom that 2! 2ant custom!s to touch o f!!l8 Fo

instanc!:3

Customer 6perience Plat$orm +3

A00l! C!ativ!/ Fi!ndlin!ss

Ama4on Com0l!t!n!ss/ Conv!ni!nc!

)+ Pactical I#C/ Pon%sata0on S8/ Pa%! ),)/ Nut R!0u-lic

)*


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D!ll Customi4a-ilit$

Disn!$ @a00$/ 2ith famil$

Int!l S0!!d/ R!lia-ilit$

+. Continuin Sales

Usin% sal!s 0omotion to attact custom!s and %!n!at! on! sin%l! sal! fom that is not

!nou%h du! to th! fact that th! cost of ac7uiin% n!2 custom!s is/ as 0ov!n !ali!/ v!$

hi%h/ as a !sult/ in od! fo th! fim to ma6! 0ofits/ th!$ must find a 2a$ to ma6!

custom!s 0uchas! mo! oft!n/ alon% 2ith th! -!st !?0!i!nc! th!$ can hav!/ -$ off!in%

2hat th!$ !?0!ct and !v!n -!$ond that8 Fo !?am0l!/ in Thailand/ mo! than )((/(((

%oc!$ sto!s 2!! 2i0!d out -$ th! mod!n tad! such as T!sco 9otus/ Bi%C and >3

));S!v!n El!v!n


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Hypothesis! /iven that no technology is used, small companies will be able to create

better relationships with customers than larger ones

Aft! 6no2in% th!i 2!a6n!ss!s/ F!shmat stat!d to -uild th!i o2n data-as!/ statin%

fom -uildin% custom! 0ofil!s/ 0uchas! !cods/ th!$ 6n!2 2h!n famili!s livin% in that

a!a last 0uchas!d su%a/ tissu! 0a0!/ -!!/ ci%a!tt! o snac6s8 So th!$ stat!d %!!tin%

custom!s -$ th!i nam!s and as6!d 2h!! th!$ liv!d/ and fom th! 0uchas! !cods this

small sto! 6n!2 2h!n th!s! famili!s 2ould un out of su00li!s/ and us!d t!l!0hon! to

%!n!at! sal!s8 #o!ov!/ th!$ %av! >3da$ c!dit t!m 2hich mad! it !asi! fo custom!s

to -u$/ so !v!n thou%h th!! 2as also >3)) in that villa%!/ F!shmat 2as still a-l! to

com0!t! 2ith it8 Unfotunat!l$/ 2h!n F!shmat stat!d to %o2/ th!$ fanchis! th!i

-usin!ss/ and as a !sult/ th!$ lost contol in t!ms of custom! !lationshi0 mana%!m!nt/

th!$ a! no2 li6! an$ oth! mod!n tad! sto!s com0!tin% in 0ic! 2as8

. 6mphasi)e on durin and a$ter sales ser#ice

V!$ oft!n man$ com0ani!s onl$ !m0hasi4! on -!fo! sal!s s!vic!)>/ th!$ %iv!

custom!s a lot of 0omis!s/ -ut duin% th! sal!s/ it -!com!s a dut$ of !tail!s o d!al!/

and 2hat th! com0ani!s do is to ho0! that th!$ 2ill s!v! custom!s 2!ll and 2ill -! a-l!

to ans2! !v!$ 7u!stion that custom!s ma$ as68 Aft! th! 0uchas!/ man$ tim!s s!vic!

!0!s!ntativ!s a! outsouc!d/ so th! com0ani!s hav! littl! o no contol ov! it/ 2hich is

not an !?cus! fo 0oo aft!3sal!s custom! s!vic!8 Custom!s 2ill not -lam! th!

outsouc!d com0an$/ -ut th! -and that th!$ 0uchas!d8

)> Th! custom! !volution/ Pi0atsa!!!thum &8/ Pa%! *+/ ,((./ #atichon P!ss

,)


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Hypothesis ! 010 (0usiness*to*0usiness) relationships affect 01C (0usiness*to*

Consumers) relationships

Th!!fo!/ com0ani!s must -! a-l! to mana%! %ood custom! !?0!i!nc!/ statin% fom

0!30uchas!/ duin%30uchas! to 0ost30uchas!8 Th! s!vic! 7ualit$/ in !v!$ sta%!/ must

-! stictl$ contoll!d to !nsu! custom! satisfaction/ thus th! com0ani!s n!!d to maintain

not onl$ %ood !lationshi0s 2ith custom!s -ut also !tail!s/ d!al!s as 2!ll as th!

outsouc!d com0ani!s8

0. /ocus on Total solution or 6nd results" not only on /eatures and 5ene$its

3Custom!s 2ant to ma6! hol!s in diff!!nt si4!s/ not dills

3Custom!s 2ant s!cuit$/ not insuanc! 0a0!s

3Custom!s 2ant cl!an cloth!s/ not d!t!%!nts

3Custom!s 2ant h$%i!n! in th!i mouth/ not -am-oo tooth0ic6s

3Custom!s 2ant to loo6 %ood and chamin%/ not cosm!tics

9oo6in% at !nd !sults h!l0s !nhanc! valu! and custom! !?0!i!nc!/ 2hich finall$ l!ads

to %ood !lationshi0s/ fo !?am0l!/ O# Scott 1 Son/ a com0an$ that s!lls %ass s!!ds/

!v!$ $!a th!$ n!!d!d to s!nd -usin!ss 0lan to -an6 to %!t loans a00ov!d8 Th! -an6in%

offic! said ! actuall$ didn5t ca! much a-out $ou 0lan -!caus! !v!$ $!a $ou hit th!

ta%!t sal!s/ 2! a! confid!nt that th!! shouldn5t -! an$ -i% 0o-l!ms 2ith $ou

-usin!ss/ -ut could $ou 0l!as! h!l0 us ! us!d $ou %lass s!!ds -ut no2 ou %ass fi!ld

do!sn5t loo6 so %ood/ th!! a! -o2n s0ots on th! fi!ld8 Could $ou h!l0 us Fom that

mom!nt/ th! o2n! of O# Scott 1 Son stat!d to und!stand 2hat his -usin!ss 2as all

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a-out/ h! didn5t s!ll s!!ds/ -ut h! s!lls -!autiful %ass fi!ld8 Th!n h! 6n!2 ho2 to satisf$

custom!/ h! !?0and!d his -usin!ss to %ass f!tili4!s/ %lass cutt!s/ fi!ld d!coation/ and

th! com0an$ finall$ -!cam! on! of th! -i%%!st com0ani!s in %ass 1 %ad!nin% tools in

th! Unit!d Stat!s8

1. Thri#e $or the best customer eperience

This is of vital im0otanc! to custom! !t!ntion/ -!in% a-l! to !tain th!m o not %!atl$

d!0!nds u0on th! !?0!i!nc! a custom! has/ !v!$ contact 0oint o touch 0oint could

-in% a-out %!at custom! !?0!i!nc!/ statin% fom 0!30uchas!/ duin%30uchas! to

0ost30uchas!8 Consumption process of custom!s should also -! ta6!n into

consid!ation -!caus! !?0!i!nc! could -! -uilt at !v!$ sta%! of th! 0oc!ss8

Fo !?am0l!/ -!fo! sal!s/ th! com0an$ must aous! th! int!!st and c!at! d!mand fo

th! 0oduct/ find 2a$s to motivat! th!i 2ants and n!!ds 2h!n th!$ !ncount! a 0o-l!m

fo th!i -!st !?0!i!nc!8 Th! com0an$ should also ma6! custom!s f!!l ac7uaint!d 2ith

th! -and in od! to maintain %ood !lationshi0s 2ith th!m

Duin% sal!s/ th! fim ma$ h!l0 custom!s sim0lif$ th!i 0uchas! d!cisions/ usin% I#C

tools/ fo th! v!$ -!st !?0!i!nc!/ custom! conv!ni!nc!/ such as vai!t$ of 0a$m!nt

m!thods/ installm!nt 0lans/ d!liv!$ s!vic!s should also -! off!!d/ in oth! 2ods/

!nhancin% th! =C5s in ma6!tin% communications 2ill damaticall$ h!l0 !nhanc!

custom! !?0!i!nc!8

,'


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Aft! sal!s/ 0oduct stoa%!/ 0oduct installation/ tainin%/ aft! sal!s s!vic! a! all

0ossi-l! consum0tion 0oc!ss!s that consum!s n!!d to %o thou%h/ th! 0oc!ss d!0!nds

on th! 0oduct cat!%o$ o indust$ that th! com0an$ is in8

Hypothesis! "f favorable experience is built into every consumers consumption

process, customers should be delighted and stay loyal to the brand.

2. 7se 8indicators9 $or e#ery eperience deli#ered to customers at e#ery contact

points and consumption process

ithout accounta-ilit$/ it is li6! shi0 2ithout a udd!/ indicatos a! us!d to contol

!?0!i!nc!/ to illustat! this/ consid! th! follo2in% !?am0l!:3

Contact Point E?0!i!nc! Indicatos

T!l!0hon! R!s!vation Ans2! th! call 2ithin on!

in%/ t!ll th! hot!l5s nam!/s0!a6!5s nam!/ and %!!tcustom!s -$ th!i nam! fo !tain!d custom!s

3Num-! of t!l!0hon! in%

-!fo! som!-od$ ans2!sth! 0hon!3Th! s0!!d of %!ttin% -ac6to custom!s

#!!t -!ll-o$ "!t th! lu%%a%! 2ithin fiv!minut!s 2ith smil!s

3Tim! ta6!n to ta6! lu%%a%!3Pl!asant P!sonalit$

At R!c!0tion Smil!/ loo6 into custom!5s!$!s -!fo! %!!tin% him/finish all th! ch!c63in 0oc!ss!s 2ithin fiv!minut!

3Sav! custom!5s tim!3Smil!s3Fist Im0!ssion

Table! A 0at of !?0!i!nc! !nhanc!m!nt 0o%am at !v!$ contact 0oint 2ith indicatosat @ilton @ot!ls ;Souc!: E?0!i!ntial R!lationshi0 #ana%!m!nt/ 0a%! )(<

,=


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3. 6mphasis not only on customer retention" but also employee retention

Em0lo$!! !t!ntion could -in% a-out custom! !t!ntion/ as discuss!d !ali! in th!

#BNA cas!/ th!$ focus!d u0on custom! !t!ntion/ 2hich -ou%ht th!m mo! 0ofits so

that th! com0an$ allocat!d som! 0otion of th! 0ofits to -! us!d as !m0lo$!!5s

inc!ntiv!s/ 2hich inc!as!d lo$alt$ and 0oductivit$/ as a !sult/ th!$ sta$!d lon%!/ as

th!$ sta$!d lon%! th!$ 6n!2 custom!s -!tt! and s!v!d th!m -!tt!/ -!tt! s!vic!

inc!as!s custom! !t!ntion at!/ and all of th!s! hav! -!com! an !ndl!ss lo$alt$ 1

!t!ntion c$cl!8

Hypothesis! 2mployee retention is directly proportional to Customer retention

And 2! a! finall$ at th! last 0at/ the challenes o$ customer retention/ custom!

!t!ntion -!com!s mo! and mo! chall!n%in% !v!$da$/ l!t5s s!! 2h$8

Technoloy : Competition

T!chnolo%$ !na-l!s -i% -usin!ss to und!stand and 6!!0 !cods of th!i custom!s Gust

li6! th! 2a$ small %oc!$ sto!s do/ as a !sult/ custom! mi%ht -! v!$ satisfi!d in th!

fist 0lac!8 Unfotunat!l$/ man$ com0ani!s stat to !ali4! th! im0otanc! of custom!

!t!ntion and stat th!i !t!ntion 0o%am/ so 2hat satisfi!s custom!s toda$ ma$ -! Gust

indust$5s standad 0actic! tomoo2/ in oth! 2ods/ custom! !t!ntion could int!nsif$

th! com0!tition in th! indust$8 Th!!fo!/ Custom! R!t!ntion must -! d!v!lo0!d and

im0ov!d at all tim!s/ o soon it 2ill m!an nothin%8

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6thical Issue

Custom! R!t!ntion is oft!n lin6!d 2ith th! com0an$5s data-as!/ and no2 th! 7u!stion is

Is th! custom! !all$ 2ant to -! in that data-as!8 Th! com0an$5s !?cus! that havin% a

0aticula custom! on th! data-as! !na-l!s th!m to 6no2 a custom! -!tt! and s!v!

him -!tt!/ on on! hand/ it ma$ su0is! him on th! oth! hand/ h! could -! v!$

fustat!d if h! do!s not 2ant so/ -!caus! th! a-ov! !?cus! is not a !ason fo 0uttin% him

into th! data-as!8

Hypothesis! 3atabase marketing helps increase retention rate only when that

particular customer is willing to be on the database

If custom! do!s not s!! th! valu! of -!in% in th! data-as!/ most li6!l$ h!Ksh! 2ill i%no!

th! communications ;9ohthon%6um/ T ,((,


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chaact!istics of thos! custom!s8 To illustat! this/ l!t5s thin6 a-out 0a!nts nutuin%

th!i child in th! -!st 0ossi-l! 2a$/ ho0in% that h! 2ill %o2 u0 and -! a docto/ -ut onc!

h! %o2s u0/ h! has his o2n natual chaact!istics 2hich cannot -! mold!d/ h! could

2ant to -! th! atist in 2hich it is com0l!t!l$ i!l!vant to th! 2a$ h! is nutu!d8

Unsu0isin%l$/ custom!s 2ho don5t hav! th! natual chaact!istics n!c!ssa$ fo

com0ani!s to -uild sustain!d !lationshi0s and inc!as! !t!ntion/ no matt! ho2 much

th! com0an$ s0!nds/ it could -! 2othl!ss8

Th!!fo!/ I 2ould su%%!st that/ in th! 2old of a0id t!chnolo%$ d!v!lo0m!nt/

-!havioal and 0s$cholo%ical chaact!istics should also -! ta6!n into consid!ation/ not

onl$ th! !conomical valu! of a 0aticula custom!8

The balance o$ ac,uisition and retention

#$ n!2 0o0os!d d!finition also ta6!s ac7uisition into th! !t!ntion 0o%am as it stat!s

that custom! !t!ntions stats fom th! da$ 2! ac7ui! th!m/ nomall$ th!s! t2o could

-! com0l!t!l$ i!l!vant -ud%!ts/ -ut as custom! ac7uisition is -!comin% a 0at of

custom! !t!ntion/ custom! ac7uisition and !t!ntion a! int!%at!d/ it is thus a

chall!n%! to -alanc! th! !ffots and -ud%!t -!t2!!n th!m8

9ast -ut not l!ast/ th! com0an$ must ma6! a v!$ ston% commitm!nt to its !t!ntion

0o%ams8 Th! 0a$off in lo$alt$ and !t!ntion ma$ -! $!as to com!/ so !v!$on! must -!

in it fo th! lon% t!m8 This 0hiloso0h$ 2o6s onl$ -$ ma6in% a d!!0/ sinc!!

commitm!nt to custom! !t!ntion8

,>


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Re$erences

2nglish References

Schult4/ D 1 Schult4/ @ ,(('/ $MC 'he ,ext 8eneration8 Th! Unit!d Stat!s:

#c"a2 @ill

Schult4/ D/ Stanl!$/ T 1 Ro-!t/ 9 )**>/ $ntegrated Marketing Communications8 Th!

Unit!d Stat!s: NTC Busin!ss Boo6s

Iaco-ucci/ D ,(()/ 9ellogg on Marketing 8 Th! Unit!d Stat!s: Hohn il!$ 1 Sons/ Inc8

&otl!/ P )***/ 9otler on Marketing :ow to create& win and dominate markets8 Th!

Unit!d Stat!s: Th! F!! P!ss

&otl!/ P ,(('/ Marketing Management Eleventh Edition8 Th! Unit!d Stat!s:

P!ntic! @all

Boon/ 9 1 &ut4/ D )**/ Contemporary Marketing %ired ,inth Edition. Th! Unit!d

Stat!s: Th! D$d!n P!ss

Bl$th!/ H ,(((/ Marketing Communications8 Th! Unit!d &in%dom: P!ntic! @all

"onoos/ C ,(((/ "ervice Management and Marketing - Customer 3elationship

Management -pproach "econd Edition8 Th! Unit!d Stat!s: Hohn il!$ 1 Sons/ 9td8

F!i%/ B )**>/ Marketing "traight to the :eart. Th! Unit!d Stat!s: Am!ican

#ana%!m!nt Association

Da$/ 9 )**)/ Ethics in Media Communications Cases and Controversies8 Th! Unit!d

Stat!s: ads2oth/ Inc8

P!nhalluic6/ H ,(('/ $ntegrated Communication Campaigns M "tudy 8uide8 Austalia:

Univ!sit$ of Can-!a8

,


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Ston!/ # ,((./ Adma0 Issu! =+,5/ Customer 3etention ; 4reams and 3eality/ old

Adv!tisin% R!s!ach C!nt!/ Unit!d &in%dom8

Ei6sson/ & 1 Va%hult/ A ,(((/ Industial #a6!tin% #ana%!m!nt5/ Customer

3etention& !urchasing +ehavior and 3elationship "ubstance in !rofessional "ervices/

Noth @olland/ Unit!d Stat!s/ 008'+'3'>,8

"ustafsson/ A/ Hohnson/ # 1 Roos/ I ,((./ Hounal of #a6!tin% Vol8+*5/ 'he Effects of

Customer "atisfaction& 3elationship Commitment 4imensions& and 'riggers on

Customer 3etention/ Am!ican #a6!tin% Association/ Unit!d Stat!s/ 008,)(3,)8

#o%an/ A )**+/ Adma05/ 3elationship Marketing :ow market research can help build

better relationships with your customers/ NTC Pu-lications/ Unit!d &in%dom8

Ba6!/ S 1 #itch!ll/ @ ,(((/ Euo0!an Soci!t$ of O0inion and #a6!tin% R!s!ach

Nov!m-! ,(((5/ $ntegrated Marketing Communications $mplications for managers/

Th! old Association of R!s!ach Pof!ssionals/ Th! N!th!lands8

Sant/ R 1 Ro$/ S ,((=/ Adma0 F!-ua$ ,((= Issu! ==>5/ 4elivering #real) customer

relationships/ old Adv!tisin% R!s!ach C!nt!/ Unit!d &in%dom8

Flo!s/ 9 ,(()/ Adv!tisin% R!s!ach Foundation o6sho0 Nov!m-! ,(()5/ 7rom

C3M to Customer Experience Management / Adv!tisin% R!s!ach Foundation/ Th!

Unit!d Stat!s8

Dittich/ )**./ Th! old Association of R!s!ach Pof!ssionals5/ $ncreasing

3evenues in 7urniture "ales +y $ncreasing Customer 3etention ; :ow -

Manufacturer +inds 3etailers ; -nd $n 'urn :elps 'hem +ind 'heir Customers/ Th!

old Association of R!s!ach Pof!ssionals/ Th! N!th!lands8

,*


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Sha2/ R ,(('/ Customer Eed business8 Th! Unit!d Stat!s: #icosoft

Busin!ss Solutions8

"ion/ R ,(('/ Hounal of Int!%at!d Communications ,((,3,((' issu!5/ 3ethinking

Customer -c/ -dvertising and !romotion8 Thailand: Diamond in Busin!ss old

'(

Essay on Customer Retention

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