Customer retention
Encyclopedia
Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product
or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace
.
Customer retention is more than giving the customer what they expect, it’s about exceeding their expectations so that they become loyal advocates for your brand
. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value
at the center of business strategy’. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.
lifetime value enable an organization
to calculate the net present value
of the profit
an organization will realize on a customer
over a given period of time. Retention Rate is the percentage of the total number of customers retained in context to the customers that approached for cancellation.
in order to increase the lifespan of a customer. The International Customer Service Institute
(TICSI) has released The International Customer Service Standard (TICSS). TICSS enables organizations to focus their attention on delivering excellence in the management of customer service, whilst at the same time providing recognition of success through a 3rd Party registration scheme. TICSS focuses an organization’s attention on delivering increased customer satisfaction by helping the organization through a Service Quality Model. TICSS Service Quality Model uses the 5 P's - Policy
, Processes
, People
, Premises
, Product
/Service, as well as performance measurement
. The implementation of a customer service standard should lead to higher levels of customer satisfaction, which in turn increases customer loyalty and customer retention.
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace
Marketplace
A marketplace is the space, actual, virtual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie. the 'real world' in which products and services are provided and consumed.-Marketplaces and street markets:A...
.
Customer retention is more than giving the customer what they expect, it’s about exceeding their expectations so that they become loyal advocates for your brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value
Shareholder value
Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders...
at the center of business strategy’. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.
Customer lifetime value
CustomerCustomer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
lifetime value enable an organization
Organization
An organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...
to calculate the net present value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
of the profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
an organization will realize on a customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
over a given period of time. Retention Rate is the percentage of the total number of customers retained in context to the customers that approached for cancellation.
Standardization of Customer Service
Published standards exist to help organizations deliver process driven customer satisfactionCustomer satisfaction
Customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation...
in order to increase the lifespan of a customer. The International Customer Service Institute
The International Customer Service Institute
The International Customer Service Institute is an international organisation enabling the recognition and sharing of global best practice in customer service...
(TICSI) has released The International Customer Service Standard (TICSS). TICSS enables organizations to focus their attention on delivering excellence in the management of customer service, whilst at the same time providing recognition of success through a 3rd Party registration scheme. TICSS focuses an organization’s attention on delivering increased customer satisfaction by helping the organization through a Service Quality Model. TICSS Service Quality Model uses the 5 P's - Policy
Policy
A policy is typically described as a principle or rule to guide decisions and achieve rational outcome. The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol...
, Processes
Business process
A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product for a particular customer or customers...
, People
People
People is a plurality of human beings or other beings possessing enough qualities constituting personhood. It has two usages:* as the plural of person or a group of people People is a plurality of human beings or other beings possessing enough qualities constituting personhood. It has two usages:*...
, Premises
Premises
Premises are land and buildings together considered as a property. This usage arose from property owners finding the word in their title deeds, where it originally correctly meant "the aforementioned; what this document is about", from Latin prae-missus = "placed before".In this sense, the word is...
, Product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
/Service, as well as performance measurement
Measurement
Measurement is the process or the result of determining the ratio of a physical quantity, such as a length, time, temperature etc., to a unit of measurement, such as the metre, second or degree Celsius...
. The implementation of a customer service standard should lead to higher levels of customer satisfaction, which in turn increases customer loyalty and customer retention.
See also
- Customer ServiceCustomer serviceCustomer service is the provision of service to customers before, during and after a purchase.According to Turban et al. , “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer...
- Customer Loyalty
- The International Customer Service InstituteThe International Customer Service InstituteThe International Customer Service Institute is an international organisation enabling the recognition and sharing of global best practice in customer service...