This document discusses various strategies for retaining customers, including offering financial bonds like discounts for loyal customers, social bonds by developing long-term relationships, and customization bonds through tailored services. It also notes that not all customer relationships are beneficial and may need to end if customers are unprofitable or difficult to deal with over time. Maintaining strong customer service and properly addressing complaints is important to retain satisfied customers and avoid negative word-of-mouth.

1. Strategies to Retain Customers
G VENKATESH

2. Financial bonds
Lower prices for greater volume purchases
Low prices for loyal customers, attractive discounts
Frequent Flier programs
Drawbacks
Price is a prime driver, differentiation is not unique.

3. Social bonds
Long term relationships
Very effective
Interpersonal skills
Lawyers, Doctors, Counsellors, tax consultants

4. Caterpillar Corporation
World’s largest manufacturer of mining,
construction and agriculture heavy equipment
Engineering and product quality are superior
Company attributes much of its success to strong
dealer network and product support services
CEO , David Fites, contends that knowledge of local
market and close relation with customers & dealers
is invaluable.

5. Our dealers are business leaders in their service
territories who are deeply involved in community
activities and are committed to living in the
area.Their reputation and long term relations help to
sell our products.
Another example is Harley Davidson motor cycles –
Groups are involved in biking tours and rallies.

6. Customization Bonds
More customised services
Eg. Tailors, Saloons.
Mass customization – use flexible processes to
produce customized services at price of standardized
mass produced alternatives

7. Customer is not always right !
Not all relationships are beneficial.
Every customer is not right all the time
Tour operators – customers experience the service
together and can influence each other’s perceptions
about value received
Discontinue relation if customer segments are not
profitable in the long run

8. Difficult customers
Dysfunctional customers
Customers from hell
Problem customers
Example : Drunk customers in a flight or a bank.
Such customers affect employees, other customers and
the organization as a whole.

9. Some consultants do work for clients in the
expectation that order will be received, but if it
doesn’t happen, they may have to politely decline

10. Relationship Ending
Firm moves location
Customer moves location
Customer not fulfilling the obligation example –
bank customer not maintaining a minimum balance
or policyholder has not paid the premium, so
insurance policy has lapsed.
Relationship has to be ended carefully to avoid
negative publicity or negative word-of-mouth.
Prices are raised or free services are charged to move
unprofitable customers out of the company.

11. If customer is too demanding, relationship may be
salvaged by negotiating expectations or finding an
efficient way to serve the client.

12. IMPORTANT
Customers who were satisfied with a firm’s recovery
efforts talked to an average of 7 people.
Those customers who were dissatisfied with the
response talked to an average of 25 people.

13. Different types of complainers
Passives – do not complain at all.
Voicers – actively complain to service provider, but
give the company a second chance.
Irates – consumers more likely to engage in negative
word of mouth communication with friends and
relatives ; they are likely to switch to a competitor.
Activists – they complain on all dimensions – they
complain to provider, will tell others, complain to
third parties. In extreme cases, these consumers can
become terrorists.

14. If a firm does nothing about service failure, 86%
customers are dissatisfied with the response.
When a firm provides an apology, % of dissatisfied
customers drops to 20%.
If you provide customers an opportunity to vent out
their frustration, customer dissatisfaction reduced to
33%

15. Customers look for fair treatment
Outcome fairness – outcomes that match their level
of dissatisfaction eg, compensation
Procedural fairness – fairness in terms of policies,
rules, timeliness of the complaint process
Interactional fairness – customers expect to be
treated politely with care and honesty.
Service recovery has to happen as quickly as
possible.