This document discusses strategies for customer retention. It describes the evolution of relationship marketing programs including financial incentives, social bonding, and structural interactions. The complete CRM for retaining customers includes acquisition, retention, and winback stages. Key aspects of a customer retention strategy are identifying objectives, managing attrition and retention rates, and implementing a welcome strategy. The document also covers access strategies, communication processes, problem identification, complaint management, and keeping in touch with customers.

1. CHAPTER 6
CUSTOMER RETENTION
STRATEGIES
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2. THE EVOLUTION OF RELATIONSHIP
MARKETING PROGRAMS
 Exhibit 6.1: Aspects of Relationship Programs
 Financial Relationships: Frequent Buyer Programs
 financial incentives-- discounts, product upgrades, or prizes that
serve as rewards for customers who exhibit loyalty or who
frequently purchase from the organization
 Social Bonding
 a friendly companionship or an affective tie such as that
experienced by Saturn owners who gather to meet other owners
 Structural-Interactive Relationships
 use system design to solve problems, reinforce purchases, and
recognize the importance of each customer
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3. EXHIBIT 6.1 ASPECTS OF RELATIONSHIP PROGRAMS
Relational facet Organizational implications
Frequent flyer/reader/buyer/vistor…rewards
Discounts, product upgrades, awards, prizes
Financial incentives
Related products or providers expand the net
Increased customer loyalty to price, incentives
Friendly companionship, trust…connections
Personal insights, recognition, mutual affection
Social bonding
Interpersonal interactions expand the link
Increased customer loyalty to the organization
Systemic mass personalization…management
Mass personalization, cultivation, stimulation
Structural-interactions
Artificial intelligence continues the connections
Increased customer loyalty 3 the experiences
to

4. THE COMPLETE CRM FOR RETAINING
CUSTOMERS
 Customer Life Cycle
 the stages a customer goes through from the time before deciding
to do business with an organization until he or she decides to stop
being a customer
 Exhibit 6.2: Picturing the Customer Life Cycle
 acquisition stage— the customer completes the initial
transactional exchange
 retention stage— implying that the customer is a loyal
advocate or at least intends to repeat another exchange
with the same organization
 winback stage— the organization will take special steps to
have a customer enter into another exchange with the
organization, if the expected lifetime value is strong enough
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5. EXHIBIT 6.2 PICTURING THE CUSTOMER LIFE CYCLE
Acquisition Retention Winback
Suspect Loyal advocate
Prospect
Repeat
Customer : customer
1st transaction
Inactive
regular customer
Lost customer
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6. Customer Retention Strategy
 a plan identifying what basic retention objectives will be
pursued and how they will be achieved in the time available
 attrition rate or churn— the percentage of customers lost in a given
period, typically a year
 retention rate— the percentage of customers expected to keep
doing business with the organization, calculated as 1- the attrition
rate
 Exhibit 6.3: Reasons for Lost Customers
 welcome strategy— acknowledges the organization’s
appreciation for the initiation of a relationship or for the
exchange, in essence, a thank you
 cognitive dissonance— a psychologically uncomfortable post-
purchase feeling or "buyer's remorse," that can follow a
commitment to purchase
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7. EXHIBIT 6.3 REASONS FOR LOST CUSTOMERS
A need, due to satiation, or a drive, due to thrill-seeking, or an
Novelty seeking intellectual curiosity that causes people to choose variety over
time
Dissatisfaction The actual performance(s) fell short of expectations
The customer perceives a higher benefit value associated with an
Relative advantage
alternative choice and believes it to be more grathifying
A disagreement in which the customer's and the company's views
Conflict
seem to be incompatible
The customer has no confidence that the organization can reliably
Loss of trust
fulfill its promises
Cease to need The product or solution is no longer required
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8. Customer Retention Strategy
 reliability— the organization can repeat the exchange time
and time again with the same satisfying results
 responsiveness— the organization shows customers it
really cares about their needs and feelings
 internal marketing— public relations efforts aimed at employees
who have contact with the ultimate consumer or who have a direct
effect on the consumer’s satisfaction with the product
 recognition— special attention or appreciation that
identifies someone as having been known before
 personalization— the organization can use its CRM system
to tailor promotions and products to the specific customer,
often using offer engines to use customer data to create an
offer or message that is appropriate to the individual
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9. Access Strategy and Customer-
Initiated Communication
 defines how customers will be able to interact with the
organization, the ease of contact, returning products,
talking with support services
 communication— the process of exchanging information
with and conveying meaning to others
 Exhibit 6.4: Traditional Communication Process
 customer- initiated communication process—the traditional
receiver, that is the customer to whom information is to be
communicated, begins the process by searching for information
 Exhibit 6.5: Customer Initiated Communication
 priority access— customers are provided with a special number or
another channel to gain quick access to the organization
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10. EXHIBIT 6.4 TRADITIONAL COMMUNICATION PROCESS
Noise Noise
Source encodes Message Channel Receiver decodes
Feedback
Noise
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11. EXHIBIT 6.5 CUSTOMER-INITIATED COMMUNICATION
Receiver Identifies
Searches Channel (s) subject
(customer)
matter
Decodes
Source Multiple
(organization) messages
Encodes
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12. Access Strategy and Customer-
Initiated Communication
 rewards program— provides the best customers
with preferential treatment or special incentives
such as priority access, thank you gifts, or other
incentives
 partnership management programs— customers
can earn additional points by making purchases
from other organizations, such as linkages
between airlines, hotels, and rental car companies
 Switching Costs
 financial penalties, time loss, or psychological barriers to
exit a program
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13. Problem Identification and
Management
 proactive approach to allowing customers to voice
concerns to the organization through surveys, mystery
shoppers, or other means
 Conflicts and Customer Complaint Management
 levels of dissatisfaction-- range from a mild displeasure to ranging
anger
 attribution theory— people look for explanations for events and
occurrences that they experience—why did this occur?
 cost/benefit perception— when the expected benefits of
complaining are high and the expected costs are low, organizations
are more likely to hear from dissatisfied customers
 Personal characteristics
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14. WHAT TO DO WHEN CUSTOMERS COMPLAIN?
 Be Customer-Centric
 understand the situation from the customer’s point of view
 Express Regret
 apology—I am truly sorry this problem occurred
 Resolve Conflict
 conflict— a disagreement in which the views of the customer and
the organization appear to be incompatible
 accommodation— a settlement of a conflict that emphasizes
cooperative behavior.
 compromise— an attempt to find a mutually acceptable middle
ground that is somewhat satisfactory to both parties
 termination— the organization or the customer ends the
relationship and sees no hope of resolving the conflict
 Follow-Up and Prevent Recurrence
 Feedback- the training of employees and strategy input for
managers
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 KEEPING IN TOUCH AND LISTENING TO VOICE OF CUSTOMERS