Customer retention

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company’s ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually generate as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Successful customer retention involves more than giving the customer what they expect. Generating loyal advocates of the brand might mean exceeding customer expectations. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center of business strategy’. The key differentiation in a competitive environment is often the delivery of a consistently high standard of customer service. Furthermore, in the emerging world of Customer Success Retention is a major objective.

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 return a revenue gain of 3.4 times the norm.

The measurement of customer retention should distinguish between behavioral intentions and actual customer behaviors. The use of behavioral intentions as an indicator of customer retention is based on the premise that intentions are a strong predictor of future behaviors, such that customers who express a stronger repurchase intention toward a brand or firm will also exhibit stronger corresponding behaviors. Customer repurchase and retention behaviors can be measured in a variety of different ways which are enumerated in several award-winning articles published in the marketing discipline. The different studies that also involve different metrics to measure customer repurchase intention and actual repurchase behaviors are summarized in a series of review papers such as Keiningham and colleagues (2007), Gupta and Zeithaml (2006), and Morgan and Rego (2006). These studies point to the following general conclusions:

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