Customer Retention Strategies

I.The complete CRM for retaining customers II.Customer retention strategy III.Customer complaint management

I. The complete CRM for retaining customers 1-1 Customer life cycle 1-2 The evolution of relationship marketing programs

1-1 Customer life cycle  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

1-1 Customer life cycle Acquisition stage Retention stage Winback stage

1-1-1 Acquisition stage  acquisition stage—the customer completes the initial transactional exchange

1-1-2 Retention stage  retention stage—implying that the customer is a loyal advocate or at least intends to repeat another exchange with the same organization

1-1-3 Winback stage  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

1-2 The evolution of relationship marketing programs Financial relationships Social bonding relationships Structural-interactive relationships

1-2-2 Financial relationships  financial incentives--discounts, product upgrades, or prizes that serve as rewards for customers who exhibit loyalty or who frequently purchase from the organization

1-2-2 Social bonding relationships  social bonds—a friendly companionship or an affective tie such as that experienced by Saturn owners who gather to meet other owners

1-2-3 Structural- interactive relationships  Structural-interactive relationships—use system design to solve problems, reinforce purchases, and recognize the importance of each customer

II. Customer retention strategy  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

II. Customer retention strategy  There are a number of reasons why customers terminate relationships.  Exhibit 6.3 Reasons for lost customers

II. Customer retention strategy 2-1 The welcome 2-2 Reliability 2-3 Responsiveness 2-4 Recognition 2-5 Personalization

2-1 The welcome  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

2-2 Reliability  reliability—the organization can repeat the exchange time and time again with the same satisfying results

2-3 Responsiveness  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

2-4 Recognition  recognition—special attention or appreciation that identifies someone as having been known before

2-5 Personalization  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

2-5 Personalization  Access Strategy and Customer-Initiated Communication  access strategy—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

2-5 Personalization  Reward Strategy  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  switching costs—financial penalties, time loss, or psychological barriers to exit a program

III. Customer complaint management 3-1 Problem identification 3-2 Factors influencing a customer’s decision to complain 3-3 What to do when customers complain

3-1 Problem identification  problem management—proactive approach to allowing customers to voice concerns to the organization through surveys, mystery shoppers, or other means

3-2 Factors influencing a customer ’ s decision to complain Levels of dissatisfaction Attribution of blame Cost/benefits of actions Personal characteristics

3-2-1 Levels of dissatisfaction  levels of dissatisfaction--range from a mild displeasure to ranging anger

3-2-2 Attribution of blame  attribution theory—people look for explanations for events and occurrences that they experience—why did this occur?

3-2-3 Cost/benefit of actions  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

3-2-4 Personal characteristics  Personal characteristics are the demographic and personality characteristics of the cusotmer base

3-3 What to do when customers complain Be customer-centric Keep in touch and listen to customers

3-3-1 Be customer- centric(1/2)  customer-centric approach—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 (e.g., customer service representative) 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

3-3-1 Be customer- centric(2/2)  Follow-Up and Prevent Recurrence  closed-look marketing—feedback should be part of the training of employees and strategy input for managers

3-3-2 Keep in touch and listen to customers  The quote, “There is nothing permanent except change.” by Pre-Socratic Greek philosopher Heraclitus suggests that organizations must continue to try to listen to the changing voices of the customer base.