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Business Analytics for Sales and Marketing Managers: How to Compete in the Information Age by Gert H.N. Laursen

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INTRODUCTION TO CUSTOMER RETENTION

The objective of customer retention is to grow your customer base by not losing customers. The alternative is to launch acquisition campaigns and then grow your customer base that way. There are, however, arguments that speak for retention as opposed to acquisition activities:

  • You know what you have got and you do not know what you get. If you can estimate the value of your existing customers, you also know the ones that are of great value to your organization. An acquisition campaign can be compared to fishing with a big net; some of the customers that you catch will be profitable and some will be less so. This is also why in Chapter 2 we recommend that you target retention activities toward high-value customers as a starting point.
  • Typically, it is cheaper to hold on to a customer than it is to go out and acquire a new one. Again, the use of value-based segmentation will give you an overview on how much you can spend on retention offers to a specific customer.
  • Customers over time are cheaper to serve since they need less support. Loyal customers will also, to an increasing extent, act as ambassadors for your business and be willing to pay higher premiums. Also, it is a generally accepted fact that happy and loyal customers increase the attractiveness of working in your organization, which in turn reduces employee turnover and is reflected back on your brand.

Churn

Churn is a well-established term within retention. It describes the percentage ...

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