Chapter 9 Managing the customer lifecycle: customer retention and development
Chapter objectives
By the end of the chapter, you will understand:
1 what is meant by the term ‘customer retention’ 2 the economics of customer retention 3 how to select customers to target for retention 4 the distinction between positive and negative customer retention 5 several strategies for customer retention, including meeting and exceeding customer expectations, finding new ways to add value, creating social and structural bonds, and building emotional commitment 6 the role of customer development 7 why and how customers are ‘sacked’.
Introduction
This is the second of the three chapters that look at the critical issues of process and structure for customer relationship management (CRM) implementation. The core CRM processes are customer acquisition, customer retention and customer development. Together, they make up the customer lifecycle. The processes of customer retention and develop- ment are the focus of this chapter. Customer acquisition is covered in Chapter 8, and structure is covered in Chapter 10. In this chapter you will learn about the important issues of customer retention and development. Managing the customer lifecycle is the last primary stage of the CRM value chain (Fig. 9.1). We propose that the major strategic role of CRM is to manage a company’s relationships with customers though three stages of the customer lifecycle: customer acquisition, customer retention and cus- tomer development. Just as a customer acquisition strategy aims to increase the number of customers in the customer base, a customer retention strategy aims to keep a high proportion of current customers by reducing customer defections, and a customer development strategy aims to increase the value of those retained customers to the company. Just as acquisition is focused, so are retention and development. Not all customers are worth retaining and not all customers have potential for development. We will deal with the issue of retention first, before turning to development. 298 Customer Relationship Management
Figure 9.1 CRM value chain
Several important questions have to be answered when a company puts together a customer retention plan.