The Importance Of Customer Retention And Customer Satisfaction

936 Words Sep 22nd, 2015 4 Pages
Why is it important to measure customer retention and customer satisfaction?
Knowing one selves competencies is essential, a firm should determine which customers it can best serve given its unique set of competencies and merchandise to be offered. A customer retention orientation basically focusses on the existing customer base(book). Retaining customer is an important step of customer relation management (CRM). Strategy of customer retention is used both in contractual as well as non-contractual settings. According to Reichheld and Sasser (1990) a 5% improvement in customer retention can cause an increase in profitability between 25 and 85 %, in terms of net present value, depending upon the industry (Kumar et al 2012). It is since then that companies have constantly allocated resources on customer retention management emphasising on studying customer retention.
Primarily, there are two main streams of customer retention. One stream is interested in investigating the effects of different marketing variables on customer retention, which in turn influences a firm’s performance. The other is interested in building econometric and statistical models to estimate or predict the customer retention decisions from both the customer and company prospective. Following figure shows an integrated framework which describes the various relationships examined in different studies across many industries which include telecommunications, financial services, hairdressing, restaurants, and…

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