Best Practice, Measures and Methods of Customer Retention Management

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(1)

Best Practice, Measures and Methods

of Customer Retention Management

(2)

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

Wisconsin International University (USA) Ukraine, 2014

1.

Basics and objectives

2.

Examples of possible measures

3.

Customer retention management in practice

4.

The future of customer relations

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General definition

„Measures of customer retention are all activities

undertaken by a company aiming to

positively shape

a

customer‘s behavior towards a provider or a provider‘s

services with the goal to stabilize or extend future

customer relations.

The main objective of customer retention measures is the

buildup of long-term, profitable relations

to customers.“

see: Christian Brock: Beschwerdeverhalten und Kundenbindung, Wiesbaden: Gabler Verlag 2009

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Reasons for a commitment to customer retention

Advantages in binding existing customers

Cost savings

Efforts focused on evidentially beneficial customer relations

Recommendations

A content customer relays his opinion to three others, on average

Lower price sensitivity

A customer convinced from a provider will accept upward changes in the pricing structure more easily

Promotion of impulse buying

Being present in a customer‘s mind promotes impulse decisions in favor of a brand

Second chance for mistakes

Bonded customers complain constructively and allow providers a second chance

New paths

Existing customers are more likely to try new products and distribution channels

More

efforts

Higher

costs

?

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Adalbert H. Lhota: Best Practice, Maßnahmen und Methoden zur Kundenbindung

Wisconsin International University (USA) Ukraine, 2014

Impact factors

Dedicated programs alone do not achieve a high level of customer satisfaction. Eventually, many factors convene to turn a customer into a content customer.

Product lines Brand image Behavior of staff

Customer

Retention

Pricing Availability Customer service 5

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Adalbert H. Lhota: Best Practice, Maßnahmen und Methoden zur Kundenbindung

Wisconsin International University (USA) Ukraine, 2014

Factors perceived negatively

Factors perceived positively

Example: Impact factors for provider evaluation

Politeness of staff

Manifold

assortment Shop design

Brand image

Price Packaging Availability

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„It is five to ten times more expensive to attract a new

customer than to retain a regular customer, because

investments placed in the course of attracting customers

(advertising, discounts) are often higher than the value of

the newly won customer for the company.“

Prof. Dr. Thomas Hutzschenreuter, Professor of Economics at Otto Beisheim School of Management, Düsseldorf / Germany

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Objectives

Increasing frequency of visits

Mining usage data

Buyer-readiness for new products

Customer

retention

Enforcing price premiums Increasing revenues Setup of switching barriers

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

Wisconsin International University (USA) Ukraine, 2014

Dedicated programs alone do not achieve a high level of customer satisfaction. Eventually, many factors convene to turn a customer into a content customer.

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1.

Basics and objectives

2.

Examples of possible measures

3.

Customer retention management in practice

4.

The future of customer relations

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Examples of customer retention programs:

Corporate Publishing

Characteristics

- Periodically issued publications

- Usually consist of an advertising and an editorial part

- Are intended to garner customers‘ interest without being obvious advertising

- Made available free, thus production costs often must be kept especially low

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Examples of customer retention programs:

Customers club

Characteristics

- Intends an increased level of identification with provider

- Membership linked to special advantages, i.e. exclusive events, pre-purchase options, rebates

- Basis for very reliable, insightful data stock - Members become communication medium

for company

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Example for customer retention programs:

Bonus programs

Characteristics

- Rewards actual revenues

- Various membership levels depending on revenue

- Possibility to tie into existing third-party programs, enabling to offer wider choice of benefits for own customers

- Generates useful customer data and enables placement of targeted offers

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Example for customer retention programs:

Social networks

Characteristics

- Best possible, continuous interaction with customers

- Comparatively little effort needed - Enables only a small degree of actual

customer retention

- Serves many other purposes apart from customer retention: information,

communication, marketing, ...

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Comparison of various methods

Short overview of advantages and weaknesses of customer retention measures

Measure Evaluation

reach Advantages Weaknesses

Corporate Publishing good

Enables targeted, comprehensive showcasing of products, may also raise interest of non-customers

Comparatively low retention effects, high wastage

Customers club medium High retention effects, generates useful customer data

Rather high expenditures necessary, comparatively low usefulness for customers

Bonus programs medium Highest retention effects, generates very

valuable data Very cost- and effort-intensive

Social networks very good

Best possible reach, in trend, targeted marketing and brand image building possible

Provides little insight into customer behavior, high wastage, low actual retention effects

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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1.

Basics and objectives

2.

Examples of possible measures

3.

Customer retention management in practice

4.

The future of customer relations

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Elements to achieve customer retention

Matrix to determine effectiveness of measures in use

Satisfaction with product and provider

Satisfaction with complaint management Recommendation rate Re-purchase rate Rate of purchase of additional products Meeting future demands Components related to the past

Component related to social environment Components related to the future

Cus

tome

r

lo

yalty

Customer

retention

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Need for continuous evaluation

Consistent monitoring of the tools in use is indispensable

Operating time of customer retention tools

Continuous evaluations at pre-defined points in time:

Reach Intensity of use Frequency of use Feedback received Usability of data generated Impact on revenues and sales

Relation cost-to-benefits Relation expenditure-to-benefit

Starting points for improvements and extensions

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Optimization possibilities:

Corporate Publishing

Weaknesses

Comparatively low retention effects, high

wastage

Possible: Switch to online publication

• Saves production and distribution costs

• More precise reach of target group

• Enables more precise user data

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Optimization possibilities:

Social networks

Weaknesses

Provides little insight into customer behavior, high wastage, low actual

retention effects

Possible: Strengthen interactive elements

• Generates more usable customer and usage data

• Increases actual retention

• Also has effects on attraction of new customers

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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1.

Basics and objectives

2.

Examples of possible measures

3.

Customer retention management in practice

4.

The future of customer relations

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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The future of customer relations

online global adaptive interactive multi-channel social

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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Thank you.

Adalbert H. Lhota: Best Practice, Measures and Methods of Customer Retention Management

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