Customer Retention - The Magic of Sales


Jay Badiyani
R.K. College of Business Management


Customer retention can be said as the philosophy of treating customers so well that they lack any reason to go anywhere else. The philosophy of building your business on the basis of repeat sales, past customers, and word-of-mouth recommendations.

Customer retention is not only a cost effective and profitable strategy, but in today's business world it's necessary. This is especially true when you remember that 80% of your sales come from 20% of your customer and clients. With these statistics I am wondering why most marketing and sales campaigns are designed for the new customer.

Take for instance the mobile network companies; if you sign a new contract you are given a large rebate or even a free cellular telephone. If you are a current customer you have the privilege of paying full price. Great !

Need for rethinking

Let us have a look to a classical note in marketing saying why customers leave ?

o Move or Die 4%
o Other Company Friendship 5%
o Competition 9%
o Product Dissatisfaction 15%
o No Customer Contact Strategy 67%

Looking to the above figures, marketers need to rethink our marketing and sales strategies. Many experts will tell you that it's five times more profitable to spend marketing and advertising dollars to retain current customers than it is to acquire new customers.

In years past the importance of focusing on customer retention was not as important stickiness came naturally. We shopped in our neighborhood shops and our corner grocery stores. We had a personal connection with our service providers.

That has all changed now. Our stores are larger, the majority of the sales personnel don't know that you even exist. Not to mention that now we have the convenience of the Internet and do a large portion of our shopping online, where you are known by your email address. As a result, customer loyalty has disappeared and large corporations and virtual storefronts are unable to ask the millions of disloyal customers what caused them to stray.


Computer technology and database equipment has made it possible for specialized firms to make attempts at customer retention through database marketing programs. Establishing a detailed client database will allow these companies to keep track of personal information and individual preferences of all their customers. This enables them to provide better service and value. Just like the corner grocery store owner kept information on 200 customers in his head, the large superstore can now keep track of thousands of customers through its customer database. With effective implementation of customer databases, companies will be able to re-establish contact with customers, and will be able to work successfully towards increasing customer retention, repeat sales, and customer referrals.

To achieve the goal of the database and customer retention programs, the entire project should be designed and carried out with the customer in mind. The exercise will only be effective if the customer recognizes and associates some value with being part of your database. If they do not perceive value in your program all of your communications, coupons, special offers, and newsletters will be discarded.

A few value-add strategies that you can use include:

o Membership cards and membership programs
o Welcome and thank you communications
o Satisfaction surveys, followed up by phone calls and letters
o Beefed up customer service, empowered to solve problems
o Enhanced technical support with follow up satisfaction calls
o Frequent buyer programs which permit customers to build up equity
o Event driven communications that are meaningful to the customers' lives
o Databases that keep track of customer's purchases, preferences, complements and complaints, which are used to carry out loyalty building services and dialogs.
o Integrated marketing programs where the advertising, direct communications, customer service, database marketing and sales programs are all orchestrated together and designed to build loyalty.
o Segmentation of the customer base by lifetime value groups, and different marketing programs designed for each segment.


Customer retention is necessary. It keeps marketers at ease. Keeping relationships individually is not possible in these large customer segment markets. Database marketing have some solutions with some limitations. But, several strategies described above can make the world of marketers colourful !

Jay Badiyani
R.K. College of Business Management

Source: E-mail July 14, 2006


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