“When we think of marketing, we often think of Marketing`s efforts to acquire customers. The world, however, is moving toward relationship-based businesses”.1)
Due to saturated markets and an increased competitive environment, companies not only focus on acquiring new customers, but more and more work on developing long lasting relationships with their customers. The goal of retention marketing is to convert new (and occasional) customers into long term customers with high loyalty.2) It is, therefore, one main effort of the overall customer-relationship-management (CRM).
Retention marketing basically relies on high satisfaction with the product and relationship quality, customer services as well as the willingness to recommend the company to others. A satisfied customer with high loyalty has only very little intention to switch to a competitor.3) To achieve the necessary customer satisfaction level, promises and expectations not just have to be met, but must be over fulfilled. Company`s ability to understand customer`s requirements and customer`s quality perception is crucial to the success of retention marketing.
“Just about every business owner or corporation executive who is awake understands that it is far more costly to obtain a new customer than retain an existing one.”4) That is why customer retention has top priority for companies according to a recent survey done by Forbes in 2011 (Source: http://www.paulhelmick.com/2011/06/customer-retentio/).
<note warning>Companies should be aware that retention marketing is not an one-sided, short-term process! To deliver more than customers expect and, therefore, achieve high loyalty, it is not only necessary to manage customer relationships well, but also to have the focus on your own employees. Companies with a high staff turnover probably won`t be able to build up long-lasting relationships with their customers. Not motivated employees cannot inspire their customers and deliver excellent quality.</note>
For a practical example look at the company Würth Elektronik (http://www.we-online.de/web/en). Their statement towards the customer is “more than you expect”. They put very much effort into managing the customer retention process, e.g. by inviting their customers to the headquarter (combined with an event on the evening), they segmented their customers and as a result they individualized their communication strategy and changed the marketing portfolio according to the different needs of the segmented customers.
Most companies only measure the number of new customers. Often they do not take into account the numbers of customers that leave the company. But for measuring the effect of customer retention marketing, it is necessary to calculate the customer basis as follows:
Number of new customers minus customers that leave the company = net growth of customer base.
The goal of retention marketing is to increase the net growth of the customer base by decreasing the number of customers that leave a company. For a broader approach of how to measure the effect of retention marketing please see also e-commerce KPI - Customer Retention.