Acquisition and Retention Rates-Customers

Investments in technology, product and process innovation or distribution can have a bearing on altering acquisition rates. So can pricing, sales and service efforts change. The above examples of mobile phones and  Airlines are just two such examples in this direction.

Retention of customer is dependant on the company’s orientation. The company plays a major role in determining its competitiveness. Customer orientation was mentioned to be the objective of most successful companies. If the company is customer oriented customer retention becomes a natural part of its process, systems and strategy. Higher rates of retention are possible only if the company pays attention to the following factors:

Customer Service:

Service plays a significant role in the customer’s decision to stay with the product and the company. Research has shown that bad experience on this account has enraged customers forcing them to abandon the company.  One of the key elements of service is complaint management. There are three different responses that companies can give to a complaint – 1) accept the complaint and proactively resolve it, 2) deny the complaint and put the blame on the customer for the product’s failure and 3) be indifferent towards the complaint for the reason that you cannot please all. As may be inferred, the second and third type of response will never help retain customers. It is the proactive approach that helps create a satisfied customer.

Further, technology should be used to facilitate customer contact and service. It should not lead to removing the human touch which is vital in any customer interface. It should be possible for the customers to speak to service representatives and not just to machines.

Recognition of the customer, empathising with him   and responding to his needs can play a major role in retaining a customer in an otherwise highly competitive environment.

Continuous value enhancement through increasing customization also helps enhance customer retention. This is greatly facilitated by co-opting customers in designing products and other elements of marketing mix. We shall further discuss this strategy of customer co-option in our New Product Development and marketing strategy.

Further value enhancement is done when the company uses its network partners to offer the desired product or service. For example, a travel portal like or delivers enhanced value when it offers travel, stay and conveyance and all other services to its customers. The customer is not directed to an airline, hotel, car rental and currency dealer links. But all these are available only through this service aggregator or service portal.

One another aspect to be considered is pricing. It is important that strengthening of product or service should take place without necessarily leading to price hike.

Another way to retain a customer in today’s time is to continuously keep pace with technology. As far as possible, the firm should lead the technological development and adoption in the industry. This will help it to continuously deliver new products which are more efficient and in line with the changing life styles of the customers.

Very often customers get tired of the same old rewards in the loyalty programme. Excitement in the program need to be maintained at high level. Jet Airways was the first airlines in India to develop a dynamic reward structure which automatically upgrades customers to higher levels of loyalty status (blue to platinum) with increased benefits. Not only so, it continues to innovate on rewards by working on relationships with various other companies and service providers. These companies offer Jet customers opportunities to earn or double the reward points on very purchase transaction.

From the foregoing one inference is that the goal of customer acquisition and retention can be achieved only by understanding customer value. What values drives the consumer to a product or brand and how these values are developed. How can the firm use this understanding for developing a strategy for creating a loyal customer.

Customer value:

This term can be understood from a variety of perspectives. All of them tend to concentrate on the customer or firm’s perspective. From the customer’s perspective value can be understood as what he or she is willing to pay and hence customer value refers to perceived value by the customer in an offer. In other words, it is the value that the customer perceives as being superior and relevant to him /her and hence is willing to pay for the purchase and consumption of the products, services. From the firm’s perspective it is the value of the customer (i.e. customer lifetime value) and use of a strategy to be used to create and deliver value to the customer.