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What is Customer Retention?

By Sheri Cyprus
Updated May 16, 2024
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Customer retention refers to keeping a client's business rather than have the client use competitors' services or products. Businesses want to reduce customer defections to their competitors because a reduction in their market share and profits could result. Customer service retention is a popular marketing strategy as it involves focusing on meeting or exceeding clients' expectations in order to maintain their loyalty.

When people feel loyal to a certain brand or business, they're less likely to be persuaded by a competitor's ads and offers. Maintaining customer retention through loyalty programs is a method commonly used by many businesses today. A loyalty program typically involves a free membership card and rewards for purchases.

The reward incentives may be for extra discount prices or prizes that can be obtained for point rewards. For example, many airlines give air miles points that may be saved for free air travel or prizes such as luggage or a complimentary night's hotel stay. If consumers are collecting points towards items they want, they're likely to keep using the products or services of the company offering the promotion. In this way, customer retention can be achieved.

The most lasting way of retaining customers, however, is through conscientious service that includes following up on any issues or complaints. If a consumer has a negative shopping experience with a company, he or she may deal with that business less often or not at all. If the firm sincerely apologizes and takes the time to have a polite representative telephone the customer occasionally to see how they can meet his or her needs, however, the consumer may reconsider and keep dealing with that company despite any past unpleasantness.

Satisfaction surveys about customer service, as well as a store's products, can help a business find areas of improvement that may help it retain customers. Short, thoughtful surveys that ask for the customer's opinion can be seen by consumers as a sign that the business does care about the people it serves. When companies really listen to their clients and are willing to make changes to please them, it can lead to successful customer retention.

Studies show that it's much less expensive for a company to spend money on customer retention than on acquiring new clients. Even smaller strategies, such as holding a customer appreciation day or remembering client birthdays, help in creating consumer loyalty. Of course, no strategy can make up for a poor product or consistently bad service. Companies who regularly monitor their daily operations as well as make any needed improvements are the most likely to have success in retaining their customers.

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Discussion Comments
By anon263714 — On Apr 25, 2012

As you mentioned, remembering customer birthdays (and I would add, the "anniversary date of major purchases") is a simple and common sense step that few businesses do today!

I use simple cards for this process and they are very memorable because no one else is doing it!

By subway11 — On Aug 17, 2010

Sneakers41- Another way to increase customer retention is to offer additional discounts to your best customers.

Creating a coded program that identifies the best customers and providing these customers with the highest discounts will cause them to return.

Also customer retention management involves quality assurance. Sometimes companies will hire mystery shopping firms in order to see how the employees are treating their customers.

This snapshot also provides information as to why customers may not be returning if your sales are down.

Some companies do in-depth research with market research companies to try to understand how the company can retain more customers. This customer retention research is critical and can often make or break a company.

By sneakers41 — On Aug 17, 2010

Customer loyalty and retention is important for any business. Many companies understand this and they create customer retention strategies.

These customer retention solutions can be something as simple as accepting a competitors coupon so that the customer will shop at your store and not the competitor.

It could also include a rewards program where the customer is rewarded with products or rebates based on their spending patterns. The use of loyalty and retention programs really helps to keep the company's market share in tact.

Some companies in order to understand their customers needs offer customer retention surveys. These surveys can be found on the back of a receipt or could be mailed to the customer's home after the purchase was made.

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