Customer retention management processes: A quantitative study

Lawrence Ang & Francis Buttle (2006): Customer retention management processes, European Journal of Marketing, Vol. 40 Issue 1/2, p83-99. 17p. DOI: 10.1108/03090560610637329

Keywords Customer retention, Complaints

Ang, Lawrence and Buttle Francis explain the current state of importance given to customer retention and explore the management processes, businesses associate with. They examine the impact of customer retention planning, budgeting and accountability, and a documented complaints-handling process. They compare the significance of having a customer retention planning process and a documented complaints-handling process. They point to the existence of the latter as the strongest reason behind great customer retention.

  • At the start, authors mention customer retention goals are common in businesses with a focus on relationship marketing. They explore the current customer retention approach of different types of businesses. It is acknowledged that customer retention plays an important role in profit.
  • They conclude that a documented complaints-handling process enables businesses to improve problem resolution, and better identify trends and causes of complaints. Excellence at these processes improves customer’s residual value and prevent systemic or repetitive complaints.

Initially, they state that even a small increase in customer retention rate can improve customer net present value up to 95% in different types of businesses. Additionally, it is recognized that customer retention has more impact on the value of a business than changes in discounts rates or cost of capital. Industrial and service markets rely more heavily on customer management, being business-to-business relationships the most stable and lasting ones. Moreover, an excellent customer retention can also decrease customer replacement cost.

They identify that precise planning processes which involve obligations from executives and budgeting are linked to superior business performance, and over half of businesses believe customer retention to be more important than acquisition. They express that bad managing of customer churn leads to decrease in the business’ value. In addition, writers express that complainants whose issues were resolved have higher satisfaction rates and are less-likely to switch.

It is revealed by the writers that, despite the evidence of its importance, not enough attention is given to developing a proper customer retention plan. It is suggested that businesses either do not think about customer profitability or are unable to properly measure it. Conventional management approaches tell it is necessary to build a customer retention plan, implement a budget and provide accountability. Nevertheless, the authors did not find enough evidence to support this claim.

Finally, it is concluded that excellent customer retention is linked to the presence of a documented customer complaints-handling process, improving not only the customer retention but employee performance and business’ processes as well. A documented complaints-management process enables organizations to improve their ability to resolve customers’ disputes. It enables companies to identify trends more accurately and find factors generating problems. Organizations with well-established documented complaints-handling processes have a tendency to have explicit customer retention plans, use a formal switching model to predict churn, have an employee in charge of customer retention and look for signals of imminent customer defection yet, none of these variables are statistically significant for exceptional customer retention performance.

In conclusion, it is explained that customer retention plan, budget and accountability are not linked to a great customer retention, unlike common management approaches might suggest. Only documented complaints-handling processes showed a strong correlation with low customer churn.


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