Determinants of Customer Retention

According to the market evidences following are the main determinants of customer retention:

  1. Delivered quality of products and services versus customer expectation: The worthiness of a particular product or service does not depend on its own merits. It is only worth and useful if it meets all customers’ expectation. If the customer expectation is very high and the provided product or service does not meet his expectation then the customer will obviously not purchase that particular product again. Hence one of the key facets in determining retention is the deference between the quality of the product or service provided and the customer’s expectation. The organization must always try to optimize the balance between quality of product and expectation from customers.

  2. Value: Value here could be defined as the getting a quality product at optimal cost. Possibilities are there that the organization could provide excellent quality product with matching price or similar quality products at comparatively lower price. Some times the organizations justify a lower quality product to be of good quality product and argue to get greater price. After the customer identifies that real value of the product is not worth its quality it may lead to customer detection.

  1. Uniqueness and suitability of products: Most customers prefer unique and different product. Identical products normally decrease the probability of selling. Uniqueness in products often increases the demand of that particular product in the global market. More importantly, the unique products should also be suitable so that it meets the differential expectations of range of customers. Hence uniqueness and suitability of products helps in retaining customers to a higher extent.

  2. Loyalty: It is necessarily required for an organization to interact and communicate with customers on a regular basis to increase customer loyalty. In these interactions and communications it is required to learn and determine all individual customer needs and respond accordingly. Even if the products are identical in competing markets, loyalty provides high retention rates. For example, shoppers and retailers are engaged with frequent shopping and credit cards to gain customer loyalty, many high end retailers also provide membership cards and discount benefits on those cards so that the customer remain loyal to them. All the important marketing strategies results in customer retention.

  3. Easy availability: Some of the products in market are not easily available. This may be because of poor marketing strategy or less retail stores. This could have an adverse effect on retention rates. For example, a customer is not able to buy a special brand of perfume if it not widely available in market or if the direct supplier or retail stores are not reachable to the customer, even if the product is of high demand. Hence, easily available products could be enhances its selling power and hence customer retention.

  4. Customer service: Customer service could be considered as the most important aspect of customer retention. In some cases, customer service determines if or not a customer defects from organization. Customer service is the reaction by the organization to the queries and activities of the customer. Dealing with these queries intelligently is very important as small misunderstandings could convey unalike perceptions. Success totally depends on understanding and interpreting these queries and then working out to provide the best solution. During this situation if the supplier wins to satisfy the customer by properly answering to his queries, he succeeds in explicating a professional and emotional relationship with him. Hence customer service is one of the most influential determinants of customer retention.

  5. Exit barrier: Organizations which are successful in creating an exit barrier can obviously retain customers. For example, by providing rewards and concessions to continuously buying customers or by designing and customizing the products according to customer needs could create a barrier against the customer to switch to other options.


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Customer Relationship Management