Customers Response and its Advantages
Customer response 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 […]
Brand Building, Launch and Promotion on Social Web
Social Networks provide great opportunity for advertising as well as promoting the brands. The fact that you can present your brand in front of over 200 million people who are participating in the discussions at various Social Networks provides a different dimension to the concept of advertising. It is important for us to remember that […]
Diversification as a Viable Corporate Strategy
Introduction Diversification is one of the strategies pursued by firms wishing to grow in newer markets and by launching newer products. Diversification usually entails the firms entering new markets in the industry in which they are already present by launching newer products. Note the emphasis on new markets and new products as diversification is not […]
Setting the Product and Branding Strategy
Marketing strategy of a company revolves around 4Ps – Product, Price, Place and Promotion. Companies devise a strategy by mixing the four. The most important among is the product. All the marketing push and promotion will go waste if the product is not able to deliver. To come out with winner product, companies have to […]
Business to Business (B2B) Marketing – An Overview
What is “Business to Business Marketing” ? Let us first understand the meaning of Business. Any organization or firm actively involved in the transaction of goods and services to the consumers/end users is known as business. As the name suggests “Business to Business Marketing” (B2B Marketing) refers to the exchange of either goods or services […]
Customer retention is a crucial factor for organizational success in business. Many companies have misconceptions about customer retention in regard to assessing customer satisfaction in order to enhance business. Following are the most prominent myths in business world today.
For example, in airline industry, airlines have good retention rate but not 100% for their lifetime valued customers who like to travel in business classes. But if the airlines expect the same retention rate from a college student it would be unreasonable.
However, the airlines inherit some pricing techniques to offer affordable tickets to these types of customers. But airlines know that college students cannot be loyal to them as they seek lowest fairs and not the overall services. But the airlines should not avoid these low valued customers because they could be sometimes profitable to them.
Hence, the airlines realize the importance of the fact that they can’t sell their tickets only to business class and high valued customer, so they accept retention rates less than 100% and inbuilt various types of classes and offers that suits different range of customers. By doing this they obviously have to compromise on 100% retention rates but they could apparently make high profit by diversifying business rules according to the type of customers.
In practice an organization should not consider all the customers to be retained as many of them could be only transactional customers who could yield profit. Concentrating on making 100 % retention rates could result in defection of many segments of customer which cause business losses.
From our above example of airline industry, it could be easily derived that it is impossible for airlines to retain 100% of its best high valued customers. If they want to try increasing this retention rates to much higher level they need distribute the tickets to these high values customers at much lower rates. This will result in serious business losses.
Hence it is important to realize that it turns out to be profitable by loosing some high valued customers by compromising on retention rates. This is because the profit earned by charging higher to the majority of retained customers always exceeds the profit washed out from defectors.
In normal situations the philosophy, that by increasing customer retention, business profits also increase, does not stand good. However, it is very essential for the organization to make subsequent strategies accordingly to manage customer retention and always aiming at business profit.
By understanding the above myths, following are the crucial aspects that all the organizations should focus on:
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