Qualitative and Quantitative Research – Concept
As the names suggest quantitative research produces numerical data whereas qualitative research generates non numerical data. However, this is only a superficial understanding of the terms. In the first chapter, while exploring the types of research, we have mentioned that when there is uncertainty or when the problem is not clearly defined, we deploy exploratory […]
Importance of Team Building in Corporates
Employees are the assets of every organization and its success is directly proportional to the hard work every employee puts in. Individuals must work in a little different and smarter way than the others and always feel motivated to give their best. Effort by a single team member goes unnoticed and every team member should […]
Competency Ice-Berg Model – Meaning and its Components
The iceberg model for competencies takes the help of an iceberg to explain the concept of competency. An iceberg which has just one-ninth of its volume above water and the rest remains beneath the surface in the sea. Similarly, a competency has some components which are visible like knowledge and skills but other behavioural components […]
Is India on the Brink of a Serious Economic Crisis?
Widening Current Account Deficit The first and most important problem facing the Indian economy is the widening current account deficit or the CAD. The CAD refers to the difference between the exports and the imports, which is always a deficit for countries like India that are dependent on imports of oil for their economy. However, […]
Financial Doping and Financial Fair Play
The business of sports leagues is inherently intertwined with the finances that the franchises have. It may appear that the success of a club is determined by the performance of its players on the field. However, that is not the entire truth because, at the back end, there is an entire team of professionals who […]
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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