Marketing Profs

A customer retention program can be a powerful tool in the arsenal of customer relationship management.

Retention is important to most companies because the cost of acquiring a new customer is far greater than the cost of maintaining a relationship with a current customer.

For many firms, customer profitability is skewed in such a way that losing the most profitable customers has a very serious effect.

In many banks, for example, the top 30 percent of customers (when ranked by profitability) can make up 100–150 percent of total customer profitability. That's right--the bottom eighty percent of customers may provide no profitability or, worse yet, destroy 50 percent of profitability.

In addition to saving profitable customers, retention programs allow companies to collect data about their customers. This data can be used to better understand, target, market to, and communicate with customers or to customize future interactions with customers.

Retention programs can be a relatively inexpensive means of making customers feel special, increase their purchases and recommend prospects.

Types of Programs

First, it must be noted that customer retention programs are not the same as customer relationship management programs.

Customer relationship management is not simply retention or customer service or marketing. CRM is a systematic business approach using information and on-going dialogue to build long lasting and mutually beneficial customer relationships.

CRM integrates data, technology, analyses and marketing and communications processes across all customer touch-points. In CRM, the customer is the building block for data management, reporting, goal setting, and measurement as well as business and marketing strategy, organization and technical infrastructure, and corporate culture and values over time and across all business units.