Question

Topic: Strategy

Customer Retention Software Programs

Posted by Anonymous on 6/23/2005 at 1:09 AM ET 250 Points
My health care company currently uses a software program mainly as a rentention tool. The software program is leased to the customer fro a minimal price in exchange for signing a long term contract(3 years). A small software support fee is also charged to the customer yearly during the course of the contract.

My question regards funding. I'm trying to find some figures as to how much monies being spent on this retention software program is too much. Should one be looking at a percentage of total sales of the core business being put back into the retention tool? If so, what is a good percentage to use for these calculations? Or should one look at the profit contribution and determine a percentage from that.

I would appreciate any feedback concerning this matter.
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RESPONSES

  • Posted by Chris Blackman on 6/23/2005 at 3:44 AM Accepted
    I would look at your cost to develop a new customer/client as an upper benchmark for what you would need to spend to get them back if you should lose them. That represents the most you would pay for this form of "insurance".

    At the lower end of the scale you might allocate an amount the program might save you in terms of regular maintenance visits or calls - If you can quantify that amount. This represents the least you would expect to pay.

    Somewhere in the middle might be about the right sort of amount to spend on the program. Then, it's costing more than the least you would have spent anyway, but not as much as you would have to expend to get the customer back if you lose them, which of course is a very "iffy" situation anyway - because when you lose a customer, winning them back isn't always possible.

    Hope this helps...

    ChrisB
  • Posted by adammjw on 6/23/2005 at 6:01 AM Accepted

    ASVP/ChrisB is absolutely right pointing out that you have to look at it the way what it could cost you should you have to win your customer back.How much money would you lose if the customer walked away from you?
    Another point to consider is to find out what are other needs your customer has that come unfulfilled and that your software ,if upgraded could answer in a better way.
    Thus you could help him with your upgraded software and charge more for the lease.

    Adam
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