Sunday, August 1, 2010

Learning from Customer Defection

I chanced upon an article on the topic of customer defection - didn't notice the original publication or date - and posted reading notes. My sense is that it may be a decade or so old, because some of the concepts were fashionable in the late 1990's, and have since fallen from favor, but the general topic remains valid.

The author's sense is that companies pay lip-service to the notion of customer loyalty and have a vague sense that it's important to retain customers, but it's difficult to put into practice. Traditional marketing (hence the performance metrics for "success") are all geared toward gaining new customers, and some degree of "churn" is taken for granted - the solution to which is simply to ramp up new customer acquisition to outpace the attrition rate.

Aside of the common notion that it costs more to attract a new customer than to retain an old one, it's noted that even a minor improvement in retention has a major impact on the bottom-line performance of a firm due to the profitability of a customer who makes more purchases over a longer period of time, while needing less effort to be constantly "incentivized" to continue doing business with a firm.

The author suggests some practices and metrics to address the problem of defection, and to leverage the knowledge of "lost customers" to improve service and prevent others from leaving. I don't think it's a sure-fire approach, or a quick cure, or even very comprehensive, but it's an interesting perspective that merits further consideration.

No comments:

Post a Comment