Customer Retention Rate |
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Customer retention rate |
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Customer Retention RateRegardless of the industry, it is a well known fact that customer acquisition is an expensive endeavor. At least when compared with the cost of keeping existing customers. The difference between getting new customers and retaining the ones you have can range from a few hundred to a few thousand dollars per person. To get new customers through the door, companies spend handsomely on their marketing efforts. Expenses such as advertisement cost, can be in the millions depending on the size of the organization and on its range of products. Once a customers are acquired, the idea is to monetize their existence into the largest amount possible. Preferably, customer spend should at least reach break even. Unfortunately, competitors may lure away valued consumers before companies recover their acquisition costs. Even if such costs have already been recuperated, there is no reason to give up hard earned customers without a fight. In response to customer churn, many organizations have implemented various retention programs with the goal of keeping as many consumers on board. However, not all programs are equally effective in terms of the ultimate goal, long term customer loyalty. In some instances, businesses may try to keep customers by offering them financial incentives, or high ticket items, in exchange for a short term commitment to the company. This approach may work for some customers, but can certainly drain the bottom line if not properly executed. In addition, combining high priced incentives with equal treatment of customers, in terms of their spend, can be truly disastrous. Offering everyone the same incentives regardless of their potential for consistent and lavish spending on the organization, will contribute more toward closing down the retention department than helping the organization. |
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