In a typical company today, customers are defecting at the rate of 10 to 30 percent each year. Organizations that can retain just 5 percent more of their customers will increase profits by up to 100 percent.

According to Ronald S. Swift in Accelerating Customer Relationships it cost five times more to get a new customer than it does to keep the ones you have. Swift states that huge profit increases follow small customer retention improvements because of reduced need to recruit new customers and the related sales cost saved. This generates higher profitability per customer because they give you higher part of their “wallet share” and increase your profits because as customers stay longer they buy more from you.

Companies that achieve high customer retention rates concentrate on satisfying the customer by delivering the right product or service, to the right customer, at the right price, at the right time, and through the right distribution channel.

Most businesses claim to have relationships with customers, but don’t. A true relationship requires-in-depth-knowledge of the customer, frequent two-way communication and mutual benefits for the customer and the company.

Organizations that prioritize “customer relationship management” understand the value of customer loyalty. Remember, it costs a lot more…five times as much…to get new customers as it does to keep the ones you have.

Customers retained are more profitable because the marketing techniques that attract new customers, such as price cuts and rebates, drain profitability. Competing on price alone is usually a zero-sum game.

The value of retaining customers thru “customer relationship management” is extremely important to your business success. Knowing who your best customers are will lower the costs of recruiting more, including savings on mailing, marketing, fulfillment, and services.

Learning customers’ preferences and using that knowledge to strengthen their loyalty to your company’s products or services reduces the cost of sales. Existing customers generally are more responsive to your marketing.

Businesses can enhance customers’ lifetime value by retaining their best for many years leading to higher profitability. Loyal customers give you a larger “wallet share.”

Managing how and when customers buy, combined with the right distribution and communication channels increases your ability to evaluate customer profitability by providing real histories of purchases and costs of service.

Customer relationship management is an interactive process. It begins with customer information, and then converts information into customer relationships. For example, assume a telephone company decides to offer customers a second line.

Traditional mass marketing would send out a mailing offering all customers the additional line and might sweeten the proposition by offering one month of free use.

One percent of customers would respond, and of those, half would accept. Other considerations? The offer and the junk mail could irritate those who already had a second line. Further, they may become disgruntled by the fact that they’re paying full price and not getting a free month.

A “customer relationship management” based campaign would start with knowledge of who already had a second line and exclude them from the solicitation. You could ask, “What customers are most likely to buy a second line?” Your database would contain information about each customer’s call volume.

The data reveals which customers receive numerous calls when they’re already on their single line. By sharing this information with targeted prospects, you present convincing problem solving reasons to purchase a second line.

By knowing who your customer really is, what they already have and are likely to need…organizations can reduce marketing expense, increase existing customer loyalty, and present compelling reasons to buy what your offering.

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