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Homework answers / question archive / Research reflects that there are five primary reasons for consumer Value Migration or Switching
Research reflects that there are five primary reasons for consumer Value Migration or Switching. Based on your expanding awareness of Customer Retention, what do you feel are the top five reasons prompting this phenomena. Please explain your choices.
The importance of customer retention has significantly grown over the last few years, primarily due to the fact that the organizations realize that the key to success in today's competitive business environment is to achieve highest possible customer customer satisfaction. Thus, customer retention becomes on the most critical goals for any business entity today. Let us see few important reasons which has prompted companies to adopt this phenomenon in a bigger manner:
1) Heightened competition in every industry has prompted marketeers to develop a strong and long list of satisfied customers and retain as many as possible for sustaining revenues, profitability and encountering competition in the long run. Companies have increasingly started realizing that the key to success is customer satisfaction and customer retention in the best possible manner.
Customer retention is not only a cost effective and profitable strategy, but in today's business world it's necessary. This is especially true when you remember that 80% of your sales come from 20% of your customer and clients.
source: http://marketing.about.com/cs/customerservice/a/crmstrategy.htm
2) Customer retention results in repetitive purchases by the loyal customers and positive word of mouth, thereby resulting in strong referral business as well. Thus, it aids the overall marketing and advertising functions. It is a kind of PR effort in the sense that positive word of mouth publicity is being generated by satisfied and retained customers, thereby enhancing the revenues of the organization.
3) Previously, customer retention was not considered that important as stickiness came naturally. For example, customers used to shop at the same stores regularly without making any effort to look for other options, such as regular purchases at neighbourhood grocery stores. With the advent of tools such as internet, the information horizon for the customer has broadened significantly and physical boundaries do not hold significance. Today's consumer is mobile and switches from one brand to another or one company to another frequently due to the power of ecommerce. Thus, it is becoming increasingly important for companies to retain this ever increasing size of knowledgeable, quality and cost conscious as well as informed consumers.
4) Availability of information technology and software tools, such as CRM solutions, database marketing tools,etc. has eased the complex task of ascertaining and analyzing consumer needs, tastes and preferences and has helped in developing customized solutions for customers, thereby leading to better satisfaction and more retained customers. Such tools were not present previously and thus, companies did not even imagined to conduct such tasks without such tools. In today's world, companies are making increasing use of such IT tools to lure their customers with customized offerings.
5) As mentioned before, today's customer has is much more informed, has access to much more information as well as has a greater need for convenience, customization and customer service. The changing expectations of the today's demanding consumers has forced companies to focus on their needs and wants and thus, customer retention becomes one of their major goals as focus on customer retention provides answer to all these questions.