Companies should focus on retaining customers that contribute long-term value. Many customers simply change their buying behavior rather than defect. Changes in buying behavior may be responsible for greater changes in customer value than defection. The need to manage migration, rather than defection, is particularly important when customers engage in multi-purchasing by transacting with more than one marketer.


The fundamental purpose of focusing Customer Relationship Management efforts on customer retention is to ensure that your company maintains relationships with value-adding customers. It is usually not beneficial to maintain the same relationships with all your customers; some may be too costly to serve, others may be strategic switchers constantly in search for better deals.

Efficacy Of Customer Retention
The longer a customer stays with a company, the more their purchases increase over time as they get more comfortable in their relationship with the marketer. As this relationship continues to be satisfactory, trust grows while risk and uncertainty declines.

Therefore, customers commit more of their spending to those companies with whom they have developed a sustained and satisfactory relationship. Additionally, this benefits the company as they reap more success from their cross-selling efforts to these retained customers.

Customers who willingly commit more of their purchases to a preferred company are generally more satisfied than customers who do not. They are therefore more likely to become positive word-of-mouth brand advocates and influence the beliefs, feelings and behaviors of others. Customers who are frequent buyers are heavier referrers.

The referred customers spend about 50 to 75 percent of the referrer's spending over the first three years of their relationship. However, it is also likely that newly acquired customers, freshly enthused by their experience, would be powerful word-of-mouth advocates, perhaps more than longer-term customers who are more habituated.

Retained customers who are satisfied in their relationship may reward the company by paying higher prices. This is because they get their sense of value from more than price alone. Customers in an established relationship are also likely to be less responsive to price appeals offered by competitors.

Which customers to retain?
The customers who have greatest strategic value to your company should be prime candidates for your retention efforts. These are the customers who are defined as having high lifetime value or who are otherwise strategically significant as high volume customers, benchmarks, inspirations or door openers.

Your most valued customers are also likely to be very attractive to your competitors. The level of commitment between your customer and you will figure in the decision about which customers to retain.

If the customer is highly committed, they will be impervious to the appeals of your competitors, and you will not need to invest so much in their retention. However, if you have highly significant customers who are not committed, you may want to invest considerable sums in their retention.