The Media and Ethics
The previous article in this series looked at how the media is an important pillar of democracy and how unless there is a free and fair media, democracies cannot be well functioning ones. This article looks at the other side and that is the practice of ethics by the media itself. In a way, this […]
Human, Social, and Intellectual Capital as a Means of Competitive Advantage
Introduction: Why Should Firms and Nations Invest in Human, Social, and Intellectual Capital We often hear economists and management experts exhorting nations and firms to invest in human, social, and intellectual capital. these calls range from asking governments to set aside substantial amounts of money to educate and skill the workforce as well as asking […]
Need for Auditors, Certifiers, and Consultants to be Ethical and Manage Conflicts of Interest
How Corporates and Auditors, Certifiers, and Consultants Partner with Each Other In the corporate world, companies have relationships with a number of external and third party entities like suppliers, auditors, certifiers, and consultants who either advise them on their strategies, partner with them in the supply chain, audit their financial statements, and have a network […]
Managing the Sales Force
The face of any organization is the sales force. Companies spend a considerable amount of time and money on sales force rather than on any other promotional activity. However, sales force is expensive and companies are looking forward to managing them in an efficient and effective manner. Designing of the Sales Force Sales force is […]
Managing the Sales Cycle
What is a Sales Cycle ? Sales cycle refers to the various processes which help the products reach the end users. Customers go through a sequence of activities before the product finally reaches them. Such activities are a part of the sales cycle. A sales cycle has the following steps: Identifying Prospects The first step […]
Customer retention is a crucial factor for organizational success in business. Many companies have misconceptions about customer retention in regard to assessing customer satisfaction in order to enhance business. Following are the most prominent myths in business world today.
For example, in airline industry, airlines have good retention rate but not 100% for their lifetime valued customers who like to travel in business classes. But if the airlines expect the same retention rate from a college student it would be unreasonable.
However, the airlines inherit some pricing techniques to offer affordable tickets to these types of customers. But airlines know that college students cannot be loyal to them as they seek lowest fairs and not the overall services. But the airlines should not avoid these low valued customers because they could be sometimes profitable to them.
Hence, the airlines realize the importance of the fact that they can’t sell their tickets only to business class and high valued customer, so they accept retention rates less than 100% and inbuilt various types of classes and offers that suits different range of customers. By doing this they obviously have to compromise on 100% retention rates but they could apparently make high profit by diversifying business rules according to the type of customers.
In practice an organization should not consider all the customers to be retained as many of them could be only transactional customers who could yield profit. Concentrating on making 100 % retention rates could result in defection of many segments of customer which cause business losses.
From our above example of airline industry, it could be easily derived that it is impossible for airlines to retain 100% of its best high valued customers. If they want to try increasing this retention rates to much higher level they need distribute the tickets to these high values customers at much lower rates. This will result in serious business losses.
Hence it is important to realize that it turns out to be profitable by loosing some high valued customers by compromising on retention rates. This is because the profit earned by charging higher to the majority of retained customers always exceeds the profit washed out from defectors.
In normal situations the philosophy, that by increasing customer retention, business profits also increase, does not stand good. However, it is very essential for the organization to make subsequent strategies accordingly to manage customer retention and always aiming at business profit.
By understanding the above myths, following are the crucial aspects that all the organizations should focus on:
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