Product Positioning Process – Steps in Product Positioning
The process of creating an image of a product in the minds of the consumers is called as positioning. Positioning helps to create first impression of brands in the minds of target audience. In simpler words positioning helps in creating a perception of a product or service amongst the consumers. Example The brand “Bisleri” stands […]
Social Responsibilities of Organization Towards Employees
What is an organization without its employees? Nothing. Employees are said to be the true assets of an organization. Even the best of technology or best of infrastructure would not be of much use if employees do not perform up to the mark and are not satisfied with their current profiles. As they say, “charity […]
8 Stages of Product Development Process
Companies first find the target market than segment and then customers. After these companies go about developing products, which may be product modification or it may be a completely new product. Product offerings are increasing every year as consumers are looking for more and more variety of products. Companies which are unable to churn out […]
Diversification as a Viable Corporate Strategy
Introduction Diversification is one of the strategies pursued by firms wishing to grow in newer markets and by launching newer products. Diversification usually entails the firms entering new markets in the industry in which they are already present by launching newer products. Note the emphasis on new markets and new products as diversification is not […]
Types of Marketing Research and their Application
Research can be categorized either on the basis of technique (surveys, experiments, observation studies, etc) or on the basis of purpose. We will look at the techniques in the subsequent chapters. Now let us focus on the 3 methods of doing Marketing Research based on purpose: Exploratory As the name implies, exploratory research is the […]
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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