Explain the importance as well as the steps that an organisation should take for retaining existing customers and attracting new customers.

Attracting New Customers –
An organisation invests in promotion activities to influence buyers in a target market. Leads are identified through various in-store promotions where buyers are asked to fill a small form, or through surveys, trade shows, online site visits, etc. Once the prospective buyers are identified they are reached through direct marketing (mails, emails, and telephone) as well as personal selling.

A buyer before making a purchase does information search and looks for alternatives to fulfill his/her need and want. Many times, customers check the organisations websites or ecommerce sites and explore various products and read their reviews by other customers. The organisations should track the site visits by these buyers and should proactively reach out to them either by asking them to share their email id or attractive offers on the site itself (pop-ups like 10% discount, coupons, etc.) To make a maximum impact at this stage and influence buyers to buy their product, organisations invest in advertising and other promotion tools which highlight the quality and attributes of the product. The job of the sales people is to match the needs and wants of the prospective buyers with the different attributes of the product – features, additional benefits, price, etc.

The organisations share testimonials of existing customers with their ads to support their claim on the quality of the product. Salesmen carry “Collateral” with them to support their claims during presentation with prospective buyers. Collateral is the brochure or documents that proves product’s success basis the case studies, customer feedback (testimonials), clinical studies, market studies, etc. done by the marketing team. If a sale is not made, the customers can be reached at a later stage by way of offers, etc.

Steps to reduce customer defection rate –

1) It should identify the lost customers. For example, a cell phone carrier may identify the customer who has asked for cancellation of the services, a magazine can check the renewal rate of its existing customers.

2) Study the reason for customer attrition and should try to retain the customer by giving incentives, proper education etc. An organisation can ty to retain customers in case of poor service, poor quality, high price, etc.

3) The reasons for customer defection should be taken as constructive feedback, and steps should be taken to bring in changes to the overall operations. There could be other customers as well who may be planning to attrite because of the same reasons.

4) Maintain good relations with the customer and invest in the channels of communication with the customers. The relations should be kept cordial not only with the existing customers but also the lost customers. Receiving inputs from customers does wonders to the business. Most of the unsatisfied customers don’t complain. They just leave. So it’s important to stay in touch with the existing customers and keep the communication as open and hassle free as possible. The customers too feel valued and get a psychological and emotional satisfaction apart from the need fulfilled by the product. Eric von Hippel of MIT’s Sloan school of management has found that 80% of the scientific breakthroughs came from the loyal customers rather than the manufacturers. A satisfied customer brings more business to the seller. Not only a satisfied customer continues giving business but also brings along new customers.

5) Act on the inputs from customers – Compare the overall costs of retaining customers with the profits. For example, a customer can have an unrealistic demand of price reduction. To retain that one or few such customers, an organisation cannot reduce the overall price of the product if it is not profitable. Wherever possible act on the customers inputs and try to make changes. If one customer is unhappy with a price of a magazine, the organisation can reward the customer for the long term relationship by extending the subscription for free for few months.