Journal of Consumer Marketing · 2005 · 188 citations · 0 references
BusinessMarketingMarketing ManagementConsumer BehaviorCustomer Relationship ManagementMarketing StrategyChurn AnalysisChurn ManagementCustomer RetentionCustomer SatisfactionRetention StrategyCustomer Retention ManagementCustomer Satisfaction VariablesHoly Grail
Customer retention is widely valued because keeping a customer is cheaper than acquiring a new one, yet traditional metrics focus on defections rather than changes in spending patterns. The article investigates how to assess customers’ susceptibility to changing spending patterns. The authors conducted a two‑year survey of 1,200 households across 16 industries to gauge attitudes toward companies. McKinsey found that targeting modest shifts in customer spending can generate up to ten times the value of focusing solely on defections, underscoring its importance for retention strategies.
Purpose Every company knows that it costs far less to hold on to a customer than to acquire a new one. That is why customer retention has become the Holy Grail in industries from airlines to wireless. Yet defecting customers are far less of a problem than customers who change their buying patterns. Today's typical metrics of customer satisfaction and defection do not tell a company how susceptible its customers are to changing their spending patterns. This article seeks to investigate this problem. Design/methodology/approach The investigation was carried out through a two‐year study of the attitudes of 1,200 households toward companies in 16 industries. Findings McKinsey found that focusing on smaller changes in customer spending can have as much as ten times more value than concentrating on defections alone. Originality/value This is important for those companies that wish to retain their customers.