Customer retention is not enough

Abstract

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.

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