customer retention is not enough - college of business.docVIP

Customer Retention is Not Enough by:?Stephanie Coyles and Timothy C. Gokey source:?The McKinsey Quarterlypublished :?February?01,?2002 Companies spend millions trying to understand and influence customers — to hold on to them and to encourage them to spend more. But to increase the customers’ loyalty, companies must do more than track today’s typical metrics: satisfaction and defection. For despite all the money invested to promote loyalty among high-value customers, it is increasingly elusive in almost every industry. A better appreciation of the underlying forces that influence the loyalty of customers—particularly their attitudes and changing needs—can help companies develop targeted efforts to correct any downward migration in their spending habits long before it leads them to defect. Such an appreciation also helps companies improve their current efforts to encourage other customers to spend more. Our recent two-year study of the attitudes of 1,200 households about companies in 16 industries as diverse as airlines, banking, and consumer products shows that this opportunity is surprisingly large. Improving the management of migration as a whole by focusing not only on defections but also on smaller changes in customer spending can have as much as ten times more value than preventing defections alone. Companies taking the approach we recommend have cut downward migration and defection by as much as 30 percent. Related Thinking from The McKinsey Quarterly ... The Price of Loyalty - James Cigliano, Margaret Georgiadis, Darren Pleasance, and Susan Whalley Think Small, Win Big - Bob Davis and Terri Austerberry? Differentiating and measuring degrees of loyalty is an evolving craft. Companies first tried to measure and manage their customers’ satisfaction in the early 1970s, on the theory that increasing it would help them prosper. In the 1980s, they began to measure their customers’ rates of defection and to investigate its root causes. By measuring the value