Q: Analyze customer retention tactics and how does it reduce customer

defection rate?

 Customer Retention

Customer retention is very important because acquiring a new customer is far more
expensive than keeping an existing one. This is even truer if the market operating is
saturated or saturating as in mobile telecommunication industry. Retention is important to
most businesses because the cost of acquiring new customers is much greater than the
cost of keeping good relationship with current customers. Best determinant of profit is ot
sale but retention rate. Retention must be greater than the defection rate.

• Acquisition of customers can cost 5 times more than retaining current customers.
• The average customer loses 10% of its customers each year.
• A 5% reduction to the customer defection rate can increase profits by 25% to
85%.
• The customer profit rate increases over the life of a retained customer.

 Customer Defection

Defects
A defect is defined as any part of a product or service that
• Does not meet customer specifications or requirements, or
• Causes customer dissatisfaction, or
• Does not fulfill the functional or physical requirements.

By knowing the defection rate firm can project about the future prediction of profit and
know about the reasons of defection and reasons of satisfaction of customer. It’s easy to
know about the reason of defection then knowing about the desires of customers.
Relationship marketing and conquest marketing are two approaches that can be used to
reduce customer defection rate.

The risk of customers defecting to competitors is extraordinarily high. While no magic

bullet exists to dramatically lower this defection risk, three steps can take to reduce the
defection risk of their customers. Responsiveness and responsibility can also be the ways
to reduce the defection of the customers.

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 Following are the ways being used by Ufone to retain the customers.

 Know About Your Customer

Can you develop effective retention strategies without knowing this vital information?
Will it be possible to do so? The single most important thing in customer retention is to
understand your customers well enough: customers' expectations, satisfaction,
demographic & geographic & psychographic customer tendencies, etc. If you understand
more about customers and know more about which customer groups are defecting to rival
providers, more effective retention strategies can be developed. This is the key to the
successful retention marketing!

How it helps?
Ufone knows its customer very well geographically, psychologically etc. And they are
providing desired products and packages. This is providing them a way to know whether
there is any need for U Nite package or not

 Customer Surveys Can Be Used To Predict Customer Churns

Customer surveys are very important means for identifying potential problems in your
services. Most common reasons for customer defection include inadequate service quality
and high cost. Ask customers to rate your services along with their demographic and
psychographic profiles. When it is matched (or combined) with customer churn status, it
can reveal surprising information! Analyzing surveys can reveal customer groups who are
not happy with your services. Actions can be taken to prevent customer defections.

How it helps?
Ufone gets information about their customer defection reason, if some one wants to
change their product from pre paid to post paid. They often conduct a survey or predict
Customer Church to know about their services and suggestions.
 Passive Retention

Passive retention involves building loyalty with customers through communication and
rewards, with segmentation being based on managerial judgments.

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How it helps?
Ufone knows and greatly communicate to their customer and design rewards program for
satisfying their customer and to retain hem. They often go to different areas and doffer a
concert and gave people gifts for participating.

Categorization of Firms by Customer Retention Processes Used

Approach to retention Passive retention Active retention Scientific

strategy development (i) (ii) retention (iii)
A Firms Automobile Publishing 2 Publishing 3
Consumer Goods Fast Food Financial 2
Charity Telecommunication
Segmentation for retention
B Base used Behaviour/attitudes Behavior Behaviour
C Variables used One or two One or two Many
D How selected Managerial Managerial Statistics
judgments judgments
Research
E No research Consumer Goods & Publishing 2
Charity
F Research to tailor offer Automobile Publishing 2
G Research to solve customer Fast Food Financial 2
problem Telecommunication

 Active And Scientific Retention

Active and scientific retention both focus on identifying customers who may lapse in the
future and using tactics to retain them. However, when segmenting to identify the right
customers to retain, active retention uses managerial judgments while scientific retention
uses sophisticated mathematical models. Furthermore, this research found that variables
are pre selected when managerial judgments is used (as occurred in passive and active
retention) and that the behavioral base and variables was used to segment customers
regardless of the approach adopted. The managerial implications for this study are that
firms should use a combination of both passive and active strategy and where possible,
firms should try to use mathematical modeling for their retention strategies.

How it helps?
They use MIS programs and self survey and other tools to know about the customer and
develop strategies according to the requirement. They have segmented customer into
different categories and have package accordingly
 Effective Communications

Developing effective and consistent two-way communication skills is the first component
in establishing and maintaining a selling edge and developing long-term customer or
client relationships. It is accomplished through practice and constant exchange of

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thoughts, feelings, and reactions with those customers, clients or prospects that have a
distinct need and ability to acquire the products or services that you provide.

A prospect's or customer's thoughts and feelings can easily be discerned by talking to

him--asking open-ended questions and really listening to what he has to say about his
family, background, employment, goals, hobbies, and interests. Then you can use what
you have learned to create a long-term, mutually profitable working relationship.
How it helps?
This develop a close relationship and Ufone uses it through print media.

 Achievement Drive

The right attitude--a strong, overpowering will to succeed (success motivation) is the
second key to achieving consistent sales. Studies show that top sales people from every
field of endeavor have more desire to achieve than the vast majority of their peers. They
also gain personal satisfaction in helping other people make sound buying decisions. This
gives them the energy, stamina, enthusiasm, and compelling motivation to attain the edge
that produces higher rates of sales and high quality customer service levels.

To successfully sell your products or services, you need to develop a strong desire to
succeed. Our research reveals that success motivation can be learned and heightened with
a positive attitude about you, your products, and services through creative mental
imagery, and by developing specific, written sales and promotional goals.

 Daily Planning and Personal Management

“The mere possession of selling techniques does little to insure success. It is the person's
attitude and work habits that are important.”

The third concept to be mastered, if you are to achieve success in selling, lies in your
ability to schedule your time wisely and work effectively during the periods you allocate
to your sales promotional activities. Major studies have conclusively demonstrated that
sales professionals are successful not because of any special or unique selling techniques
they use or a sales personality, but they succeed because of the positive disciplined
approach they bring to their work.
How it helps?
Thos tells frequency of use and is gathering by usage of product. This make them up-to-
date