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October 25, 2014

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Gordon McDougall

Customer retention strategies: When do they pay off? (ABSTRACT)


McDougall, G.

published: 2001 | Research publication | Refereed Journals - Marketing

McDougall, G. (2001). "Customer retention strategies: When do they pay off?". Services Marketing Quarterly, 22 (1), 39.



ABSTRACT: Many firms have invested substantial resources in customer retention strategies based on the premise that improving customer retention rates leads to significant increases in profits. However, the profitability is determined by four factors: 1. industry retention rates, 2. segmentation issues, 3. components of long-term customer value, and 4. ability to calculate long-term customer value. If these factors are not favorable, the payoffs may be lower than the costs of retention strategies. Using the factors, a case study illustrates how firms can evaluate when retention strategies are likely to pay off. In general, the strategies are appropriate when: 1. industry retention levels are high, 2. segments differ in value, 3. components of long-term customer value are favorable, and 4. individual customer value can be determined.

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revised Jan 7/05

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