Research Recap
In Pursuit of Enhanced Customer Retention Management: Review, Key Issues, and Future Directions
Key Takeway
This integrated framework centers on continued transactions with customers – distinguishing between which customers are at risk and which should be targeted, as they aren’t necessarily the same customers.
In today’s turbulent business environment, customer retention presents a significant challenge for many service companies. From the customer point of view, 85% of customers report that companies could do more to retain them. And while a majority of top executives report that customer retention is a priority within their organization, 49% admit to being unhappy with their ability to support their retention goals.
Many researchers have studied customer retention, but most research has been devoted to predicting customer churn. Less attention has focused on elements of campaign design such as whom to target, when to target, and with what incentives, as well the broader issues of managing multiple campaigns and integrating retention programs with the firm’s marketing activities and strategy.
In this report, the authors draw on previous research and current practice to distill insights and key issues regarding customer retention and to propose avenues for future research. A central theme of their work is that researchers and managers need to take a broad view of retention management. They propose a definition that extends the concept beyond the traditional binary “retain/not retain” view of retention. Their definition of retention centers on continued transactions and applies to a wide range of businesses, regardless of the existence of a customer/ firm contract or the type of transactions.
To begin, they discuss a variety of metrics to measure and monitor retention. These range from 0/1 measures to recency/frequency calculations to metrics imputed from models designed to measure unobserved churn.
They then present an integrated framework for managing retention that leverages emerging opportunities offered by new data sources and new methodologies such as machine learning. They highlight the importance of distinguishing between which customers are at risk and which should be targeted – as they aren’t necessarily the same customers. They identify tradeoffs between reactive and proactive retention programs, between short-term and long-term remedies, and between discrete campaigns and continuous processes for managing retention.
Finally, the authors identify several areas of research where further investigation will significantly enhance retention management.
Many researchers have studied customer retention, but most research has been devoted to predicting customer churn. Less attention has focused on elements of campaign design such as whom to target, when to target, and with what incentives, as well the broader issues of managing multiple campaigns and integrating retention programs with the firm’s marketing activities and strategy.
In this report, the authors draw on previous research and current practice to distill insights and key issues regarding customer retention and to propose avenues for future research. A central theme of their work is that researchers and managers need to take a broad view of retention management. They propose a definition that extends the concept beyond the traditional binary “retain/not retain” view of retention. Their definition of retention centers on continued transactions and applies to a wide range of businesses, regardless of the existence of a customer/ firm contract or the type of transactions.
To begin, they discuss a variety of metrics to measure and monitor retention. These range from 0/1 measures to recency/frequency calculations to metrics imputed from models designed to measure unobserved churn.
They then present an integrated framework for managing retention that leverages emerging opportunities offered by new data sources and new methodologies such as machine learning. They highlight the importance of distinguishing between which customers are at risk and which should be targeted – as they aren’t necessarily the same customers. They identify tradeoffs between reactive and proactive retention programs, between short-term and long-term remedies, and between discrete campaigns and continuous processes for managing retention.
Finally, the authors identify several areas of research where further investigation will significantly enhance retention management.