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"Your customer doesnt care how much you know until they know how much you care"

-Damon Richards

Vol. III, No. 44, 13 November 2015

Marketers face a big question in todays dynamic world- enterprise success lies in acquiring new customers, or retain
and nurture their current customer base. Its a conundrum companies have faced for years and continue to do so
even now. Is it wise to go out for new leads or develop a loyal customer? The dilemma is where to allocate time,
money and resources- so as to attain profitability.

70 per cent of the companies say its cheaper to retain a
customer than acquire one. A recent research shows that
44 per cent of the companies have a greater focus on
customer acquisition vs. 18 per cent that focus on
retention. Customers are assets that need to be acquired
before they can be management for profits.

Acquisition will remain the cornerstone in the early stages
of a start-up business. Its a means of brand building and
further generating revenue. As the competition rises
customer acquisition strategies become more important
than retention. For new startups and for those looking for newer markets, acquiring new customers is crucial, as
they do not have any customer base. For the already existing companies, where the market is mature there is always
a need to acquire a new customer, as the older ones are lost.

Customer acquisition is always a dependent process and certainly exerts influence on customer retention and
consumer behaviour. In the E consultancy study, 47 per cent of the marketers said they behave equally on retention
and acquisition. Retention is all about turning the first time buyers into repeat purchasers. Customer loyalty has
been positively related to profitability. It takes less effort and resources on loyal customers compared to acquiring
new one. Amongst rising corporate expenditures on customer loyalty, there has been some challenging evidence as
far as its relation with profitability is concerned. Recent evidence from Werner Reinartz and Kumar has shown that
the loyal breed of customers was hardly generating any profits. Their database taken from four companies, studies
for four years, challenges the fact that loyal customers are cheaper to serve lesser price sensitive and bring business
to the organization.

Businesses need to be more judgmental and objective in measuring relationship between loyalty and profitability.
This is for the first time that the profitability of loyalty has been challenged. Understanding which customers are
really profitable for any organization remains a relative term.

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Written by: - Ms. Swati Vashishtha

Faculty of Marketing, Chitkara Business School


Disclaimer: This Newsletter is prepared to enhance awareness and for information only. The
information is taken from sources believed to be reliable but is not guaranteed by Chitkara
Business School as to its accuracy. Chitkara Business School will not be responsible for any
interpretations, opinions generated or decisions taken by readers.