Relationship Marketing Strategy and implementation

points increase in customer retention for a number of businesses
yielded an improvement in profitability, in net present value terms,
of between 20 per cent and 125 per cent. Some of their findings on
the profit impact of retention in a range of industries are shown in
Figure 2.7.
They concluded that such a dramatic effect on profitability was
due to a number of factors, including:

●retained business
●sales, marketing and set-up costs are amortized over a longer customer

lifetime
●increased expenditure by the customer over time
●repeat customers often cost less to service as there is a mutual famil-
iarity with systems and processes
●satisfied customers can be an important source of referrals

The customer market domain: Managing relationships with buyers 47

0

20

40

60

80

100%

95%

85% 85% 84%

81%

75%

45%

35%

Advertising

agency

Bank branch

deposits

PublishingAuto/homeinsurance

Auto serviceCredit cards

Industrial

distribution

Software

Percentage increase in profits

per customer

Figure 2.7 Profit impact of 5 per cent increase in retention rate.

Source: Based on Reichheld.^20