they modelled long-term profitability within four key market seg-
ments. They suggest that retention strategies need to be based on
understanding the relative profitability of different segments and
micro-segments and that existing mass-marketing strategies will
need to be replaced by those based on identifiable value propositions
and retention management programmes aimed at specific segments.
Other researchers are also working on aspects of customer reten-
tion. These include Ennew and Binks,^18 who have examined the
links between customer retention/defection and service quality in
the context of the UK banking sector and banks’ relationships with
small business customers. They develop a framework for examining
satisfaction and retention and present the results of some empirical
research. They find support for the hypothesis that loyalty/reten-
tion is influenced by service quality and customer relationships; and
find that trust in the banking relationships has the largest impact on
potential defection.
Other work on customer retention has been undertaken by Page,
Bethon and Money,^19 who developed a quantitative approach to
analysing defections and their impact using a case study approach.
They explore the role of customer defection probability and customer
contribution as a function of age and then use sensitivity analysis to
investigate the impact on contribution and market share sensitivity of
two different strategies – reduction in defection rate and improve-
ment in new customer acquisition. They then address different poten-
tial marketing mix strategies for new and existing customers.The customer market domain: Managing relationships with buyers 49Number of customersRetention rateProfit per customerCost of acquisitionTotal number
of customersTotal profitNPV of a customerNPV of firm's
future profitsRetention model:
key equationsRetention model input variables Retention model output variables
Figure 2.8 The customer retention model.
Source: Based on Payne and Rickard.^15