Context-Aware Applications - Guide to Cloud Computing for Business and Technology Managers - page 506

• Differences in the impact of marketing-induced and word-of-mouth
customer
• Acquisition on customer equity
2. Customer retention: This involves decisions on who will buy, what
the customers will buy, when they will buy, and how much they will
buy, and so on. During a customer's tenure with the firm, the firm
would be interested in retaining the customer for a longer period
of time. This calls for investigating the role of trust and commit-
ment with the firm, metrics for customer satisfaction, and the role
of loyalty and reward programs, among others. The objective of
customer retention modeling includes examining the factors influ-
encing customer retention, predicting customers' propensity to
stay with the company or terminate the relationship, and predict-
ing the duration of the customer-company relationship. Customer
retention strategies are used both in contractual (where customers
are bound by contracts, such as cell (mobile) phone subscription or
magazine subscription) and noncontractual settings (where custom-
ers are not bound by contracts, such as grocery purchases or apparel
purchases).
Who to retain can often be a difficult question to answer. This is because the
cost of retaining some customers can exceed their future profitability and
thus make them unprofitable customers. When to engage in the process of
customer retention is also an important component. As a result, firms must
monitor their acquired customers appropriately to ensure that their loyalty is
sustained for a long period of time. Finally, identifying how much to spend
on a customer is arguably the most important piece of the customer retention
puzzle. It is very easy for firms to overcommunicate with a customer and
spend more on his/her retention than the customer will ultimately give back
to the firm in value.
The decision patterns would incorporate
• Explaining customer retention or defection
• Predicting the continued use of the service relationship through
the customer's expected future use and overall satisfaction with the
service
• Renewal of contracts using dynamic modeling
• Modeling the probability of a member lapsing at a specific time
using survival analysis
• Use of loyalty and reward programs for retention
• Assessing the impact of a reward program and other elements of the
marketing mix