Customer Retention: Definition & Importance

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  • 0:04 Customer Retention
  • 1:13 Types of Customers
  • 3:07 Customer Service
  • 5:13 Lesson Summary
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Lesson Transcript
Instructor: Allison Tanner
In order to stay profitable, you want to keep your customers coming back. This means you need to retain their business. This lesson describes the important link between customer satisfaction and customer retention.

Customer Retention

The fitness industry is booming and your company has taken advantage of this! As the manager for one of the top sporting good stores in the country, J-Mountain, you were ecstatic to find out that your amazing sales record, positive attitude, and customer-oriented personality got you promoted to district manager. In this position, where you have ten stores in your district, your primary job is to ensure that all staff are working hard to keep customers coming to J-Mountain.

In fact, your first task as district manager is to help educate new managers on customer retention and customer satisfaction. This is the perfect position for you! You believe that few things matter more to business success than customer retention, or the process of ensuring customers continue to give your store their business. After all, keeping customers means keeping profit!

You firmly believe that in order to increase retention, you must ensure that every staff member gives perky, positive, and educated service to all customers. A great shopping experience due to awesome customer service, paired with quality products, should guarantee your customers are happy, also known as customer satisfaction.

Types of Customers

Over the next month, you'll be traveling to all ten stores and meeting with managers to give lessons on customer retention and customer service. In your approach, you'll first discuss the types of customers. As you see it, there is a huge difference between a first-time customer, someone who hasn't been in your store before, and a returning customer, someone familiar with your products and services.

A first-time customer is going to be unfamiliar with the products and services that J-Mountain offers. They may come in just to look around. Or, they may come in for one specific product. Either way, this experience will determine whether or not this first-time customer becomes a returning customer. The first-time customer is feeling you out. They want to know what kind of goods you sell, the level of quality, and how your staff treats customers. You believe there are a few key things to hooking, or retaining, a first time customer:

  • Greet them right away and ask if they've been in before
  • Since they're new, offer to show them around
  • Give a brief explanation about J-Mountain, their philosophy, and why you like their products
  • Help determine how J-Mountain can help them to get what they want and need

The main idea is to give them a great experience so they can't wait to come back. Even if you don't have what they're looking for, a good experience can create a lifelong customer.

The returning customer has either enjoyed your service, enjoyed your product, or enjoyed both. This is someone who knows your store, your values, and what they like. You want to keep their service because their loyalty means they'll continue to return, which is customer retention, and they'll tell others to shop at J-Mountain. To you, this means that you want to do a few things for the returning customer:

  • Build in a loyalty program
  • Know what they like
  • Maybe even get to know their name
  • Thank them for their continued patronage
  • Be consistent with your service

You know that if they feel valued and receive consistent service, then they'll keep coming back!

Customer Service

You've spent a lot of time thinking about the topics you want to discuss with your stores. You also want to come up with a few examples that will highlight the connection between customer service, customer satisfaction, and customer retention.

You imagine that a customer walks into J-Mountain and your staff promptly greets them but then ignores them for the rest of their shopping experience. In your mind, you figure that this customer may feel like your store doesn't care about their wants and needs. They might buy something, but the experience will not be memorable. They won't be excited to come back to your store.

Or, the other extreme. You imagine the salesperson that a customer tries actively to avoid because they know that salesperson is going to bombard them with unwanted help. Or a salesperson who pressures customers to look at items that they may not even be interested in. With all this unwanted attention, all the customer wants to do is run away.

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