Essay on Customer Defection
Customer Defection
In order to learn from customer defection, a business must understand the strategic importance of customer loyalty. Product-oriented companies with no focus on its customers and no market orientation will more likely to have high customer defection. Not many of those firms will take the time to find out why they lost the customer. Businesses understand the significance of existing customers and enforce every effort to keep them satisfied. However, lost customers are the most valuable source to recognize potential improvements for the company.
One of the reasons the businesses fail is that they tend to focus on profitability and stock prices rather than customer satisfaction and loyalty. Businesses that utilize its operations on creating customer value are destined to be market leaders. Lexus, for example, initiated a model that calculates how much more each dealership could earn by achieving customer loyalty. Through the use of this model, Lexus recognized the importance of customer retention, and it empowered and trained its employees to offer full customer satisfaction.
Customer Value
Companies that do not emphasize on customer value and enforce no effort to prevent customer defection will lose about half of their customers in about every five years. If those companies do not measure the reasons behind customer defection, they will more likely lose profits and market share to competition. Creating customer value is the most important step to prevent customer defection. Understanding the reasons behind customer defection will lead to improvements in the business operations. The concept of customer value and customer defection is inversely related meaning that the higher the customer value, the lower the customer defection rate will be.
Learning from the Customers
The article states that one misconception among managers to measure customer satisfaction is the use of satisfaction surveys. The surveys are often misleading and should not be taken as a benchmark. Companies that search for the “root cause” of customer defection will learn from their customers and will be able to identify the areas that need improvements. MicroScan, for example, interviewed its lost customers and identified the root causes of defection. After learning from their customers, the company gave attention to its equipment and delivery problems. By getting feedback from its lost customers, the company was able to improve its “results and process quality of customer value”. MicroScan’s ability to learn from its lost customers and failures eased its way to a market leadership position.
The key success factor for companies to succeed in today’s competitive job market is to emphasize on customer value. High customer value will keep the customer defection at low levels. Each company will experience customer defection, but the companies that learn from customer defection will be the ones to lead the market.
In order to learn from customer defection, a business must understand the strategic importance of customer loyalty. Product-oriented companies with no focus on its customers and no market orientation will more likely to have high customer defection. Not many of those firms will take the time to find out why they lost the customer. Businesses understand the significance of existing customers and enforce every effort to keep them satisfied. However, lost customers are the most valuable source to recognize potential improvements for the company.
One of the reasons the businesses fail is that they tend to focus on profitability and stock prices rather than customer satisfaction and loyalty. Businesses that utilize its operations on creating customer value are destined to be market leaders. Lexus, for example, initiated a model that calculates how much more each dealership could earn by achieving customer loyalty. Through the use of this model, Lexus recognized the importance of customer retention, and it empowered and trained its employees to offer full customer satisfaction.
Customer Value
Companies that do not emphasize on customer value and enforce no effort to prevent customer defection will lose about half of their customers in about every five years. If those companies do not measure the reasons behind customer defection, they will more likely lose profits and market share to competition. Creating customer value is the most important step to prevent customer defection. Understanding the reasons behind customer defection will lead to improvements in the business operations. The concept of customer value and customer defection is inversely related meaning that the higher the customer value, the lower the customer defection rate will be.
Learning from the Customers
The article states that one misconception among managers to measure customer satisfaction is the use of satisfaction surveys. The surveys are often misleading and should not be taken as a benchmark. Companies that search for the “root cause” of customer defection will learn from their customers and will be able to identify the areas that need improvements. MicroScan, for example, interviewed its lost customers and identified the root causes of defection. After learning from their customers, the company gave attention to its equipment and delivery problems. By getting feedback from its lost customers, the company was able to improve its “results and process quality of customer value”. MicroScan’s ability to learn from its lost customers and failures eased its way to a market leadership position.
The key success factor for companies to succeed in today’s competitive job market is to emphasize on customer value. High customer value will keep the customer defection at low levels. Each company will experience customer defection, but the companies that learn from customer defection will be the ones to lead the market.
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