Retaining Customers in a Small Financial Planning Business - Case Study Example

Foundation of Marketing Theory Case: Retaining s in a Small Financial Planning Business: The Elusive Pursuit of Marketing’s Silver Bullet Submitted by: XXXXXX XXXXX Student Number: XXXXXXX University of XXXXXXX Tutor’s Name: XXXXXXXX Subject: XXXXXX Subject Code: XXXXXXX Date of Submission: XX – XX – 2009 Number of Words: XXXX (Excluding Executive Summary and Bibliography) Table of Contents Table of Contents 1 Executive Summary 2 1.Introduction 3 2.Background 3 3.Analysis of the Case 4 a)Low Customer Relationship Management: 4 b)Low Customer Retention: 5 c)High Levels of Customer Churn: 5 d)Low Customer Loyalty: 6 4.Recommendations 6 a)Customer Service and Support: 6 b)Personalisation: 7 c)Interactions: 7 Conclusions: 8 References 9 Executive Summary The case in focus here is of a financial services company started by John in a small town. The main issue being faced within the company is the high level of customer churn and low levels of customer retention which require attention. Based on the situation of the company and based on the various marketing theories that have been developed a list of recommendations has been drawn out for the company. The company can help improve the customer retention and reduce the customer churn by following a few steps like personalisation, customer services and support and higher levels of interactions. This has been discussed in detail within the report. 1. Introduction With the rising competition and the aggressive marketing that is prevalent in the current time for all products and services, it is now becoming a business requirement to ensure all customers are retained. According to Gronroos (1994), it is a well-established fact that an existing customer is not to be lost since the cost of customer retention is much lower compared to the cost of acquiring a new customer. In fact, it is estimated that the cost of acquiring a new customer is six times costlier than retaining an existing one (Jobber, 2004). This case is the study of a business initiated by John. The paper will deal with the various factors that have caused the decline of the business and the role of customer relationship management in today’s business environment. 2. Background John had developed his own business in the field of financial planning in 2001 in his home town, New South Wales. John aimed at providing financial planning services to assist people lead a constant life even after retirement. The case brings out the new lifestyle that is being followed by people in metropolitan cities like Sydney and Melbourne, where people now ‘worked to live’ rather than ‘lived to work’. The case highlights how due to the negligence and lack of customer relationship management, John had been faced with a decline in the business. John had begun the business with a bang and had been able to follow up with every lead that he found in the business however after one year of the business, he decided to take a breather since his business had grown to a strong figure of almost three hundred customers. During this period John went through his customer database only to realise that a few of his initial clients were now lost due to lack of communication from his end as well as their end. This, he realised cost him as much as $50,000 worth of his business. John’s main issue has clearly been the lacking ability to keep in touch with all of his customers which has lead the business towards a clear decline. This paper will deal with a few essential concepts like customer relationship management, customer retention and customer churn that will be beneficial for John’s business and will assist John retain his customers. 3. Analysis of the Case a) Low Customer Relationship Management: It is clearly noted in the case that the main cause of the loss of customers is due to the lack of proper customer relationship management. Customer relationship management has been defined as: “CRM is a business strategy that has been built around the notion of being customer-centric. The main aims are to have optimum revenue by better customer satisfaction through improved contacts at each client touch point. This is possible by an improved understanding of customers, on the basis of their demographics and purchasing patterns and a better interface with the customer at all touch / contact points” (Learn that, 2007). “Making the Customer king is one way of improving sales. But a better one is making the right customer king. This discipline is called customer relationship management” (McCabe & Wolfe, 2000). In the case of John’s business, it is clear that the business lacks the basics of CRM, i.e. good customer contact and close customer relations especially in a business which relates to the finances of the customers. The financial sector is one which requires the businesses to be customer centric and requires the businesses to continuously focus on the needs of the customers. Here it is clear that John has not been able to keep up with his current clients due to the focus on only attaining newer clients. CRM has three main pillars that it is built on, a) Customers, b) Relationship and c) Management. CRM happens to be a trial for achievement of a ‘single integrated view of customers’ as well as an approach with “customer centric view” (Roberts-Witt & Sarah, 2000). b) Low Customer Retention: It has also been clearly noticed that the business lacks the ability to retain its existing customers. Customer retention is an essential element of every business and to a great extent plays a major role in the success of any business. In the case of John’s business, John has been unable to retain his customers and it has been noted John had lost contact with ten of his customers. It was also noted that eighty percent of them did not require John’s services any longer. It is a known fact that it is extremely difficult and costly to acquire a new customer. Hence the most beneficial option for any company is to ensure customer retention to the maximum levels (Kotler, et.al, 2002). c) High Levels of Customer Churn: The financial sector has been growing over the years and the level of competition in this sector has been intense. This sector has a wide range of options that are available for the customers, and this leaves the cost of acquisition as well as the churn rate of the customers at high levels. If John ensure complete customer satisfaction and every client is given a personalised approach, John will be able to retain his customers to a great extent. As seen in the case, three of the clients had moved on to other financial services providers, this highlights the high levels of customer churn in the market. It is essential to understand that retention proves to be a difficult task though not impossible. d) Low Customer Loyalty: As widely known, customer loyalty is always directly proportional to customer satisfaction as well as customer delight. According to Salvati (1999, p6), till a customer remains satisfied with the service, there are no major chances that he/she may drop or switch to another business. It is a fact that in a highly competitive atmosphere just as in the financial sector, customer loyalty is to be given a deep thought. The statistics of the company show that company has been able to build its customer database to a whooping three hundred within a year. This however has lead to lack of communication among initial customers of the company making them leave the company for other options. There are different levels of customer loyalty like hard core loyalist, split loyalist, shifting loyalist and switchers (Jobber, 2004). It is a challenge for John to constantly upgrade the customers from a lower loyalty level to an upper level to obtain greater customer lifetime values and return on investment (Deighton, 1996). 4. Recommendations Based on the case and the above analysis of John’s business, the following recommendations can be drawn out: a) Customer Service and Support: Customer service and support are two essential elements of building stronger relations among the company and customers and is also an essential element of CRM. According to Kelly, Hoffman & Davis (1993), a better customer service and support ensures higher customer loyalty. This leads to a strong strategy of building customer loyalty. It is easy to link with the customer by an efficient and up to the mark customer service and tagging along one particular service financial services expert to a particular customer (Poleretzky, 1999, p78). This will help in understanding the queries, customer preferences and requirements in a better manner and hence reduce the time taken to solve the problems faced by customers and even provide them with financial advice designed to meet their requirements. This will in turn lead to customer satisfaction which increases the loyalty level. b) Personalisation: According to Scharge (1999), personalization and customization is aimed at fostering higher customer loyalty and resulting in enhanced returns on the investments in marketing. Personalization and “customization also creates the perception of increased choice by enabling a quick focus on what the customer really wants” (Shostak, 1987). John requires concentrating on building newer systems to help personalise the experience for the customers and to assist them and make them feel needed. c) Interactions: It is also essential to stay in constant contact with customers. This will help retain the current customers and will allow for better relations building with the new customers. It is a best practise to contact the customer periodically to ensure that the service provided to him/her is satisfactory (Poleretzky, 1999, p78). These interactions with the customers will make them feel unique and will increase the level of loyalty among the customers as well. Conclusions: It is clear from the above discussion that John will be able to regain his business and will also be able to improve the business to a great extent if a few steps are followed: a) The information system of the company should always be built around the customer, i.e. it should be customer-centric, b) The company should make the customer feel that he/she is unique and is valued, c) Friendly service and prompt responses also has a great effect on retaining customers, d) Personalization based on the needs of the customers will help the company benefit to a great extent and e) Offers made to customers if the customers aim at switching to other financial experts and financial service providers. If these points are noted and followed, John will be able to retain his customers for longer periods, and will thereby increase customer retention to a great extent. References Deighton, J. "The Future of Interactive Marketing". Harvard Business Review November 1996: 151-160. Gronroos, C. "From Marketing Mix to Relationship Marketing – towards a paradigm shift in marketing". Keynote Paper, Marketing Journal 1994: 332-339. Jobber, D. Principles and Practice of Marketing. Berkshire: McGraw – Hill, 2004. Kotler, P, Armstrong G, Wong V and Saunders, J. Princilples of Marketing. Milan: Prentice Hall, 2002. Learn That, "CRM Definition". Free Definitions. 25th September 2009 . McCabe, B, and Wolfe M. Making the (right) Customer King. London: Global Telecoms Business, 2000. Poleretzky, Z. "The call center and e-commerce convergence". Call Centre Solutions 1999: 76. Roberts-Witt, Sarah, L. "It’s the Customer, Stupid!". PC Magazine 27th June 2000: 6-22. Salvati, T. "The Interactive Imperative". Banking Strategies 1999: 6-7. Scharge, M. "The Next Step in Customization". MC Technology Marketing Intelligence August 1999: 20-21. Read More