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Disadvantages of Customer Retention

While companies normally aim to establish strong relations with customers and achieve customer retention, they also recognized that there are also disadvantages in customer retention as follows:

Old market. Maintaining a customer database is a must. However, there should be a continued endeavor to create or find new market else market will be saturated and the product sales may stagnate. This is especially true for products where there is a fast phase of obsolescence. Focusing so much on customer retention can make one’s products outdated. This was experienced for instance by Harley Davidson, which is a well known American motor brand. This company went into a brink of bankruptcy in the 1980’s because of its focus on customer retention. Unfortunately, when its target market started to age (i.e. babyboom generation), product sales start to stagnate resulting to the gradual decline of the company. After learning its lesson, the company started creating products that appeal to new generation customers to keep itself afloat. Thus, focusing on the old market can stifle a company’s progressive effort to maintain relevance to the dynamically changing market.

Too many discounts. Loyal customers tend to be demanding. They want more discounts and other incentives which they feel they deserve or the company owes them for being loyal to the company. Because of this, companies usually earn less to retained customers despite providing equal level of service or product to new customers.

Two heads are better than one. Retained customers tend to have strong familiarity with the company and its products. This can be disadvantageous in a way because these circumstances tend to make the thinking of old customers more akin with the company. If that happens, the old customers tend to stop seeing things from outside, which could have helped the company to create innovative changes for the improvement of the products. Old customers tend to become ineffective sources of innovative changes for product development because of too much familiarity with the product and the company.

Bored and fatigue. Variety is the spice of life. Some retained customers tend to become bored with the company that they would prefer products of rival companies for a change. If your rival company serves your retained customers well, the possibility of finding your greatest foes is high. Retained customers are the company’s best friends and can potentially become the company’s worst enemies as well.


Originally posted 2012-05-30 08:42:19.

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