Many research has been carried out to find the best possible ways of Customer Acquisition, Retention, and Expansion but very few studies highlights on the challenges faced by marketers to during this course of action specifically when environmental drivers for defection is high. A research done in America proves that most of the American CEO’s are struggling hard to manage their customers attrition rate which altogether compounded on average, U.S. corporations lose half their customers every five years. Reason might be any like customers see a deteriorating stream of value from the company. or, a climbing defection rate is a sure predictor of a diminishing flow of cash from customers to the company—even if the company replaces the lost customers. Jet, researchers have found that attracting new customers is five times more costly than retaining existing ones. Recently, companies have become more aware of this dilemma, and have begun focusing on strategies to win back lost customers (Athanasopoulou, 2009).
1.1 Customer Defection
There can be many drivers for developing a mode-of-operandi so as to interact with customer but Service quality is taken as one of the prominent among them. Today’s Customer when purchase a product evaluated firms own perspective about what they are offering to them and also measures the company’s service performance, and their opinion of the quality of this service (Shepard, 1999). This may also mean that though service quality is taken as a variable impacting intention but may not lead to behavioral change. Keaveney (1995) has stated that even satisfied customers may terminate a relationship to switch to a different company. He also developed a model exploring the various drivers triggering the switching behavior among consumers.
Defection not only effect Marketing activities adversely but also to financial services of an organization. However (Arndt, 1967; Mizerski, 1982) experienced that aggrieved customers spread negative word-of-mouth about firm product or services to others also. Sonnenberg (1990) states that customers who leave a company because they have been dissatisfied with the service are believed to tell nine to ten people about their experience. Word‐of‐mouth is clearly a double‐edged sword.
According to Hesket et. Al (1994), high satisfaction is not indicative for firms high growth or decline in turnover, consumer repurchase intention can be positively related with satisfaction and
Customer defection is a very important issue in any competitive market affecting the profitability. A research (Reichheld 1996; Reichheld and Sasser 1990) reported that 123 the net present value increase in profit that results from a 5% increase in customer retention varies between 25 and 95%. In the simplest sense, customer defection will be a problem as it cuts out the service firm’s future revenue stream from the defected customer. But this doesn’t end here as customers that do not defect increase their spending at an increasing rate, purchase at full-margin rather than discount prices, and create operating efficiencies for service firms (Reichheld and Sasser 1990), the loss of a continuing service customer is a loss from the high-margin sector of the firm’s customer base. Furthermore, the new customers that come in also cost much as the firms now incur the initial costs yet again—this includes new account setup, credit searches, and advertising and promotional expenses. The sum total of this can add up to five times the cost of efforts that might have enabled the firm to retain a customer (Peters 1988).
Customer defection, customer exit or switching behaviour can be total or partial (Colgate and Hedge, 2001; Hirschman, 1970; Steward, 1994). Total defection is usually easy to detect, since consumers close all their accounts and switch all their business to another financial service provider (Bolton and Bronkhurst, 1995; Boote, 1998). Partial defection can be determined as a loss of any portion of a customer’s business and it is significantly more difficult to detect than total defection (Reichheld, 1996). Partial defection occurs in two ways. Customer can either shift some of their current affairs elsewhere or they can actually buy more, but from another service provider, with the latter being substantially more difficult to discover.
(Anthony. J, Susan and Rajendra in 2003) very first time tried to understand the reasons for defection as an outcome of consumer information based knowledge about product or services and their evaluation of alternates to incumbents. This paper also emphasized on what and how much customer owns information about the incumbents and alternates.