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Back in the industrial days, businesses used to practice the "leaky bucket" theory: It didn't much matter how many customers leaked out of the bucket, because there was always a ready supply of new ones.
Now it matters. In the Information Age, keeping customers is the name of the game. You've seen the studies: Getting a new customer can cost 10 times more than retaining one. A five-percent improvement in customer retention can lead to an 85-percent increase in profits.
The best way to keep customers is to know who they are and what they do. That's what database marketing is all about. It has evolved from a muddle of mumbo-jumbo into an almost routine way to monitor, measure, and manage customers. One thing has become clear: If you can mesh database marketing technology with good communications psychology, you'll keep more customers than your technologically deficient or psychologically obtuse competitors.
Given the right technology and psychology, how do you maximize customer retention? Generally, love your customers more and your products less. Specifically, systematize trust, contact, and the manual override.
No matter how great your database, you can't keep customers unless you trust them. Not many firms are as technologically astute as American Airlines. However, that technical acuity is often subverted by a culture of mistrust. Recently, I witnessed American Airlines illustrate the point. A man and his wife showed up...