Driving the Bottom Line in Finance — Is There a Link Between Customer Retention and Business Success in the Financial Services Market?

Abstract

High customer retention is of outstanding importance to all financial institutions. However, during challenging times, investment in the management and monitoring of customer retention is frequently called into question. The rationale for this questioning is that the costs of such activities are often not directly coupled to earnings within a business. But this can be changed.

By developing a company’s alignment more towards “customer value management” it is possible to establish a direct link between customer retention and the financial success of the business.

The present article begins by setting out the most important trends in this direction within the financial sector and shows how these are changing the demands being placed on market research.

Its main emphasis is on re-evaluating current hypotheses concerning the links between customer retention and customer value, and profit. Numerous examples are presented from validation studies covering the private and corporate markets in a wide range of financial sub-sectors, such as banking, insurance and credit cards.