Measuring and Managing the Benefits of Customer Retention

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Abstract
Past research on the benefits of customer retention (BCR) has been characterized by the lack of a psychometrically adequate criterion. Research has primarily operationalized the BCR by using only repurchase intent or a factor score of several measures including repurchase intent, word of mouth, and price tolerance. In the process, it has ignored the possibility of a hierarchical ordering of the BCR measures that would lead to a unidimensional and cumulative BCR scale. In this article, the authors investigate this issue using a set of intent measures developed based on past work in customer retention, customer loyalty, brand loyalty, and satisfaction. As hypothesized, support is foundfor a unidimensional and cumulative BCR scale. The authors also investigate howfirms can use BCR along with satisfaction to monitor and manage customers. They propose that vendors use a customer management strategy that is based on managing both satisfaction and BCR.