ABSTRACT
This chapter focuses on the major strategic purpose of customer relationship management (CRM) to manage a company's relationships with customers profitably through three stages of the customer lifecycle such as customer acquisition, customer retention and customer development. The economic argument focuses on customer retention is based on four claims about what happens as customer tenure lengthens, likely the volume and value of purchasing increases, customer management costs fall, referrals increase and customers become less price sensitive. The chapter discusses the distinction between positive and negative retention strategies. It focuses on two other customer management activities, such as developing and sacking customers. The fundamental purpose of focusing CRM efforts on customer retention is to ensure that the company maintains relationships with value-creating customers. Customer value might identify customers that are candidates for dismissal, including customers who will never be profitable or who serve no other useful strategic purpose.
