Client Final Report

8/3/2019 Client Final Report

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Royal Melbourne Institute of Technology University

RMIT International University Viet Nam

Client Management - COMM 2384

Final Assessment Report Brief

Lecturer: Melanie Casul

Student: Nguyen Thi Bich Huyen

ID: s3210216

Group: 2



COMM 2384

Client Management - COMM 2384 2

Topic 1: “Client acquisition is a higher priority than client retention”. Discuss both sides of this

statement and state which is more important in your view and why. In your discussion, make

reference to a minimum of three (3) strategies discussed in any of the lectures, assigned readings,

group reports presented in this course and your wider research.

I. Introduction

A successful business could be evaluated with the quantity of clients and the strategy

it maintains effectively these relationships. With the increase in society demanded,

day by day there are countless companies with variety of sizes which pop up as fast as

mushroom growing after a rain. Imperceptibly, that situation has placed pressures onbusiness activities, especially on client management departments when targeting the

right customers to maximize company‟s profit. Thus, the opinion “Client acquisition

is a higher priority than client retention” becomes a controversial topic. This paper

will emphasize the important role of client retention over client acquisition in an

organization as well as provide reasons and also strategies in following paragraphs.

II. Overview of the terms “Client acquisition” and “Client retention”

According to Lewis (2006), client acquisition could be defined as potential customers

that the business focuses to measure their potential values and to allocate acquired

resources with greater long-term value. On the contrary, client retention focuses on

“obtaining information and allocating resources to manage relationship with existing

customers on the basic of their long-term value” (Reinartz et al. 2004).

III. Discussion on “Client acquisition is a higher priority than client retention”

1. General view on both sides of Client acquisition and Client retention

Client acquisition and client retention are not mutually exclusive because a

business might concentrate on one or both terms depending on companies‟ visions

and characteristics such as products, services or business‟ goals.

For client‟s acquisition, Bolton & Tarasi (n.d.) suggest that it is the first step in

building a customer base. Client acquisition is inadequate but it is obviously true



COMM 2384


for new establishment firm due to lots of risks. Additionally, Mittal & Kamakura

(2001) state “customers with different characteristics have different satisfaction

thresholds and different probabilities of repurchase”. Hence, client acquisition

carries a lot of risk such as waste time and money to research what do they want,

need and aspire. These elements will directly diminish to company‟s revenue.

In sum, client retention is often easier and cheaper than client acquisition.

According to the data of CRMGuru – the world‟s best community for business

leaders, releases that 80% business leader believes in loyalty which means their

client retentions are crucial to business success (Thompson 2005). The data also

shows the different respondents in investment between client acquisition (40%)

and client retention (22%). In the other word, catching up a new customer is very

hard but if it not fit for organization‟s value or future profitability, it will waste

the amount of company‟s resources such as financial, time and people. Thus, the

expense for client acquisition is double amount and it directly diminishes to

business profit.

2. Methods used to analysis client’s strategies.

Boston Consulting Group matrix (BCG matrix)

Every business needs to build

effective and strong relationships

with its customers in order to

enrich its own business potential.

Thus, before making any decision,

a thoughtful analysis to select a

proper strategy for long-term

maintain and development

agency-client relationship is highly

required a serious attention. BCG matrix is a portfolio planning method

that evaluates a company‟s strategic business units in terms of their

business growth rate and relative share with four categories including

starts, cash cow, question mark and dog (Kotler et al 2008). In case of

client-agency relationship, the matrix is used to evaluate an agency‟s

Figure 1. Adapted from: Magdy 2010



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strategic client units in term of its client growth rate and relative share

with the same four categories. The categories that beat the target profit

easily is cash cow with low client growth but high client share which is

usually suitable to target client retention (Bolton & Tarasi n.d.). The other

categories including star and question mark could be invested for client

retention but it does not strong enough because it is just right in case of

special characteristic of company.

Iceberg strategy

The strategy supports the idea that

measures and enhances the profitability

of customer relationship through a better

understanding of customer‟s behavior

(Icebergstrategy 2010). For client

retention, due to long-term working

together the agency and client might have

better mutual understandings about

organizational cultures, goals or

behaviors than in case of client acquisition which requires much time and

even money to get good knowledge about them to serve their needs. In the

other word, continue maintaining and developing current clients could

save time and finance as the agency somehow could reach some levels of

the invisible parts of the iceberg. Hence, client retention seems a safety

way to limit the expense and risk.

Risk/Revenue matrix

When determining client retention, the major and final aim is that the

company also needs to decide which customers are the most valuable or

most costly to lose for. Hughes (cited in Thompson 2005) suggests using a

Risk/Revenue matrix to figure out which customers needs to care mostly.

In the table, the priority A and B are the most important regardless of

lifetime value, those who are client most likely stay with you and the

priority C vice versa. Hughes states that the priority C could be the loyal

Figure 2. Adapted from: Haines 2005



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client that is never going to leave you; so in this case, the business does

not need spending much of money on to build healthier relationship.

High Medium Low

High Priority A Priority B Priority C

Medium Priority B Priority B Priority C

Low Priority C Priority C Priority C

Figure 3. Adapted from: Hughes n.d.

IV. Conclusion

Different customers provide different revenue as well as require variety expenses onto the organization. To maximize profitability, it is essential to establish the right

target clients which divided into two main types including client retention and client

acquisition. By the utilization of three strategies: BBG, Iceberg, and Risk/Revenue

matrix, although client‟s acquisition is the first step in building a customer base, it

maintains a lot of cost and risks. Thus, client retention is the best choice for the

agency to earn profits and strengthen long-term company‟s development.

Word count: 1003

Probability of leaving soon

Life-

Time

Value



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V. References

Bolton, R N & Tarasi, C O n.d., „Managing customer relationship‟, Marketing

Science, pp. 3-31.

Haines, S G 2005, „The Iceberg theory of change‟, image, Hainescentre, viewed 10

May 2011, <http://www.hainescentre.com/consulting/pdfs/MEWC-01.pdf >

Gupta, S & Lehmann D R 2005, Managing customer as investment – the strategic

value of customer in the long run, Pearson Education, USA.

Hughes, M n.d., „Risk/Revenue Matrix‟, image, The customer Loyalty Solution,

viewed 12 May 2011,

<http://www.omdec.com/moxie/Technical/reliability-continuous-improvement---

living-rcm.shtml>Icebergstrategy 2010, homepage, Icebergstrategy, viewed 12 May 2011,

<http://icebergstrategy.com/ >

Kotler, P, Armstrong, G, And, S H, Leong, S M, Tan, C T & Hon-Ming, O Y 2008,

Principle of marketing – a global perspective, 12th edn, Pearson/Prentice Hall, New

York.

Lewis, M 2006, „The effects of shipping fees on customer acquisition, customer

retention, and purchase quantities‟, Journal of Retailing, vol 82, issue 1, pp. 13 – 23.

Magdy, M 2010, „BCG Matrix‟, image, How to be a marketer , 24 March, viewed 12

May 2011, <http://www.howtobeamarketer.com/articles/marketing-mix/3-

product/39-bcg-matrix/how-to-make-a-bcg-matrix-model-boston-consultancy-group-

matrix-model

Mittal, V & Kakakuma, W A 2001, „Satisfaction, repurchase intent, and repurchase

behaviour: investigating the moderating of customer characteristics‟, Journal of

Marketing Research, vol XXXVIII, pp. 131 – 142.

Reinartz, W, Krafft, M, & Hoyer, W D 2004, „The customer relationship management

processes: its measurement and impact on performance‟, Journal of Marketing

Research, vol 41, pp. 293 – 305

Thompson, B 2005, „The loyalty connection: Secrets to customer retention and

increase profits‟, Right Now Technologies, USA.

http://www.hainescentre.com/consulting/pdfs/MEWC-01.pdf

http://www.omdec.com/moxie/Technical/reliability-continuous-improvement---living-rcm.shtml


http://icebergstrategy.com/

http://www.howtobeamarketer.com/articles/marketing-mix/3-product/39-bcg-matrix/how-to-make-a-bcg-matrix-model-boston-consultancy-group-matrix-model







http://icebergstrategy.com/



http://www.hainescentre.com/consulting/pdfs/MEWC-01.pdf

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Client Final Report