t’s far less expensive for a business to retain customers than it is to acquire new ones, yet most

companies continue to invest significantly more money into customer acquisition than retention. As a
result, they do acquire new customers, but they lose a lot along the way.

Brand characteristics

When a brand is being considered for extension into another product class (brand extension) or in the
same product class (line extension), it is important to understand how consumers perceive that brand.
Brand associations have been suggested as one method for finding out the characteristics that
consumers associate with the brand. Brand associations have been defined as the thoughts that are
linked to the brand in the consumers memory (Aaker 1991) and a set of associations may represent the
underlying value of the brand. It may be possible to use the underlying set of brand associations as a
basis to evaluate and select brands for different types of extensions (both brand and line).

A simple and first step to understanding the usefulness of brand associations in extension decisions may
be to classify the associations into groups based on shared similarities. A number of content based
classifications have been proposed (Aaker 1991; Biel 1992). However, as we are interested in extensions
within and outside the product category, it may be better to classify the associations as either product
class or non-product class related. Product class related associations are those associated with the
performance or use of the product category and would be somewhat analogous to the functional
characteristics as defined by Park, Milberg, and Lawson (1991). Non-product class related brand
associations are those which are not directly related to the use of the product class and may be
associated with the super-ordinate category (soft drinks for a cola brand), user experiences (thirsty),
usage situation (party), etc.

Product and non-product class related associations provide us with an initial criteria to understand how
a brand may be extended in the same or different product category. The type and characteristics of the
associations may be used to decide on the type of line or brand extension suitable for a brand. By
analyzing the individual and groups of associations and measuring their strength, brand managers may
be in a position to decide the product category (in the case of brand extension) or product usage (in the
case of line extension) that may be most appropriate for the brand, from the consumers perspective. In
this paper, we will develop this concept further by identifying and classifying brand associations for a
number of different brands. We will also develop guidelines and propositions that may be empirically
tested.

THEORETICAL BACKGROUND
Brand associations and sets of associations represent not only the underlying value of the brand, but
also the meanings that consumers attribute to brands and brand names. Brand associations may very
well be the basis on which consumer decisions like brand loyalty and purchase decisions are made
(Aaker 1991). In order to better comprehend how brand associations play a role in the consumers
attitude toward brand extensions and decision making, it is necessary to understand how associations
are developed in memory and how they are activated when consumers are exposed to a brand.

Associative network model

Memory models based on the associative network theory view semantic memory or knowledge as a set
of nodes and links (Anderson 1983). Nodes are points in memory that store information or knowledge
and there are a number of links that connect these nodes. These links are, in turn, connected to other
nodes. Any activation of a node will also activate the links that are connected to it and the other nodes
that are connected to those links.

The associative memory model provides us with an excellent framework to represent brand knowledge
and associations. It is possible to view brand names or brands being represented as nodes in memory,
and the various associations as links connected to that brand name. This conceptualization provides us
with a theoretical foundation to understand how associations are formed and developed.

Associations are created by anything linked to a brand (Aaker 1991). Let us consider a new brand that
does not have any associations. When this brand name and product class is introduced to a consumer,
either through advertising (print or television) or promotion, the consumer may represent knowledge of
the brand name as a node in memory. It is also possible that the consumer may have certain thoughts
associated with that brand name and product class, creating links attached to that brand node. These
associations may be based on the brand name itself (a brand like Federal Express may create an
association like fast or quick, based on the 'Express' part of the name) or it may be based on the product
class to which the brand belongs (Bic pens may create associations related to the product class of pens
and may be based on the consumers previous knowledge of that product class). These initial
associations need not be based on any knowledge of the brand or its qualities or performance. Once a
consumer actually sees a brand, a different set of associations may be created based on the shape or
size of the product, its packaging, or its distribution channel. And once a consumer starts using a brand,
yet another set of associations may be formed based on actual usage experiences, usage situations, etc.
Thus, it is possible for brand associations to be formed at each stage of interaction between the brand
and the consumer.
Strength of associations

Once the initial set of associations are formed, it is likely that further exposures to the same brand name
would strengthen these associations. These exposures may be through advertisements or actual product
experiences. Each exposure to the brand name would activate both the brand node and the linkages
that have already been formed and would strengthen these associations. Not every association may be
activated with equal strength on each activation of the brand node. Only those associations that are
relevant would be activated and become stronger. For example, if a consumer has the associations of
Ronald McDonald, having fun and good service for the McDonald's brand name, and the consumers
brand node for McDonald's is activated in a service context, i.e., when buying something at McDonald's,
the association of Ronald McDonald or having fun may not be activated, and only the association of
good service may be activated. Such selective activation may lead to a strengthening of the good service
association only and not of the Ronald McDonald or having fun associations. Thus, we can see that
certain associations or sets of associations may be activated with specific experiences. We can also infer
that it may be possible to deliberately activate specific sets of associations and not all of the associations
at all times. Thus, over a period of time, consumers could develop associations that vary in strength and
type.

Content based classifications

Aaker (1991) contends that brand associations may be classified based on content into 11 different
groups. The proposed groups are celebrity/person, life style/personality, product class, competitors,
country/geographic area, product attributes, intangibles, customer benefits, relative price,
use/application, and user/customer. However, so far this proposed classification has not been tested
empirically. Of these groups, some like product attributes, customer use/application and customer
benefits could be thought to consist of product class related associations and the rest of the groups to
consist of non-product class related associations. Product class/non-product class related classification
may also be compared to the context independent and context dependent characteristics (Barsalou
1983) where the context independent characteristics would be similar to the product class related
associations and the context dependent characteristics would be similar to the non-product class related
associations. Product class related brand associations are defined as those associations directly linked
with the attributes or characteristics of the product. Examples of product class related brand
associations would be easy to use, durability, etc. Non-product class related associations are defined as
all the associations not linked to the attributes or characteristics of the product. These may include
association groups like intangibles, life style/personality, etc. The focus is on associations that link the
brand to a general rather than specific benefit that can be obtained because the brand possesses a
specific attribute. The first step would be to identify all the different associations that consumers
actually possess. It should then be possible to classify these associations into product and non-product
related groups based on whether the associations are directly related to the performance of the product
or not. This leads us to our first proposition:

P1: Brand associations can be classified into product class and non-product class related groups.

When a brand is being considered for line or brand extension, the groups of brand associations and their
strengths may play an important role in how the extensions are evaluated. In terms of the associative
network model (Anderson 1983), the strength of the brand association in the consumers memory would
be the strength of the association between the brand node and the association concept node. A brand
having strong product class related associations would indicate that consumers have associations linked
to the actual use or performance of the brand and also that the brand is perceived to represent the
product class quite well. This strength of association may make it difficult to extend the brand to
another product class as consumers may still associate characteristics of the parent product class with
the extension product class and this may lead to some confusion. However, this strength may be
extremely useful in extending the brand within the same product class, but to another segment of
consumers using line extension. If consumers already have strong product class related associations, it
may be more efficient and effective for the firm to consider line extensions. On the other hand, a brand
with stronger non-product class related associations may indicate that the brand is not very closely
linked to the product class and may, therefore, be easier to extend to another product class using brand
extension. The classification of brand associations into product class and non-product class related
associations may be used as a basis to initially decide on the growth strategy that the brand may be able
to pursue. If a particular product class association or group of associations becomes strong, consumers
may even base their purchasing decisions on that association (Aaker 1991). If the product class related
brand association of "roller coasters" becomes extremely strong for the Disney brand name, consumers
may expect all Disney brands to possess that particular brand association. This may limit the Disney
brand name to consider pre-dominantly line extensions with "roller coasters" as an important physical
attribute. If the company were to consider brand extension, consumers may try to transfer some of the
strongly held product class related brand associations to the extension brand, creating a situation of
poor fit between the extension brand and its product class. This leads us to our next proposition:

P2: Line extension would be the pre-dominant choice of extension for brands that have stronger product
class than non-product class related associations.
Consumers may be influenced by groups of associations in different ways. The user/customer group of
associations may indicate the typical user of the brand, and if the consumer identifies with that
particular group, then these associations may have a positive influence on brand extension evaluations.
On the other hand, if the consumer has no reason to associate with that user group, then there may be
no influence or there could even be some negative influence. Brand extensions to other product classes
associated with the same user group may be favorably perceived by the customer. Similar results may
be possible with any of the different groups of associations. Any or a combination of the association
groups may be used as a basis to develop possible brand extension opportunities. For example, if
McDonald's found that consumers had high strength on a particular group of associations (the intangible
group of associations, say), it may become important to focus on this group of associations when
considering extensions. If we compare the product class and non-product class related associations with
context independent and context dependent characteristics (Barsalou 1983), it may be possible to think
of non-product class related associations as being not too strongly linked to the characteristics of the
product class. If the non-product class related brand association of "having fun" is strongly linked to the
Disney brand name, consumers may expect all other Disney products to have a similar association. This
gives Disney a broad range of product categories to choose from when they consider extending into
other product classes. On the other hand, if there is a strong association with the type of people who
use the Disney brand name, this provides different types of products into which the Disney brand name
can be extended. If the company were to consider line instead of brand extension, the lower strength of
the product related brand associations may not provide the necessary additional benefits of staying in
the same product class. This leads us to our third proposition:

P3: Brand extension would be the pre-dominant choice of extension for brands that have strong non-
product class related associations.

The above three propositions provide us with a general idea of the direction that a brand may use to
pursue its growth opportunities. However, these propositions still do not clearly show the type of brand
or line extension that may be successfully used by a brand. In order to determine this, the brand
manager has to be able to analyze the individual brand associations for strength and other
characteristics like favorability, etc. Associations that are strong and favorable are more likely to indicate
opportunities for the brand to utilize for growth and, therefore, it becomes important to be able to
measure these characteristics.

TABLE 1

BRAND ASSOCIATIONS: PRODUCT/NON-PRODUCT CLASSIFICATION AND STRENGTH

Research in psychology has shown us that it is possible to identify word associations through free recall
(Nelson et. al., 1992) and this can be extended to associations that consumers may have for brands.
Typical experiments have asked subjects to write down the first word that comes to mind when a
particular word is activated, the assumption being that when the node containing the name is activated,
the relevant associations would also be activated. It is also possible to calculate the strength (based on
frequency) of various brand associations by measuring the number of times an association is named by a
group of consumers out of the total number of associations. These findings in psychology (Nelson et. al.
1992) are used to test proposition 1 in a pre-test, the details of which are given below. Propositions 2
and 3 are not tested in this paper.

Pre-test

36 undergraduate marketing students participated in the pre-test to fulfill course requirements.

Subjects were told that when evaluating an existing brand name, marketers are often interested in
finding the associations that brands possess and that one way of finding these associations is through a
typical brand name association task. Subjects were provided with complete names of 25 existing brands
(e.g., Miller Lite beer, Lee Jeans, etc) selected from the list of strong and weak brand equity (Miller 1993)
and told that their task was to write down two words or phrases that they associated with each brand
name. Nelson et al. (1992) have recommended that subjects should be asked to list only one thought in
a free association task in order to avoid problems of response chaining and retrieval inhibition.
However, these problems were reduced by asking subjects to think of the brand name again before
coming up with the second associated word.

The list of associations generated for each brand was tabulated separately. Two judges who were blind
as to the purpose of the study were given definitions and examples of product class related and non-
product class related associations (Appendix 1) and asked to classify the associations into these
categories. The inter-coder reliability was 0.82 and all disagreements were resolved by discussion
between the two judges and the author. Table 1 gives the list of brands, the number, and strength of
product class and non-product class related associations.

RESULTS
The results obtained in Table 1 show that most brands used in this study (15/25) have stronger product
class related than non-product class related brand associations. We were able to identify only 2 brands
which clearly had higher strength (0.60 or higher) of non-product class related brand associations.
Fifteen of the twenty five brands were perceived to have stronger (0.60 or higher) product class related
brand associations while eight of the brands had about equal strength (between 0.4 and 0.6) for the
product class and the non-product class related brand associations.

APPENDIX 1

DISCUSSION

The results show that a higher number of brands have stronger product class related than non-product
class related brand associations. This suggests that consumers may be relating more to the particular
features and benefits offered by the product class to which the brand belongs rather than benefits at a
more general level. Brands having stronger product related associations may be able to utilize
extensions that retain this strength by using line rather than brand extension as a route for expansion
and growth. Brands in the introductory stage of their life cycle may be keen to become a part of the
product category and therefore advertising and promotion may focus on achieving this objective by
creating product class related brand associations. If the intent is to remain as a prominent member of
the product category only, the focus of later advertising may be to strengthen the product class related
brand associations rather than on creating or developing new associations. For brands with stronger
product class related associations, brand extension may be a risky venture as consumers may not be
able to understand how the new extension makes sense given the fact that they associate the parent
brand so strongly with its product category. Brand extension may lead to perceptions of lesser fit thus
reducing chances of success in the marketplace.

Brands with stronger non-product related brand associations can consider brand extension as the
primary means of expansion. The strength of the non-product class related brand associations may
indicate that consumers perceive that the brand offers benefits at a more general than at a specific
product feature level. Benefits at a more general level may be easier to transfer across product
categories using brand extension.

IMPLICATIONS
The preliminary results of this study offer a broad framework for brand managers for identifying growth
opportunities in the same and different product classes. Brand managers need to first identify the
different associations that consumers have for their brand. Free recall could be one of the techniques
used for this purpose. Aaker (1991) offers a comprehensive list of techniques that may be used to
generate brand associations. These associations need to be analyzed to determine whether they are
more strongly related to the product class or whether they indicate that the benefits and associations
are at a more general, non-product class related level. This classification can be used to make
preliminary decisions with respect to the growth of the brand - line extension if the associations are
more strongly linked to the product class, and brand extension if the associations are more strongly
linked to non product features and benefits. These are steps which can be undertaken by all brand
managers for all brands. Once a decision is taken for a line or brand extension, the nature of the
associations can be further analyzed to determine the particular segment to which the brand can be
targeted to (line extension) or the particular product class to which it can be extended to (brand
extension). This analysis needs to be based on the characteristics of the individual brand associations.

Keep this in mind as you plan your next marketing budget. It just might make sense to shift some of your
marketing investments into retention initiatives and away from acquisition initiatives. First, you need to
develop strategies and specific tactics to make those strategies drive positive results for your business.

Strategies to increase customer lifetime value.

There are three key strategies your business can use to increase customer lifetime value (CLV). If you
don’t pursue one or more of these strategies, it’s unlikely that you’ll see a big uptick in customer
retention or customer loyalty toward your brand anytime soon. Let’s take a closer look at each:

Increase sales per order: The first strategy to increase customer lifetime value is to increase sales per
order. Your goal is to motivate customers to spend more money on every transaction.

Increase sales over time: The second strategy to boost CLV is to increase the number of sales your
business closes over time. While the first strategy focuses on the value of each individual transaction,
this strategy focuses on the quantity of transactions.

Reduce costs to serve customers: The third strategy to increase CLV is to reduce your business’ costs to
serve customers overall. This includes all costs from packaging products for shipping to answering
customer service calls. The lower your costs to serve customers are, the greater the value of each
customer to your bottom line.

Tactics to implement your strategies.

Once you have your strategies to increase customer lifetime value, you need to identify the tactics to
implement those strategies. How will you turn your strategies into action?

Related: How 9 Successful Companies Keep Their Customers

Fortunately, there are many options available to you. Any steps you take to improve the customer
experience should improve CLV. Here are five tactics to help get you started:

1. Communication.

To increase sales over time and build customer lifetime value, you must communicate with your
customers on an ongoing basis. The secret to building a powerful brand is developing a relationship with
customers that leads to brand loyalty and brand advocacy over time. That starts with consistently
delivering on your brand promise, meeting customer expectations for your brand, and communicating
with them to build brand trust.

Email marketing is an excellent tool for communication that leads to increased CLV. Send campaigns on
customers’ birthdays and anniversaries with special discounts. Don’t be afraid to get creative. You can
also leverage the reach of social media to communicate with customers. For example, feature fans in
user-generated content contests on your Facebook page, and share useful, meaningful information.

Customer service is an essential part of communication. If your customer service communications are
poor, you’ll have a very hard time increasing CLV. Make sure customers have a variety of customer
service options, including chat, email, and phone. Furthermore, make sure your customer service team
is available during extended hours. We live in a 24/7 world, and offering customer service only during
regular business hours is rarely enough to keep customers satisfied.

2. Personalization.
Personalized content and offers are critical to building customer lifetime value. Today, marketers have
access to so much data that it’s much easier to offer personalized product offers, promotions, and more
to specific customers or customer segments.

Related: The 3 Big Problems with Personalization in Online Sales and Marketing

Leverage dynamic content on your website and in your email marketing, so customers always see the
most relevant offers to them. For example, show related products that customers might be interested in
when they view specific products on your website or when they add certain products to their online
shopping carts. This is a great way to increase sales per order!

3. Exclusivity.

It’s important to recognize and reward your customers by creating exclusive offers and programs for
them, particularly for your most loyal customers. Create frequent shopper programs and other loyalty
perks that make your best customers feel special.

Furthermore, make sure it’s extremely easy for customers to make repeat purchases from your
business. For example, ensure your ecommerce store offers easy password and username retrieval, and
offer to save shipping and payment information in customers’ accounts so repeat customers don’t have
to type that information all over again. Every step that you can remove in the purchase process will
increase sales.

4. Details.

Details matter a lot. Even though customers have purchased products or services from your business in
the past and may have been satisfied with those experiences, you can’t cut corners on future
communications or transactions. Remember, user experience is critical to building customer loyalty and
increasing retention and CLV.

With that in mind, go the extra mile to get the details right. For example, when you ship products to
consumers, do you just toss them into a box or do you take some extra time to make sure the
presentation a customer sees when they open the box is in line with your brand reputation and brand
promise? Something as simple as packaging could create a wow moment that adds to customer lifetime
value.

5. Re-engagement.

What do you do to re-engage prior customers who haven’t purchased anything from your business or
opened one of your email messages recently? You can’t expect them to become repeat customers if
you’re not trying to re-engage them. You can do this through email remarketing. Send messages to
customers who haven’t purchased anything from you in three months or who haven’t opened your
email newsletter or promotional emails in six months. Offer them something special to come back and
buy again.

Related: Steal These 4 Proven Customer-Retention Strategies

Re-engagement should happen in real-time, too. Send emails to shoppers that abandon their online
shopping carts. Retarget ads to people who visited specific pages on your website but didn’t buy. Both
are tactics to increase sales from new and prior customers. Don’t let them get away! Instead, re-engage
them with your brand and remind them of what they’re missing when they don’t buy.

Getting started.

Increasing customer lifetime value is dependent on your ability to develop both long-term strategies and
short-term tactics to implement those strategies. Test these tactics immediately to boost your CLV.
Remember, few companies invest enough in customer retention. That means your competitors probably
aren’t investing adequately in CLV tactics, either. In other words, prioritizing customer loyalty and
retention gives you another way to get a jump on the competition.

Post summary:

When customers are unhappy, they stop doing business with you. It’s that simple. The more customers
that leave, the less you grow. If you want to keep your customers, then you need to address customer
churn.

Customer churn has a significant impact on your business as it lowers revenues and profits. Yet
surprisingly, more than 2 out of 3 companies have no strategy for preventing customer churn.
Here, we share a list of 12 practical strategies to help you focus on reducing customer churn and build
relationships with your existing customers, so that you can keep happy and loyal.

There is not a single business in the world that has never lost a customer.

And every business deals with it differently: some immediately start looking for new customers to
replace the loss; others throw all their forces at analyzing what went wrong and how to put a lid on
others trying to run away.

This problem is called customer churn – the number of customers who leave a company during a given
time period.

What is customer churn?

Customer churn is calculated by the number of customers who leave your company during a given time
period. In a more down-to-earth sense, churn rate shows how your business is doing with keeping
customers by your side.

But why does churn matter so much for businesses in the first place?

Well, the short answer is – because it costs too much to lose customers.

Why does churn matter?

Customer churn is a real headache for many companies, as it shows how good (or bad) they are at
keeping customers by their side.

First, it’s the financial aspect of churn that causes most trouble.

In the US alone, companies are losing $83 billion each year due to customer churn and abandoned
purchases!
According to the Forrester, it costs 5 TIMES MORE to acquire new customers than it does to keep the
existing ones and it will cost you 16 times more to bring a new customer up to the same level as a
current one.

The second reason lies in the fact that the more customers a business retains, the more revenue it
makes!

For example, the Harvard Business School report claims that on average, a 5% increase in customer
retention rates results in 25% – 95% increase of profits. And the lion’s share – 65% of a company’s
business comes from existing customers!

The same truths are revealed by KPMG, who found that customer retention is the main driver of a
company’s revenue.

Customer retention as a significant revenue driver

Impressive, isn’t it?

But that’s not all.

According to Gartner, a staggering 80% of a company’s future revenue will come from just 20% of its
existing customers. Meanwhile, Marketing Metrics claims that the probability of selling to an existing
customer is 60-70%, and only 5-20% to a new prospect.

customer acquisition costs vs customer retention costs

So, it makes perfect sense that focusing on reducing churn is paramount since keeping your customers is
profitable!

Yet, not too many companies understand this and, as a result, still struggle in trying to implement a
successful churn prevention strategy. So, how do you reduce customer churn?

12 ways to reduce customer churn

No need to panic, there are things that you can do right here and right now to combat customer churn.

To get you started, here are 12 ways you can reduce customer churn.

1. Analyze why churn occurs

Yes, this may sound obvious, but let’s stress it once again: you have to simply find out why customers
decided to leave.

The easiest way to do this is to talk to the customer.

And by “talk”, I mean really talk: getting your customers on the phone is the best option. This way you
can demonstrate that you genuinely care, and you can find out what went wrong instantly.

FACT: 68% of customers leave because they think a company doesn’t care about them.

Don’t go down the lazy path by sending the customers exit surveys; just call them up and ask why they
left. This will give you the immediate, voice of customer feedback on whether or not your product solves
the customers’ problems or causes trouble
In fact, communicating with the customers does miracles in analyzing churn. And you need to be actively
using all channels for that: phone, e-mail, website, live chat, and social media. The valuable feedback on
how well you serve your customers is just a phone call, an e-mail or a survey away. As simple as that.

2. Engage with your customers

Another way to prevent churn is to actively engage your customers with your product.

Give your customers reasons to keep coming back by showing them the day-to-day value of using your
products, by making your products, services, offers, etc. a part of their daily workflow.

So, how can you do it?

For starters, provide ample and versatile content about the key functional benefits of your product and
offer regular news updates, such as announcements of deals, special offers or upcoming upgrades.

Again, you should engage with your customers on all channels.

According to a recent report from Marketo, the most efficient customer engagement channels for B2B
companies to reach out to their existing customer base is through email marketing.

Top communication channels to engage with customers

Not sure what kind of emails to send to your customers?

Use these 19 B2B email marketing examples for inspiration!

But as for when you should contact your customers, start by analyzing the customers’ journey.
The customer journey gives you a clear picture of all customer interactions across all channels, devices
and touchpoints throughout every stage of the customer lifecycle, and be present with the right content
at the right place and time.

Another method comes in the form of social listening – the process of finding and contributing to
conversations about your company online by seeking out brand mentions, specific keywords or phrases
and comments. This will help you keep your finger on the pulse of what’s going on in terms of customer
satisfaction.

And, finally, don’t forget about the good-old feedback. For example, ask your new customers what their
first impression of using your product was. This will help you better understand the initial impact that
your products are making.

3. Educate the customer

This churn-prevention trick naturally flows from the point above.

You have to provide enough good quality educational or support materials, which will help increase
retention and reduce churn. Offer free trainings, webinars, video tutorials, and product demos –
whatever it takes to make your customers feel comfortable and informed.

In other words, you have to not only to give them the tools that work, but also offer the training on how
to use these tools at a maximum profit. In this way you will demonstrate the full potential of your
products and services, and ensure that customers have a successful onboarding and implementation.

4. Know who is at risk

The best way to avoid churn is to prevent it from happening in the first place, right?

There is always a group of customers that is more likely to leave than others – so it’s in your best
interests to know who is balancing on that dangerous edge. This way you can reach out to them in time
to make them stay.
Spotting those who are getting closer to the ‘at-risk’ group is easy. Find out which customers were not
contacted for a while. Or maybe they asked for something like a price list, a quote or just more
information, and you forgot to follow up on that?

Knowing all this will help you become more proactive in preventing churn.

Also, after analyzing the reasons for churn, you become aware of certain actions, or maybe the lack of
actions, that your churned customers made. This knowledge can help you foresee if someone, who is
behaving similarly, is likely to leave your company soon.

5. Define your most valuable customers

As sneaky as this might sound, you’d better separate the most valuable customers from the rest and go
an extra mile to make sure that at least they are getting what they have signed up for.

Why? Well, let’s be honest, these are the customers you want to keep the most. Valuable customers
have to be taken extra care of because they bring in the biggest revenue.

A history of your interaction with the customers can show how deeply they are involved at each stage,
whether they had any problems with the product, and whether these issues were dealt with.

So, what you can do is segment your customers into groups of profitability, readiness to leave, and their
likelihood to positively respond to your offer to stay. In this way you can better predict customer churn.

6. Offer incentives

Another advisable tip is to offer incentives, such as discounts and special offers, to those customers who
were identified as likely to defect.
But! Beware that you have correctly evaluated whether offering an incentive is beneficial for you. That
means you have to be sure that the costs of your retention program do not outweigh the profits to be
gained from the customers you intend to save.

Bottom line – you should not be wasting money on customers who are not likely to bring you substantial
revenue.

7. Target the right audience

No matter how sophisticated your retention tricks are, they may all go down the drain if you are
attracting the wrong audience.

What I mean here is – if your first interaction with the customer is about “free” and “cheap”, then you
risk attracting people who are not looking for the value you provide. These “freebie” collectors are the
most likely to leave.

It’s better to target those who appreciate the long-term value of products and see investing in good
quality as an advantage. You’d better focus on those.

8. Give better service

You anticipated this tip earlier, didn’t you?

Yes, it is the most obvious method of keeping customers by your side. In fact, poor customer service is
the leading case of customer churn. According to a Customer Experience Impact Report by Oracle, the
two main reasons of why customers leave the company are incompetent and rude staff and unbearably
slow service.

Churn because of poor service stands at 70%, according to Forum Corporation’s research.

Why do customers churn?

By all means, do not underestimate the detrimental effect of poor customer service!

Studies show that 58% will never use a company again after 1 negative experience, and 48% who had
negative experience will tell 10+ people about it.

And we are not talking here about really bad service. Sometimes an average customer experience, or
what can be called a “meh” experience, is a trigger for churn. You simply showed nothing to hook that
customer on.

So, make sure that you provide “best in class” customer service that makes customers, above all, happy.

9. Pay attention to complaints

Complaints are like tips of the icebergs – they suggest that the bigger part of the problem is hidden from
the view.

Did you know that 96% of unhappy customers don’t complain, and 91% of those will simply leave and
never come back?

A typical business hears from only four percent of dissatisfied customers

Are you also aware that it takes only 1 negative experience to make 32% of customers stop doing
business with a brand they once loved?

So, you’d better take complaints seriously and act on them, and in this way prevent customer churn,
because, as Strauss & Seidel claims, dissatisfied customers whose complaints are attended to are more
likely to remain loyal, and even become advocates, than other average customers.

10. Make your best people deal with cancellations

To save a customer who is about to churn is certainly not mission impossible.

But you will have to call on your best sales experts to achieve good results in keeping them.

Find out who your best, most vocal and convincing B2B sales reps are and give them the task to talk to
those who decided to leave, and in this way – prevent customer churn. At this point, you can certainly
make use of their charisma and experience in dealing with difficult situations and dissatisfied customers.

Sometimes it only takes a good listener who is eager to walk in the customers’ shoes to change things
around. According to the customer satisfaction survey conducted by Customer Service Group, the
majority of respondents said that being heard and respected are more important than having their issue
resolved.

11. Flaunt your competitive advantages

How different are you from your competitors? What makes you stand out? What will your customers
lose if they decide to quit?

Answering these questions will help you define your competitive advantages and then flaunt them
more. Competitive advantages are like honey that glues your customers to you. Analyze what it is that
you do better or what makes you unique. Now think – do your customers know about it?

If not, it might be high time you told them.

12. Offer long term contracts

Finally, how about extending your customers’ commitment?

Instead of the month-to-month contracts, try offering a longer subscription model. In such a way your
customers will have enough time to implement the product and see the benefits of using it. And once
they see the benefits, they are more likely to commit to the product.
Conclusion

Now that we have established that you simply cannot afford to lose customers, it is better to focus on
being a keeper. That means that your customers have to clearly see why it is better to keep you and stay
with you instead of leaving.

And you’d better be proactive in how you prevent customer churn by creating the conditions in which
customers would clearly see and make use of the benefits your products offer.

To stay motivated, just keep in mind that 82% of companies claim that retention is cheaper than
acquisition and even a small 2% increase in retention can lower costs by as much as 10%.

It’s also important to realize that the main reasons of churn have nothing to do with the product, but
mostly comes down to poor customer service!

All in all, keeping your customers is not magic. It all boils down to analyzing the reasons behind churn
and then acting on them. Communicate with customers and involve them with your products, improve
your customer service levels and make sure they see what they are gaining if they stay with you, rather
than stray away from you.

What tips do you have for reducing customer churn?

Let me know by leaving a comment below.

P.S. If you enjoyed reading this post, please share it on Twitter here!

Reducing churn should be at the top of the priority list for every business. To learn how we use
SuperOffice CRM to reduce churn and keep our customers happy, sign up to a free personalized demo
below.
 A customer journey map is a visual representation of every experience your customers have with you. It
helps to tell the story of a customer's experience with your brand from original engagement and into
hopefully a long-term relationship.

Firms use perceptual or positioning maps to help them develop a market positioning strategy for their
product or service. ... Positioning maps show where existing products and services are positioned in the
market so that the firm can decide where they would like to place (position) their product.

Perceptual mapping / Market mapping is a diagrammatic technique used by asset marketers that
attempts to visually display the perceptions of customers or potential customers. The positioning of a
brand is influenced by customer perceptions rather than by those of businesses

A perceptual map is of the visual technique designed to show how the average target market consumer
understands the positioning of the competing products in the marketplace. In other words, it is a tool
that attempts to map the consumer's perceptions and understandings in a diagram.

HE THREE MODES OF PRODUCT-

MARKET FIT CHANGE
All disruption and profitable innovation is driven by changes in product-market fit. Any
time a new product is introduced and starts selling like wildfire or a company suddenly
outperforms its competitors, there is a change in product-market fit powering the
process.

And, there are only three ways that product-market fit can change. If you understand
these modes, you understand 100% of the possible ways that one product can become
more competitive than another, in all product categories, in all markets, and for all time.

The three modes are:

1. Change the performance of the product along one or more value dimensions.
2. Change the weight of one or more value dimensions
3. Add (or Remove) Value Dimensions

Let’s look at them one at a time.

CHANGE PRODUCT PERFORMANCE

Change the PERFORMANCE of the product along one or more value dimensions.
This is the most common kind of change – simply making a product better in an existing
value dimension. Examples include making the product smaller, bigger, lighter, heavier,
faster, cheaper, more durable, more reliable, more delicious, more intelligent, more
beautiful, more prestigious, gluten-free, simpler, sexier, and lower fat.

Let’s see what this type of change looks like in a Q-PMF diagram. We’ll pretend that
there are two products, called Blue and Orange, that are competitors in a market. Let’s
say that before the change, the Blue and Orange products are competing head to head,
like this:

Although Orange has higher performance in the most important value dimension
(FEATURES), it’s overall Delta-V is minimal because it under-performs Blue in two
important secondary dimensions (DURABILITY and PRICE).

Now look what happens if Orange can close the performance gap in the DURABILITY
dimension:
Now Orange has a significant overall Q-PMF advantage. Note that Orange does not
need to out-perform Blue in the Durability dimension; Orange just needs to reduce the
competitive deficit so that FEATURES becomes the only real point of comparison for
customers.

Christensen refers to performance enhancing improvements as “Sustaining

Innovations.”

CHANGE THE IMPORTANCE OF VALUE DIMENSIONS

Change the WEIGHT of one or more value dimensions.
It takes two to tango, and it takes both product and market to make Product-Market
fit. A change to the weight of a value dimension is a change in market
attitudes. Product changes certainly can drive attitude changes, but so can marketing
campaigns, economic booms and busts, new competitive offerings, and cultural change.

For example, let’s look at what might happen to the relative Q-PMF of two products in
an economic recession. Let’s say that before the recession, the Q-PMF situation for
products Orange and Blue looks like this:
Orange has better features but is more expensive (as shown by it’s relatively poor
performance in the PRICE value dimension). Because customers feel that FEATURES
are more important than PRICE, Orange has an overall Delta-V advantage.

Then, along comes the recession. People everywhere are pinching pennies. A change
in customer attitudes results in a change in the Customer Value Model, and now PRICE
is the most important value dimension:

Suddenly Blue has much higher fit than Orange. With this swing in Delta-V Blue grabs
significant market share from Orange.
Note that neither product changed in this scenario. But the market changed, and the
product that once had lower Q-PMF now has the Q-PMF advantage. If Blue can take
advantage of the increased market share to improve product features, it can probably
hold onto its position even when the recession ends. On the other hand if Orange can
cut prices, it can maintain it’s previous advantage and hold market share through the
recession.

CHANGE THE CUSTOMER VALUE MODEL

ADD (or REMOVE) Value Dimensions.
There is one more way that Product-Market Fit can change. It’s a big one — it is at
work in many of the most dramatic cases of disruptive innovation.

Let’s return to our Orange and Blue products. Here they are, back in neck and neck
competition with minimal Delta-V:

Let’s say that Blue introduces a new Value Dimension: STYLE. Let’s also say that
STYLE rapidly becomes a dimension that carries a lot of weight with customers. Here’s
what happens:
Not a good situation for Orange. Caught off guard, they have very little performance in
the new dimension. They didn’t even know that people cared about it, because people
didn’t care about it — until Blue made them care. Blue had to raise prices a bit and lost
some of their price advantage, but that impact is completely overwhelmed by the
massive Delta-V boost they got by disrupting the customer value model.

Whenever there is a change in the competitive landscape for any product, one or more
of these three modes of PMF change is behind it. This is true 100% of the time. It
always has been, and always will be. It is the 2nd Law of Disruption.

dvantages and Disadvantages of Market and Product Development Strategies

by Devra Gartenstein; Reviewed by Jayne Thompson, LLB, LLM; Updated March 29, 2019

Advantages and Disadvantages of Market and Product Development Strategies

Related Articles

The Benefits & Risks of a Product Development Strategy

Market Development vs. Market Penetration

3

The Disadvantages of Market Research on New Product Development

What Are the Disadvantages of the Market Penetration Strategy?

Market situations change, so it makes sense to change up your product mix as well. Your product
development strategy is a path forward in an evolving marketplace, keeping your business relevant and
interesting to both customers and employees. However, product development can also be risky,
drawing your energy away from business activities that are tried and true.

Advantages of Product Development Strategy

Keeping pace. In a world where game-changing technologies are introduced more quickly than most
consumers can keep up with them, a product line that stays the same over time may come to seem tired
and stale. A product development strategy helps your business keep pace with the changing times,
appealing to customers who get bored with always seeing the same offerings.

Seizing opportunities. As consumer tastes and interests evolve, a product development strategy can
help your business leverage opportunities to market to these new preferences. If your efforts are
successful and you correctly read upcoming trends, you put your company in the position of potentially
sparking a fad or riding the wave of one that has already been set in motion.

Providing opportunities. Your business will have an easier time attracting and keeping talent if you build
a reputation as an operation where creative individuals have the space to innovate. Building a strong
and vital team not only puts you in a strong position to develop and introduce exciting new products, it
also gives you personnel who can approach day to day challenges with fresh eyes.

Being newsworthy. Media coverage garners more attention for your business than advertising dollars
can buy. If you have a strong product development strategy and you introduce new offerings that
people want to hear about, reporters and bloggers will be eager to help spread the word.

Disadvantages of Product Development Strategy

Riskiness. It's safer to stick with something that you and your customers already know than to venture
into untested territory. New products come with a world of uncertainty, from ironing out unfamiliar
production processes to introducing customers to offerings that they may or may not want. If your
product development strategy isn't successful, your company will need to absorb the investment you've
made without returns to offset the expenditures.
Extra cost. A product market and development strategy can be expensive, especially if you are thorough
and invest in processes such as market research and advertising. Even if your new offerings are
eventually successful, you will still be faced with considerable expenses before your new products bring
in any significant revenue.

Evolving markets. Although new product development is a proactive response to a continually changing
landscape of customer tastes, those same tastes will continue to evolve even as you're developing your
new products. Things that interest customers when you begin the product development process may no
longer seem as exciting by the time you're ready to take your new product to market.

Competition. At the same time your business is scrambling to come up with the next exciting product
that your customers will embrace, your competition is also working hard to solve the same problems.
It's sometimes not enough to come up with something innovative –

you may also need to get it to market before someone else does. Failure to do so may make all your
hard work irrelevant.

Brand association is anything which is deep seated in customers mind about the brand. Brand
associations are the attributes of brand which come into .

Brand context

ll brands have a clear idea of their audience: identifying, understanding and segmenting customers
underpins every marketing strategy. But how much effort is spent uncovering a brand’s ideal target
context – the times, places and moments when a message will resonate best? Far less.

Is this a mistake? Psychological research into the fundamental attribution error suggests so. The
fundamental attribution error refers to the widespread, but mistaken, belief that people’s character is
more important in explaining their behaviour than the context of their decision.

What’s the evidence?

One of the original experiments (pdf) into the fundamental attribution error was conducted by
Princeton psychologists John Darley and Daniel Batson, who devised a rather mischievous test to
determine the impact of character versus context.

First, they assessed the personalities of 40 theology students by asking about their motivation to study –
personal salvation, or to help others? They then asked each student to deliver a sermon in a nearby
church. This was when the researchers introduced a situational variable.
Brands should focus as much on target contexts as they do target audiences

Just as the students headed off to preach, half were told they were running late; the other half that they
had plenty of time to reach the venue. Here’s the next twist. Darley and Batson had positioned, en route
to the church, a plant – a man in need of help, claiming to have fallen. The final step was to record which
students stopped to help the suffering man.

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The results are not what you may have predicted. Despite there being two distinct personality types –
either selfish or altruistic – this type was found to have no noticeable effect on whether participants
stopped to help the man. The biggest determinant was simply how much of a rush they were in. This
seemingly small variation had a tremendous impact: only 10% of those who were late stopped,
compared with 63% of those who had plenty of time.

However, when the psychologists told another group about the experiment and asked them to judge
what the biggest influence on behaviour would be, most respondents picked personality.

Why do we underestimate context as a driver of behaviour? Perhaps because it boosts our self-image: it
appeals to our ego to believe that we are paragons of rationality. Who wants to admit to being at the
whim of external forces?

Intriguingly, this opens up an opportunity for businesses. If most people place too little weight on
context then it leaves an underexploited opportunity for a contrarian brand.

How can marketers apply these findings?

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So what can marketers do? The most important learning is that situational or contextual factors are
often more important than personality in determining behaviour. This undermines one of advertising’s
most deeply held beliefs: that brands must identify and then focus their communications on a core
target audience. The experiment suggests that brands should focus as much on target contexts as they
do target audiences.

Brands are increasingly identifying the right target context for their message. The creator of Snickers
chocolate bars, for example, recently began targeting its ads by mood, believing that people who are
happy, bored or stressed are more likely to snack. It identified these moods by mining information
captured by Google’s ad server, DoubleClick. However, mood targeting has application beyond just
identifying snacking moments.

Identifying relevant contexts

The final consideration is: which context should a specific brand should focus on? This is not
straightforward, as a twist in the experiment demonstrates.

Darley and Batson told half the participants to give a sermon on their job prospects. The other half
talked about the parable of the good Samaritan. It’s hard to think of a topic better designed to
encourage people to help a stranger than this – but the sermon topic made no difference to the
likelihood of a student helping.

So while it is critical for brands to reach their customers in the right target context, identifying that
context is not a matter of intuition. Brands need to test, rather than assume, which context their
message will be best received in: whether that’s when customers are in a good mood or a foul one;
distracted or attentive; in public or in private.

Brands that prioritise context will have a significant advantage over those that fall for the fundamental
attribution error.

Richard Shotton is the head of insight at Zenith

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Brand context

Nothing matters more than context. What consumers see, hear and think about a brand is wholly
shaped by the context in which they encounter it, which in turn directly affects what they do and buy.

Brand marketers know this, of course, which is why so much time and money are invested in carefully
constructing retail environments. But there is more to context than facings and shelf placement.

Much of the context that matters is out of the immediate control of marketers, like the weather. A
recent working paper by four economists from Northwestern University, the University of Chicago,
Brigham Young University and the University of California at Riverside analyzed national data for 40
million car purchases and four million home purchases. They modeled price paid as a function of
seasonal temperature variations, while controlling for other factors. It turns out that, holding other
things constant, the premium paid for a house with a swimming pool or a convertible car was much
greater when the purchase was made during months with warmer average temperatures. Bottom line, if
a buyer sees a house with a pool or a ragtop car in the context of a sunny summer day, he or she is likely
to pay a higher price.

There is no mystery about what’s going on here. Good weather puts people in a better of frame of mind,
and makes them susceptible to a well-known, extensively documented cognitive mistake called
projection bias. This is the tendency of people to overestimate how much they will enjoy something in
the future (i.e., projecting future happiness) based on how much they like it today. When people see the
sun glinting off a shimmering blue pool or the polished sheen of a new car, they forget that they won’t
always feel that way. The value they place on it today – what they are willing to pay in the moment – is
not predictive of the value they will realize over the long-run. In short, what they project is biased by the
immediate context, and so they pay more than they would have if they had seen that house or car on a
cold, rainy day.

While marketers can’t control the weather, they can control what they do for or with their brands in the
context of the weather. But generally speaking, brand marketers focus instead on just the attributes of
their products, and give little attention to context. They test what consumers like and what consumers
will be willing to pay in isolation from the contexts within which people will actually encounter these
products in the real world. The implicit assumption in doing so is that differences in real world context
will cancel each other out over time and place such that the sterile testing environment, while not
realistic, is predictive nevertheless of how things will average out across thousands if not millions of
consumers and buying occasions.
While this implicit assumption is true, and has been validated over time through the proven track record
of successful product forecasting, it consigns marketers to a passive role in dealing with context, thus
overlooking and sacrificing the opportunities available to marketers to do more. Perhaps the best way to
illustrate this is to make note of how the active management of context is being used these days to the
disadvantage of marketers.

James Surowiecki, “The Financial Page” columnist for The New Yorker, explained in a recent piece that
the impact of New York City’s ban on large soda sizes is best appreciated by understanding the ways in
which it will change the context of consumption. Surowiecki makes reference to a number of empirical
principles discovered by social psychologists and behavioral economists, especially the principle of
default. This is the tendency of consumers to equate portion and package. In other words, consumers
don’t eat a certain portion; they eat what they’re served, so package size, or serving size, creates the
context of consumption.

By banning any soda size greater than 16 ounces, New York City is changing the “default.” Time and
again, behavioral research has shown that people go along with whatever is the default, whether it’s
retirement plans, organ donations or the size of the scoop to get candies from a bowl. It takes extra
effort and attention to override the default, which, more often than not, people are unwilling and
unlikely to do.

Other contextual effects also come into play with respect to New York City’s ban. A 16-ounce maximum
will reframe how big and how filling consumers perceive even smaller sizes, affecting how satiated
people feel after consuming smaller portions.

The range of contextual elements at work in any given situation are far greater than the few mentioned
here, and only a very few raise questions of risk to consumers. Most elements of context give brand
marketers untapped opportunities for reshaping how consumers stack up the brands in their
consideration sets. It’s a matter of relative priority. What can brand marketers do to put their brands in
the best light when consumers are ready to buy? The answer is not simply the best possible product.
Indeed, more often than brand marketers realize, it’s not about the best possible product at all. It’s
about the best possible context.

Your Brand Schema

So what is your brand schema? You don’t really know if you only frame your own thoughts. You need to
continuously stay in touch with your customers and strive to learn what they believe about you today, in
six months, 12 months and so on. Beliefs change, so you must continuously monitor customers’
attitudes through ongoing surveys, meaningful dialogues and feedback mechanisms.

Know the following consumer schemata about your brand:

How do they feel about your category? If you’re in financial services, you’re in the least-trusted industry
of all. How can you create engagement, transparency, and service protocols that build trust and set you
apart from and above the category’s reputation?

What do they believe about your brand? Do they believe your promises and claims? Ask, and ask often.

What is the foundation of trust associated with your brand? Do they trust you will follow through on
promises, quality claims and that you will take care of them of them if things go wrong? And do they
trust you enough to refer you to others?

Understanding the above helps you understand what goes on in your consumers’ conscious and
unconscious minds when considering your category and brand. And this understanding enables you to
frame how consumers feel about you, which more than anything enables you to capture their trust,
sales and referrals.