How loyal are your customers? That’s a question I bet many companies can’t answer with any specificity. Yet, it’s a critically important question. If you haven’t heard by now, loyal customers are profitable customers—an annuity, if you will, with recurring payments.

Customer retention is an important component of growing market share. It does little good to spend significant resources acquiring new customers only to lose them to some other competitor that offers greater value. Consider the wireless telecom company that was hemorrhaging customers at the rate of 50 percent per year. It had no idea about customer loyalty and regarded this excessive churn rate as a cost of doing business.

Companies can take several steps to assess the loyalty of their customer base and manage it as a profit center.

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