Does your company have a customer retention problem? Alas, all leaders are to blame.
by Tijs Besieux, PhD
As Drucker said, "the purpose of business is to create and keep a customer." And as studies confirm, the part of "keeping" a customer can be highly valuable. For instance, research finds that a 1% increase in customer retention lifts the value of the firm's customer base (the present value of all future profits from those customers) by nearly 5% on average (Gupta, Lehmann, & Stuart, 2004). This makes increasing retention a powerful lever for companies to increase business performance.
And now comes the difficult part. First, leaders often don't know why their customers might 'cancel their loyalty' and decide to take their business elsewhere. Second, when a customer leaves, a single team or division is rarely to blame.
A review of literature on why customers decide to leave surfaces five main 'triggers':
(1) Billing and pricing problems
(2) Service quality failure
(3) Low switching cost, attractive competitor offer
(4) Poor complaint handling, failed service recovery
(5) Perceived unfairness, trust erosion
Here are two examples to illustrate why customer retention so often is a cross-functional responsibility. First, complaint handling: resolving a complaint well depends on HR hiring and training staff with real judgment, finance granting them authority to issue a credit or refund without three rounds of approval, and IT giving them full visibility into the customer's history. If you miss one of these, a routine complaint could turn into a lost customer. Second, consider the example of a broken delivery promise that erodes trust: sales commits a key account to priority delivery to close the deal, but if procurement has not secured supplier capacity and the supply chain has not been looped in, your company has now overpromised and underdelivered. And your customer doesn't care about the internal dysfunctions; all they feel is being treated unfairly.
This backdrop invites leaders across the company: even though acquiring new customers is often attributed to "the salespeople", striving to keep those valuable customers is everybody's business. And so it doesn't matter whether your role is in procurement, compliance, HR, or sales: everyone's perspective and commitment are essential to creating a seamless customer experience.
One of my favorite tactics to do so is to hold regular "reversed customer exit interviews" where leaders from across all major functions tune in. How? When a new customer signs on, invite them to an interview and ask: "What will it take for you to remain our customer in the future?" Listen closely, as their answers reveal the cross-functional "hot spots" where your company needs to excel.
Customer loyalty is something earned by the company, not the other way around. Leaders make all the difference by joining hands and working across functions to acquire a customer, but more than ever, to keep a happy one.
Key references:
Boulding, W., Staelin, R., Ehret, M., & Johnston, W. J. (2005). A customer relationship management roadmap: What is known, potential pitfalls, and where to go. Journal of Marketing, 69(4), 155–166. https://doi.org/10.1509/jmkg.2005.69.4.155
Chen, P.-Y., & Hitt, L. M. (2001). Measuring switching costs and their determinants in internet-enabled businesses: A study of the online brokerage industry [Working paper]. University of Pennsylvania, Wharton School.
Gupta, S., Lehmann, D. R., & Stuart, J. A. (2004). Valuing customers. Journal of Marketing Research, 41(1), 7–18.
Ismail, M. R., Awang, M. K., Rahman, M. N. A., & Makhtar, M. (2015). A multi-layer perceptron approach for customer churn prediction. International Journal of Multimedia and Ubiquitous Engineering, 10(7), 213–222. https://doi.org/10.14257/ijmue.2015.10.7.22
Matos, C. A. de, Henrique, J. L., & Rossi, C. A. V. (2007). Service recovery paradox: A meta-analysis. Journal of Service Research, 10(1), 60–77. https://doi.org/10.1177/1094670507303012
Min, S., Zhang, X., Kim, N., & Srivastava, R. K. (2016). Customer acquisition and retention spending: An analytical model and empirical investigation in wireless telecommunications markets. Journal of Marketing Research, 53(5), 728–744. https://doi.org/10.1509/jmr.14.0170
Rahman, M. M., & Khan, M. K. (2023). Mechanisms by which AI-enabled CRM systems influence customer retention and overall business performance: A systematic literature review of empirical findings. International Journal of Business and Economics Insights, 3(1), 31–67. https://doi.org/10.63125/qqe2bm11
Ribeiro, H., Barbosa, B., Moreira, A. C., & Rodrigues, R. (2024). Customer experience, loyalty, and churn in bundled telecommunications services. SAGE Open, 14(2). https://doi.org/10.1177/21582440241245191
Tebu, G., & Izang, A. (2025). Customer churn prediction in the telecommunication industry over the last decade: A systematic review. Asian Journal of Research in Computer Science, 18(4), 256–271. https://doi.org/10.9734/ajrcos/2025/v18i4618