Question

Which one of the following statements is correct with respect to customer retention or agency profitability?

A. It costs an agency more to keep an existing customer than it does to attract a new one.
B. Whether or not an agency retains customers has no direct impact on customer service representatives' job security.
C. Most agencies and brokerages have a goal of 50 percent customer retention.
D. Relatively small increases in customer retention result in significantly larger percentage increases in future profits

Answer 1

The correct statement is that small increases in customer retention can significantly boost future profits, as retaining customers is typically more cost-effective than acquiring new ones.

Step-by-step explanation:

The correct statement with respect to customer retention or agency profitability is: D. Relatively small increases in customer retention result in significantly larger percentage increases in future profits. This concept is well documented in various business studies, which indicate that retaining existing customers is generally less expensive than acquiring new ones, and this retention translates into higher long-term profitability for an agency. Businesses often aim for far higher retention rates than 50 percent, and customer retention has a direct impact on aspects such as customer service representatives' job security because it can reflect the health and stability of an agency.