Question

The most significant impact of satisfying and retaining customers is ________.

A) that a business can redirect marketing efforts to better serve dissatisfied customers
B) that a business can redirect marketing efforts to attaining new customers
C) that it can result in tremendous financial leverage
D) that a business can eliminate the need for advertising
E) that a desired increase in the level of profitability requires an increase in sales volume of only half as much

Answer 1

The most significant impact of satisfying and retaining customers is financial leverage due to lower costs of retention compared to acquisition, leading to higher profitability and reduced marketing expenses.

Step-by-step explanation:

The most significant impact of satisfying and retaining customers is financial leverage. When a business focuses on customer satisfaction, it sees a compounded return on investment, as the cost of retaining existing customers is generally lower than acquiring new ones. Consequently, a business can invest more in enhancing product quality and customer service, which in turn solidifies the loyalty of its customer base. This strategy can lead to a virtuous cycle of increased profitability, as satisfied customers often lead to repeat business and referrals without the need for proportional increases in marketing expenditure.

By retaining customers, a business experiences an indirect but significant financial benefit - the reduction of expenses associated with attracting new customers. Moreover, satisfied customers may provide free marketing through word-of-mouth, further reducing the need for advertising spend. This customer retention strategy emphasizes the importance of existing customers over constantly seeking new ones, thus offering businesses substantial cost savings and a better bottom line.