The Impact of Customer Retention on Business Performance

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The general purpose of this study is to assess the impact of customer retention on business performance. This study adopted a descriptive research design. The population of the study comprises all the departmental heads and branch manager, because they have the knowledge of how customers have stayed or otherwise and the implications on their branch performance. By implication, a total of thirty-five (35) is the population of the study. The sample size used in the study was thirty (30) management staff, drawn from the subject area.

The researcher made use of the following instrument in obtaining the needed information; Questionnaire, Personal interview, Surveys and Library research. The tools used in analyzing the data include; tables, frequency and simple percentage method. The result of data analysis indicates that, there is a significant influence of customer retention and business performance. This implies that As customers are the backbone of any business, firms without customers would not be able to sustain their performance.

In view of this study, empirically based insight has been provided for on the impact of customer retention on organizational performance. It was recommended among others that, Management of Crunchies fast food should continue with the objective of embracing customer relationship management, relationship marketing and perceived price tactic in all their services they provide since it enhances customer retention of their organization.




Background of the Study

The present competitive setting of businesses exploits customer retention in order to ensure the company’s fortification against penetrative competition (Fluss, 2010). Retention of the customer is the approach in which organizations emphasize their exertions on current customers with the aim to carry on business with them (Mostert et. al, 2009). As customers are the backbone of any business, firms without customers would not be able to sustain their performance.


Ramakrishna (2006) defines customer retention as the objective of marketing that bars customers from joining the competition. Nevertheless, customer retention can also imply the number of clients who stay with the supplier over an established period, like a year (Dawes, 2009).


Customer retention is considered an important aspect in shaping the accomplishment of businesses. Fluss (2010) asserts that opponents are ever on the sentry to snip customers through superior deals. Fluss witnessed that annual customer attrition rates vary from seven percent in industries that have extraordinary withdrawal obstacles such as banking and insurance, to nearly 40 per cent in the mobile phone industry.

Accordingly, managing customers is deemed to be very crucial business agenda in which the key focus has been switched in recent years from attracting new customers to preserving existing ones. Both practitioners and scholars have discovered that it is much easier and cheaper to retain the exiting customers than investing on the potential customers. A decent customer retention level is believed to be a significant contributor towards improvement in the overall firm performance. A glimpse on the existing researches on customer retention highlights that financial sector has been thoroughly investigated. Which leave a room for a detailed investigation on customer retention within the fast-food industry.


Customer retention is seen as an obligation by a customer to carry out business transactions with a particular firm on a regular basis (Hansemark & Albinsson 2004). Molapo and Mukwada (2011) ascertained that business organizations are all out to foil attempts by customers to switch retailers and indirectly retain them.

In addition, Erdis (2009) established that businesses direct their marketing efforts to please their current customers. In order to retain them and foster long-term relationships with them. Customers will frequently patronize firms which meet their needs and hence, an enduring relationship will be fostered (Fill, 2005).

Farquhar (2004) claimed that retained customers increase firms’ profits because acquiring new customers is a costly affair. This is in line with the findings of Reichheld and Schefter (2000) which showed that firms that are able to raise customer retention by five per cent would be able to boost profits by 25% to 95%. In addition, the costs of acquiring new customers are five times more than those of retaining an existing customer for a firm. Thus, boosting customer retention will increase firm’s profits and performance by leaps and bounds (Sim, Mak & Jones, 2006).

In line with Richard (2009), performance of business organizations incorporates three main zones of firm outcomes. Financial performance (profits, return on assets, and return on investment). Product market performance (sales, market shares); and shareholder return (total shareholder return and economic value added).

Retention of customers is a prospective operational apparatus that eateries can utilize in advancing a strategic gain and endure in the ever-increasing competitive business environment thus enhancing their overall performance (Hull, 2002). The supporting argument on retaining customers is comparatively forthright. It is more economical to retain customers than to obtain new ones.


Besides, longstanding consumers purchase in large quantity and quite frequently and, when motivated, might brood affirmative oral promotion for the institutions. In addition, lasting customers also consume slighter company’s time and are not so thoughtful to price variations (Healy, 2009).

The outcomes pinpoint management prospect to secure more referrals in someone’s business, as it is frequently of superior quality and economical to acquire. Hence, it is understood that dropping customer defections by as little as five percent can double the profits (Healy, 2009). Base on these assertions, It is therefore imperative to examine the impact of customer retention on business performance.


The Impact of Customer Retention on Business Performance

Statement of Problem

In the world of business, there are plenty of bridges to cross and battles to fight. The crowded market space has only become more crowded over the past few years. Making it harder for brands and easier for customers with the range of choices at their disposal.

Brands are left to ask: How do we attract more customers? What about maintaining the existing customer base? All of this boils down to Customer Retention.

Service sector is therefore, one of the important segments for the global economic growth. Its global Gross Domestic Product (GDP) has been rapidly expanding. Thus, has accounted for about two thirds of the world’s trade (Lo et al. 2007).

At present, knowledge cum labor-intensive service industries such as information and communication technology, financial. Healthcare, entertainment, biotechnology and education are the world’s crucial fortune initiating industries (MITI, 2011). As such, the Nigerian economy has involved in a structural transformation from the manufacturing to services sector.


Objective of the Study

The general purpose of this study is to assess the impact of customer retention on business performance. The specific objectives include:

  1. To determine the factors that influences customers’ retention.
  2. To examine the dimensions of customer retention.
  3. To examine the relationship between customer retention and business profitability.


Research Questions

  1. What are the factors influencing customer’s retention?
  2. What are the dimensions of customer Retention?
  3. To what extent does customer retention increase business organization’s profitability?


Research of Hypothesis

There is no significant influence of customer retention and business performance.


Scope of the Study

The study covers all the business organizations in Akwa Ibom State. However, due to time and financial constraint, the researcher limited the study only to Cruncjes fast food Uyo-Akwa Ibom State.

Therefore this study seeks to empirically investigate on the impacts of customer retention on organization performance. Using chi-square method of analysis on primary data obtained from respondents.


Limitation of the Study

  1. Secrecy: Most respondent were indifference on their part to provide credible answers to the researcher.
  2. Time factor: The time given within which the work has to be completed is definitely inadequate considering the tedious work involved ranging from getting the raw data, computation to conclusion.


Significance of the Study

This research work will go a long way in helping an business organization in the following ways:


  • Business firms will understand that customer retention is indeed a highly reliable measurement of non-financial performance for service-oriented firms, in general and retailers, in particular.
  • A research into the impact of customer retention will help a business organization to identity the factors influencing customer retention.
  • Data generated from the study will help an organization to evaluate their performance on quality service delivery as an aspect of customer retention.
  • The study will go a long way to boost the database of existing literatures. Pertaining to customer retention within the retailing sector.


  • The study shall provide information on what strategies similar organizations can adopt to achieve customer
  • It will provide a guidance on how well the eateries are utilizing the retention strategies, identify any gaps that may prevent retention and work towards improving customer retention.
  • Findings of the study will add to existing knowledge in various categories of organization’s performance.
  • The study will also be significance to students, scholars, lecturers and other third parties as it shall open new area of further research work and at same time advance challenges to up-coming researchers.


Definitions of Terms

Customer Retention: This refers to the ability of a company or product to retain its customers over some specified period. It however refers to the activities and actions companies and organizations take to reduce the number of customer defections often through customer loyalty and brand loyalty initiatives.

Business Performance: comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives). It involves analyzing a company’s performance against its objectives and goals. It is the comparison of an organization’s goals and objectives with its actual performance in three distinct areas—financial performance, market performance, and shareholder value.

Price: A value that will purchase a finite quantity, weight, or other measure of a good or service. As the consideration given in exchange for transfer of ownership forming the essential basis of commercial transactions. It is the quantity of payment or compensation given by one party to another in return for one unit of goods or services.
Customer Satisfaction: It is a measure of how products and services supplied by a company meet or surpass customer expectation. It is the number of customers, or percentage of total customers. Thus, those reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals.

Product Quality means to incorporate features that have a capacity to meet consumer needs (wants) and gives customer satisfaction. By improving products (goods) and making them free from any deficiencies or defects.

Service Quality: An assessment of how well a delivered service conforms to the client’s expectations. Service quality generally refers to a customer’s comparison of service expectations as it relates to a company’s performance.

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