i. ross-selling, up-selling and asking for referrals from existing customers

ii. Developing programs to increase customer loyalty and decrease turnover

iii. Prioritizing retention as a major focus in your annual marketing plan.

iv. Knowing the lifetime value for different segments and using that data to improve the marketing.

Studies say it costs ten times more to generate a new customer than to maintain an existing one. If organization has a small number of customers, losing a few could cripple company. Even if there are a large number of customers, a small increase in the rate should dramatically increase profits.

The maintenance of the patronage of people who have purchased a companys goods or services once and the gaining of repeat purchases. Customer retention occurs when a customer is loyal to a company, brand, or to a specific product or service, expressing long-term commitment and refusing to purchase from competitors. Of critical importance to such strategies are the wider concepts of customer service, customer relations, and relationship marketing. Companies can build loyalty and retention through the use of a number of techniques, including database marketing, the issue of loyalty cards, redeemable against a variety of goods or service, preferential discounts, free gifts, special promotions, newsletters or magazines, members clubs or customized products in limited editions. It has been argued that customer retention is linked to employee loyalty, since loyal employees build up long-term relationships with customers. Customer retention has always been an important topic for the marketing. For sure, the advantages of loyal clients are obvious. Often CRM is only implementing new systems for data mining and client segmentation or operational system like a complaint management. But the thing is: data mining system or client clubs are not the basis. They are the cherry of the cake called client retention. A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship.

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This techniques is now used as a means of counter balancing new customer and opportunities with current and existing customers as a means of maximizing profit and counteracting the leaky bucket theory of business in which new customer gained in order direct marketing oriented businesses were at the expense of or coincided with the loss of older customers. This process of "churning" is less economically viable than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more investment.

Many companies in competing markets will redirect or allocate large amounts of resources or attention towards customer retention as in markets with increasing competition it may cost 5 times more to attract new customers than it would to retain current customers, as direct or "offensive" marketing requires much more extensive resources to cause defection from competitors. However, it is suggested that because of the extensive classic marketing theories center on means of attracting customer and creating transactions rather than maintaining them, the majority usage of direct marketing used in the past is now gradually being used more alongside relationship marketing as its importance becomes more recognizable. According to Buchanan and Gilles the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a

customer.

i. The cost of acquisition occurs only at the beginning of the relationship, so the longer the relationship, the lower the amortized cost.

ii. Account maintenance costs decline as a percentage of total costs or as a percentage of revenue.

iii. Long-term customers tend to be less inclined to switch, and also tend to be fewer prices sensitive. This can result in stable unit sales volume and increase in dollar-sales volume.

iv. Long-term customer may initiate free word of mouth promotions and referrals.

v. Long-term customers are more likely to purchase ancillary products and high margin supplemental products.

vi. Customer that stay with company tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.

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IMPORTANCE OF CUSTOMER RETENTION

There are a number of reasons for this. To begin with, to acquire a customer a company incurs promotional costs like advertising, sales promotion etc. It is said that it costs five times more to attract a new customer than retaining one. The operating cost decrease when a customer stays. Service being rich in experience and credence qualities, it takes some time for customers to get accustomed to it and once they are used to the service and are satisfied with the service provider, they tend to purchase more over a period of time. As they remain satisfied with a service provider, they spread a positive word of mouth, which is very effective in case of service for attracting new customers. Longer the customer stays with an organization, more the organization knows about him, which enables it to offer a customized service which makes it difficult for the customer to defect. This may even provide opportunities to the organization to charge price premium by offering individualized service which may be difficult for the competitors to offer. Considering the importance of retaining customers in service business, Reichheld & Sasser coined a term Zero Defection. They highlighted that companies can boost profits by almost 100% by retaining just 5% more of their customers. Further, it is also very important to understand the life time value of a customer. Further, if by a positive word of mouth, he brings just one more customer to the organization, his value to the organization doubles. Therefore, it is important for all the employees in the organization to understand the life time value of their customers.

ADVANTAGES OF CUSTOMER RETENTION

POSSIBILITY OF REPEAT BUSINESS

This is probably the most obvious advantage of customer retention. Effective services that lead to customer satisfaction will make customer coming back to again, thus giving repeat business. Repeat business is a win-win proposition for the business or service and the customer. The business reduces the cost of customer acquisition, while the customer reduces the cost of finding a reliable vendor and thus also saves on costs associated with switching vendors.

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REDUCED COSTS FOR CUSTOMER ACQUISITION

Acquiring a customer has certain associated costs. These include the costs associated with advertising, following up, sales demos, travel and meeting cost etc. having a repeat customer means that the customer means that the customer is already aware of your processes and can predict certain quality of output, thus minimizing the cost involved in new customer acquisition. Having a repeat customer also has the potential to open up another channel to advertise your business word of mouth. Word of mouth advertising / recommendations are perhaps the most important outcome of having a satisfied customer.

FOSTERINGGREATER INTERACTION BETWEEN BUSINESS

AND CUSTOMER

Todays markets are increasingly moving away from mass produced standard products and service, towards a more customized market, where products and service are tailored to meet customers specific requirements. Having a repeat customer is an opportunity for you to build a more focused relationship based on your customers specific needs and requirements. Being ensured of having a customer who comes back, you have more confidence to suggest improvements, provide an insight to better understand their needs and consequently design products and services that are relevant. Having a repeat business also provides an opportunity for the buyer and the seller to co-create products and services.

HAVING MORE DELIGHTED CUSTOMERS

Effective customer retention strategies allow you to move from the zone of customer satisfaction to customer delight. Studies have shown that customer delight is achieved only when there is a perfect synergy between the buyer needs and the buyer understands what the seller can deliver exactly what the customer need. If you are able to deliver your customers, you have better chance of them coming back to you, since they now know why you are different from the rest of competition.

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CUSTOMER RETENTION: STATISTICS

i. Acquiring new customer can cost five times more than satisfying and retaining current customers. (Source: http://www.parature.com/tag/customer-service-statistics-2012)

ii. 2% increase in customer retention has same effect on profits as cutting costs by 10%. (Source: http://www.bautomation.com/resources/articles/startling-statistics-on-customer-retention-acquisition/489/)

iii. The average company losses 10% of its customer each year.(Source: http:/www.dbmarketing.com/index.html)

iv. 5% reduction in the customer defection rate can increase profits by 25-125%, depending on the industries. (Source: http://www.parature.com/tag/customer-service-statistics-2012)

v. The customer profitability rate tends to increase over the life of a retained customer.(Source: http:/www.dbmarketing.com/index.html)

vi. Companies can boost profits anywhere from 25 to 125% by retaining merely5% more existing customers. (Source: http://www.parature.com/tag/customer-service-statistics-2012)

vii. Only one out of 25 dissatisfied customers will express dissatisfaction. (Source: http://www.bautomation.com/resources/articles/startling-statistics-on-customer-retention-acquisition/489/)

viii. Happy customer tells 4 to 5 others of their positive experience. Dissatisfied customers tell 9 to 12 how bad it was. ( Source: http://www.parature.com/tag/customer-service-statistics-2012)

ix. Two-thirds of customers do not feel valued by those serving them. (Source: http://www.dbmarketing.com/article/Art232.htm)

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MEASURING CUSTOMER RETENTION

Retention rate is normally calculated as the number of customers who have been lost over a period of time, usually calculated over a quarterly or annual period. The key is to calculate the percentage versus existing customers, and not underestimate the loss rate by tallying new customer acquisitions into the mix. The customer retention rate refers to the number of customer lost over a period of time. It is normally calculated by the percentage of lost customer versus existing customers over a quarterly or annual period, without tallying new customer acquisitions. While there are obvious benefits to keeping customers loyal and maintaining retention rates, it can be extremely challenging for management to keep retention rates up.

Some companies can measure retention rate using their CRM system, since any of the vendors with solid sales modules should offer this capability. Customer service expert Lori Bocklund recommends that companies look for this functionality when evaluating CRM solutions, even though it is unlikely to be the differentiating factor. Companies like witness, Performix, AIM, and Merced offer these types of tools. To measure this, some companies combines data from the CRM system and data from other systems, such as your systems, such as your quality monitoring system, ACD or CTI solution handling contact routing and reporting. There are no hard and fast rules on calculating customer defection and customer retention, according to Lowenstein. It can depend on the industries or the type of business, since companies have long-term arrangements with customers.

However, several consulting and database management companies have succeeded in creating them. However, the appropriate interval over which retention rate should be measured is not always one year. Rather, it depends on the customer repurchase cycle. Car insurance and magazine subscriptions are bought on an annual basis. Carpet tiles and hi-fis are not. If the normal hi-fi replacement cycle is four years, then retention rate is more meaningful if it is measured over four years instead of twelve months. Additional complexity is added when companies a sell a range of products and services, each with different repurchase cycles. Automobile dealers might sell cars, parts, fuel and service to a single customer. These products have different repurchase cycles which make it very difficult for the dealer to have a whole of customer perspective on retention. Sometimes companies are not clear about whether an individual customer has defected. This is because of the location of customer related data, which might be retained in product silos, channel silos or functional silos.

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TYPE OF CUSTOMER RETENTION RATE

RAW CUSTOMER RETENTION RATE

This is the number of customer doing business with a firm at the end of a trading period, expressed as percentage of those who were active customer at the beginning of the period.

SALES-ADJUSTED RETENTION RATE:

This is the value of sales achieved from the retained customers, expressed as a percentage of the sales achieved from all customers who were active at the beginning of the period.

PROFIT-ADJUSTED RETENTION RATE:

This is the profit earned from the retained customers, expressed as a percentage of the profit earned from all customers who were active at the beginning of the period.

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3. COMPANY PROFILE

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THE INSURANCE INDUSTRY:

The insurance sector has gone through a number of phases and changes. Insurance in India used to be tightly regulated and monopolized by state-run insurers. Following the move towards economic reform in the early 1990s, various plans to revamp the sector finally resulted in the passage of the Insurance Regulatory and Development Authority (IRDA) Act of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic private-sector companies were permitted to enter both life and non-life insurance business. Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at 26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other economic sectors on the growth march.

During the 2003 financial year, life insurance premiums increased by an estimated 12.3% in real terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose 12.2% to INR 178 billion (USD 3.8 billion). Growth in insurance premiums has been averaging at 11.3% in real terms over the last decade. There are strong arguments in favor of sustained rapid insurance business growth in the coming years, including Indias robust economic growth prospects and the nations high savings rates.

COMPANY PROFILE

IDBI FEDERAL LIFE INSURANCE CO. LTD.:

IDBI Fortis Life Insurance Co. Ltd., is a joint venture between three financial companiesDevelopment and Commercial Bank, IDBI Bank, Indias private sector

Bank, Federal Bank and European insurer Ageas (formerly Fortis).

IDBI Fortis Life Insurance Co. Ltd. was formed on March 2008. In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26% equity each. The Headquarters is located in Mumbai, India.

IDBI Bank Ltd. continues to be, since its inception, Indias premier industrial development bank. Created in 1956 to support Indias industrial backbone, IDBI Bank has since evolved into a powerhouse of industrial and retail finance.

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Today, it is amongst Indias foremost commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from 720 branches and 1228 ATMs.

The Bank offers its customers an extensive range of diversified services including project financing, term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate advisory services and legal and technical advisory services to its corporate clients as well as mortgages and personal loans to its retail clients.

As part of its development activities, IDBI Bank has been instrumental in sponsoring the development of key institutions involved in Indias financial sector such as the Securities and Exchange Board of India (SEBI), National Stock Exchange of India Limited (NSE) and National Securities Depository Ltd.

Federal Bank is one of Indias leading private sector banks, with a dominant presence in the state of Kerala. It has a strong network of 708 branches and 749 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network.

In addition to interconnected branches and ATMs, the Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, and Any Where Banking, debit cards, online bill payment and call center facilities to offer round the clock banking convenience to its customers. The Bank has been a pioneer in providing innovative technological solutions to its customers and the Bank has won several awards and recommendations.

Fortis is an international insurance group composed of AG Insurance, the overall market leader in life and non-life insurance in Belgium, distributing its insurance products through the network of BNP Paribas Fortis Bank and independent insurance brokers, and Fortis Insurance International with subsidiaries in the UK, France, Hong Kong, Luxembourg (Non-life), Germany, Turkey, Russia and Ukraine, and joint ventures in Luxembourg (Life), Portugal, China, Malaysia, Thailand and India.

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VISION AND VALUES

VISION

To be the leading provider of wealth management, protection and retirement solutions that meets the needs of our customers and adds value to their lives.

MISSION

To continually strive to enhance customer experience through innovative product offerings, dedicated relationship management and superior service delivery while striving to interact with our customers in the most convenient and cost effective manner. To be transparent in the way we deal with our customers and to act with integrity. To invest in and build quality human capital in order to achieve our mission.

VALUES

Transparency: Crystal Clear communication to our partners and Stakeholders.

Value to Customers: A product and service offering in which customers perceive value.

Rock Solid and Delivery on Promise: This translates into being financially strong, operationally robust and having clarity in claims.

Customer-friendly: Advice and support in working with customers and partners.

Profit to Stakeholders: Balance the interests of customers, partners, employees, shareholders and the community at large.

EXCELLENCE

"In every aspect of work ranging from the in-house training institute to the detailed Personal Insurance Plan. IDBI Fortis is focused on achieving the highest standards of quality in every aspect of their business".

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HONESTY

"Is the heart of the Life Insurance business? IDBI Fortis believes that above all, Life Insurance is based on trust. Transparency, Dependability and Integrity will form the cornerstones of the IDBI Fortis experience."

KNOWLEDGE

"Is what makes experts. IDBI Fortis is focused on the Life Insurance business. Perfectly combining global expertise with local knowledge, IDBI Fortis is the Indian Life Insurance specialist."

CARING

"For the customer IDBI Fortis is redefining the Life Insurance paradigm to focus on the needs of the customers. The IDBI Fortis service process is responsive, personalized, humane and empathetic."

CULTURE

Our "in house culture recipe" has some of the finest ingredients going into its making. Some of the more prominent aspects of our culture are stated below:

i. Customer comes first

ii. Do it right the first time

iii. Bias for result oriented action

iv. Financial strength and discipline

v. Clarity of purpose

vi. International quality standards

vii. Inclusive Meritocracy

viii. learning opportunities

ix. Fun at work

x. Commitment to published value system

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TECHNOLOGY

To monitor and manage its network equipment across 34 sites, IDBI Fortis uses Tulip Proactive Managed CE solution. The solution includes device management, proactive troubleshooting and notification support. With the implementation of the solution, IDBI has reported improvement of network performance and availability, with a faster, more effective change and configuration management.

PRODUCTS

IDBI Fortis launched its first set of products across India in March 2008, after receiving the requisite approvals from the Insurance Regulatory and Development Authority (IRDA). IDBI Fortis offers services through a nationwide network across the branches of IDBI Bank and Federal Bank in addition to a network of advisors and partners. IDBI Fortis has 35 branches across the country.

SPONSORSHIPS, AWARDS

IDBI Fortis Life Insurance Company was selected as the title sponsor for the India-Sri Lanka Cricket Series. This was followed by the IDBI Fortis Wealthsurance Twenty20.

Wealthsurance Made Easy (WME), a knowledge aid by IDBI Fortis for its sales force, won The Bronze Dragon in the category for Best Dealer/Sales Force activity at the Promotion

Marketing Awards of Asia (PMAA).

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ORGANIZATIONAL STRUCTURE

SALES ORGANIZATIONAL STRUCTURE

G.V NAGESHVAR

RAO (MD & CEO)

MURLIIYER (country

Head sales)

NorthSouthEastWest

Zonal HeadZonal HeadZonal HeadZonal Head

AreaBankAreaBankAreaBankAreaBank

agencyassuranceagencyassuranceagencyassuranceagencyassurance

headheadheadheadheadheadheadhead

ManagerManagerManagerManager

distributiondistributiondistributiondistribution

deputydeputydeputydeputy

chief seniorchief seniorchief seniorchief senior

Corporate

Corporate

CorporateCorporate

head

head

headhead

DistributerDistributerDistributerDistributer

& trainees& trainees& trainees& trainees

& agencies& agencies& agencies& agencies

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HUMAN RESOURCE ORGANIZATIONAL STRUCTURE

MURLIYER (Country

Head Sales)

G.V NAGESHVAR RAO (MD &CEO)

MALLIKA

SARASWATH (Human

Resource Head)

Service DepartmentPay RollRecruitment

Senior Manager

Chief Manager

Assistant

Manager

There are no Zonal Heads in the Human Resource Department the area Human Resource executive only acts as the Human Resource Manager and reports all the activities to the Head Office that is in MUMBAI.

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OPERATIONS ORGANIZATIONAL STRUCTURE

G.V NAGESHVAR

RAO (MD &CEO)

MURLIYER

(Country Head

Sales)

MARKET &UNDERWRITINGFINIANCEPRODUCT

PROMOTIONDEPARTMENTDEPARTMENTDEPARTMENT

DEPARTMENTANIL SHRIVATSAV

North Zonal

Support Manager

South Zonal

Support Manager

East Zonal

Support Manager

West Zonal

Support Manager

The Zonal Managers are supported by Branch Support Executives and the Operations

department is present only in the Head Office which is in MUMBAI.

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PRODUCT PROFILE:

WEALTHSURANCE: The Wealthsurance Milestone Plan enables the policyholder to save and build wealth to meet their financial goals. This Plan comes with a wide range of 13 investment options and 7 insurance benefits - all packaged with a low charge structure and unmatched flexibility.

HOMESURANCE: IDBI Federal Homesurance Protection Plan provides full insurance cover for properties even under construction, thus ensuring that the beneficiary gets the full sanctioned amount in case of any unfortunate event. It also has an innovative fixed period cover for those who would aim to prepay their loans early.

BONDSURANCE: Bondsurance is designed for customers looking for guaranteed returns which will not get affected by financial market conditions. It offers guaranteed return on investment along with life insurance cover.

MICROSURANCE: IDBI Federal Microsurance Plan is a one of its kind insurance plan which can be very useful for various Micro Financial Institutions and NGOs, wherein not only the members but even the members family gets an insurance cover.

TERMSURANCE: IDBI Federal Termsurance Protection Plan offers the unique Increasing Cover option that automatically increases the cover every year without increasing the premium.

INCOMESURANCE: Knowing the customer helped us to combine the Endowment & Money Back plans into a single plan. It linked the returns to the G-Sec rates, transparently declared by the government. Also, the Guaranteed Annual Payout and other benefits upon death are tax-free under Sec 10(10D).

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4. RESEARCH METHODOLOGY

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INTRODUCTION

The system of collecting data for research projects is known as research methodology. The data may be collected for either theoretical or practical research for example management research may be strategically conceptualized along with operational planning methods and change management. Research methodology is to describe how to gather information (method) this can be survey interview, litterateur review etc. And then explain each method what are they, what are the method. Some important factors in research methodology of measure most of your work is finished by the time you finish the analysis of data. Formulation of research questions along with sampling weather probable or non-probable is followed by measurement that includes surveys and scaling. This is followed by research design, which may be either experimental or quasi-experimental. Methodology includes a philosophically coherent collection of theories, concepts or ideas as they relate to a particular discipline or field of inquiry.

METHOD OF DATA PRESENTATION

Any research finally leads to a result, which would be analyzed, from the data that have been received by the researcher. Data analysis is meant to be the most sensitive part of any research work. On achieving this various methods can be adopted there are three different methods using for data analysis such as univariate statistic.

The univariate analysis consist of mean, standard deviation, percentage etc. although the mean most commonly seen representation of central tendency and the stranded deviation takes into account each observations distance from the mean. The obtained data were presented through table based on the percentage of the respondents and were analysis through spread sheet under the univariate measures such as mean, standard deviation.

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5. ANALYSIS & INTERPRETATION

33

METHOD OF DATA EVALUATION

After the data analysis, it must be evaluate to get the decision. Here the decision rule will be applied that is univariate measure calculated to the decision. The likers scale is given 1-3 to each statement in the questionnaires.

Based on the value indicated in the questionnaire, the average value for each factor is considered. The mean value lies between 1-3 which follows.

1) Agree

2) Neutral

3) Disagree

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Further three types of degree of consideration that can be derived regarding differentiation variables are show in the following table

Decision Criteria for Univariate Analysis

RangeDecision Attribute

1