Customer retention can significantly affect:

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The question asks about the impact of customer retention on various business aspects, so we must evaluate each option in light of how keeping customers influences outcomes.
Option 1: Market share. While retention can influence market dynamics, market share is more directly affected by new customer acquisition, competitive strategies, and overall market growth. Retained customers contribute to revenue stability but do not automatically translate into a larger share of the market relative to competitors.
Option 2: Employee satisfaction. Retaining customers does not inherently determine how satisfied employees are; satisfaction more closely ties to workplace conditions, management, pay, and culture. While there can be indirect effects (e.g., stable business reduces stress), retention itself is not a primary driver of employee satisfaction.
Option 3: Product innovation. Retention affects feedback and loyalty, but it does not directly drive product innovation unless that feedback is systematically used in development. The linkage is indirect and contingent on a company’s processes, so this is not the most direct impact of retention.
Option 4: Profitability. Keeping existing customers tends to lower acquisition costs, increase lifetime value, and promote steady revenue, all of which directly improve profitability. Retention strategies can reduce churn, raise average order value, and create predictability in cash flow, making profitability a primary and well-supported impact.
In summary, each option explains an impact in its own right, but profitability is the most direct and well-supported outcome of strong customer retention due to reduced costs and higher revenue per customer. The other choices describe effects that are more indirect or dependent on additional factors not guaranteed by retention alone.

BUSML 4383 SP2025 (4693) BUSML 4383 - Final Exam - Requires Respondus LockDown Browser

Customer retention can significantly affect:

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