Understand The Basics Of Customer Retention

Think fast

  • Are you wanting your existing customers to stick to you in the long run?
  • But at the same time, are you fetching ways to bring new customers onboard?

If your answer to the questions asked above is YES, then you have arrived at the right place.

Before we start, let us check out some remarkable customer retention examples and what results did they deliver


Negative reviews have the power to drive away new clients while also making existing ones doubt themselves. Modern businesses have begun to recognize the value of social media in providing speedy customer service and protecting their brand from a negative reputation. Nike hence became one of the most active Twitter customer service handles. Customers who have had a poor experience are swiftly contacted by the brand, who offers rapid support. 


Simply gathering consumer feedback is insufficient. You must also integrate them into your business procedures. The consumer feedback cycle at Uber helps drivers, customers and the firm as a whole. After finishing a trip, you may rate the driver on Uber, and your input is recorded in real-time. This continual feedback mechanism has assisted Uber in removing troublesome drivers, hence enhancing the overall passenger experience.


Amazon’s Prime Day competes with both Black Friday and Cyber Monday as a 24-hour long sales extravaganza. Amazon’s Prime Day encourages existing and past customers to return to check if there are any great offers. This keeps clients intrigued and gives them the impression that they are receiving a secret reward.


Walmart had come across a problem: fewer people are shopping in physical shops, while more people are shopping online. Walmart took two approaches to client retention. First, it expanded its delivery services to encourage customers to connect with the company more. Second, in order to boost its visibility in its customers’ digital life, Walmart launched a “Walmart pay” option that enabled customers to pay on the go at the ease of their homes!

By going through these, you perhaps have understood the significance of customer retention, right? Yet, here’s an overview for better clarity’s sake:

One of the most common fallacies for businesses all over the world is the belief that having a fantastic product or service which is sufficient for a good client retention strategy. The harsh reality is that this is only one component of marketing. There exist other crucial techniques for client retention.

While every business needs new customers, it is equally important to enhance customer retention strategy for small businesses, especially, because the cost of acquiring a new customer is five times that of maintaining an existing customer.

Here’s why companies prioritize it

The Reasons Why Firms Prioritize Customer Retention

If you own a small business, you may have prioritized client acquisition in order to boost income. Selling to your existing clients, on the other hand, is a far easier and faster approach to generate both sales and income. This is due to the fact that your existing customers have determined that they enjoy your firm and hence associate with you.

Furthermore, established clients are 50% more inclined to test new goods introduced by your company. That implies you’ll have more chances to upsell or cross-sell to existing clients than to new ones. You will need to focus less on marketing if you focus on client retention. This is because your existing consumers do not need to be persuaded to buy from you again. You will spend less on marketing and more on developing your current customer connections.

Your current clients are aware of the high level of service you offer, which is why they chose to work with you in the first place. The likelihood that they will buy from you again is pretty high, which means that you will not have to do much effort to persuade them to do so.

In addition, when a customer remains with you for a long period, you have a deeper understanding of their needs and get better at forecasting the selling point for them.

According to Gartner, only 20% of your current clients will provide 80% of your company’s income in the future. Consider your earnings if you can keep 100 percent of your consumers.

Interestingly, there also exist certain metrics that businesses actually work upon in order to track how much of customers they’re managing to retain overall

Customer Retention Metrics

Here are three customer retention metrics to track your progress

  • NPS or net promoter score

Your Net Promoter Score indicates whether or not your consumers are likely to suggest your company to a friend or colleague. The greater your number, the more probable it is that you will have repeat customers—and those repeat customers will spread the word.

  • CRR or customer retention rate

Customer retention rate (CRR) addresses the question: what proportion of new customers do you receive and how long do they stay with you? Here’s how to figure things out

CRR = (E – B) / T * 100


    • E denotes the number of clients at the conclusion of a term.
    • B is the number of clients at the start of a period.
    • T signifies the total number of new consumers in a given time period.
  • CV or customer value

Client value expresses the worth of a single customer to your company over a specific time period. Knowing the customer value allows you to determine how much that client will spend over the course of their engagement with your company (the customer lifetime value).

There also exists a formula to calculate the Customer Value, which is

CV = purchasing frequency * average order value


    • Purchase frequency is the total number of purchases divided by the total number of unique customers
    • Total income/number of purchases equals the average order value

Companies also follow certain strategies when it comes to customer retention. Here are bullets that concern it

Customer Retention Strategy

It is critical to have consumer understanding. You should have enough information on their age, demographics, things they buy, products they don’t buy, payment methods and so on. Therefore, instead of giving out a whole list of the benefits or types of your customer retention strategies would render, we have provided you with an insight on the strategy that can inculcate the drive in your firm to succeed.

Here’s how you can create a client retention strategy

  • Determine why your clients are leaving. When you look at your historical churn data, you can construct a predictive model that will alert you when a client is ready to churn.
  • Divide your consumer base into smaller groups of customers that share similar characteristics. Segmentation promotes increased personalization, which leads to lower turnover. Personalized content increases repeat purchases from almost 44% of buyers.
  • Keep an eye on and assess your loyalty programs. Customers who actively participate in rewards programs make 90% more frequent purchases. They are also five times more likely in the future to associate with your brand. Monitoring your loyalty programs may provide useful insight into how to improve your client retention methods.
  • Client profiling is essential for understanding different customer categories so that you can sell to them more effectively and retain them in the long run.


You can better understand your customers’ demands and increase loyalty with well-designed client retention initiatives. To treat consumers positively, you must provide exceptional customer service and cultivate interpersonal civility. Make your consumers feel like they are a part of your company by soliciting their feedback. Implement and accept their advice if you want to achieve the customer success you deserve.