customer retention
  • Copied

Customer Retention: Definition, Metrics, Strategies, and Examples

Customers are the lifeblood of every successful business. Marketing professionals across various industries and niches combine different marketing, sales, customer service, and social media strategies to gain the attention of their customers, engage them and convince them to make a purchase.

With every sale made comes the need to develop and implement customer relationship management strategies to build and maintain mutually beneficial customer relationships to encourage repeat buying and customer retention.

Creating and managing customer relationships is crucial to business sustainability. Research by Harvard Business School found that a 5% increase in customer retention rate resulted in a 25 to 95% increase in the company’s profit. In addition, it is more profitable and effective for businesses to retain their existing customers than acquire new ones – because you will most likely have to start the sales process with new clients compared to existing clients who have already bought from you.

In this blog, we have covered all you should know about customer retention definition, metrics, importance, strategies, and practical examples to help you improve your customer retention strategy.

Table of Contents

  • What is Customer Retention?
  • Why is Customer Retention Important?
  • Crucial Customer Retention Metrics To Measure
  • How to Retain Customers
  • 15 Customer Retention Strategies & Examples
  • 5 Client Retention Program Ideas

What is Customer Retention?

Customer retention is defined as a company’s ability to transform customers into repeat buyers and prevent them from switching to a competitor. It refers to the metric businesses use to measure customer loyalty and determine overall success over time.

Customer retention is the lifeblood of many subscription-based companies and service providers because it indicates whether your customers find your product and the quality of your service satisfactory and helpful to achieving their goals – it validates your product or service value to your customers.

Companies develop and implement many actions, strategies, and practices to reduce the number of customers lost within a given period and improve customer experiences to encourage their loyalty to your brand. Although companies should aim for a considerably high retention rate, the benchmark for small businesses is around 20 percent, and 5 percent for e-commerce businesses.

A customer retention strategy can help you identify your business’s critical issues. However, even with the best customer acquisition plan, you might still fail if your retention plan is terrible.

Why is Customer Retention Important?

Customer retention is an important business strategy that helps you understand how loyal and satisfied your customers are, how effective your customer service is, and helps you identify red flags that can turn off your potential customers. Overall, a well-developed customer retention strategy can help your business in the following ways:

1. It helps you save cost

According to a report by Econsultancy, 82% of companies state that customer retention is much cheaper than customer acquisition. Yet, many companies spend more on acquisition than nurturing and reselling to their existing customers.

Asides from this data, realistically too, it saves more time and effort to sell to people who have bought from you before – especially when they have a good experience – compared to finding leads and pitching all over again.

2. It increases your business profits.

Building successful relationships with your clients and keeping them committed to your product, service, or brand can positively impact your business revenue. Existing data also shows that a 5% increase in customer retention can increase a company’s profit anywhere from 25% to 95%. Existing customers also provide 65% of a company’s business.

3. Increase loyal customers

Customer satisfaction is key to increasing your business success rate. Loyal customers are priceless and committed to seeing your business grow. In addition, when you have loyal customers, they share their positive experiences with your brand with their family and friends.

A study by Yotpo revealed that 60% of consumers talk about the brands they are loyal to with their family and friends. Word-of-mouth marketing is a guaranteed, cost-effective way of growing your business.

4. Increase Customer Lifetime Value

Customer lifetime value is the total amount of money a customer is expected to spend on your products during their sales lifetime with your brand. A customer retention strategy can help you get the best out of your customers to grow your business. The better your retention strategy, the higher your customer lifetime value.

Creating an effective customer retention strategy helps you spend less on the acquisition and gain more vis the lifetime value.

5. Earn More referrals

Long-term loyal customers are more likely to refer their friends, family, and acquaintances to buy from your business. Voluntary referrals are the best form of acquisition strategy you can ever get. When your customers have been with your company for a while and enjoy your service, they are likelier to recommend your product or service to others.

Since social proof is crucial to increasing sales, you should prioritize customer retention – as this can encourage existing customers to buy from you while also gaining new ones.

Crucial Customer Retention Metrics To Measure

Customer retention is crucial to growing your business. The key to enhancing your customer retention rate is understanding the key metrics that you need to measure the success of your customer retention plan. Here are the five most important customer retention metrics that you need to monitor:

1. Repeat customer rate

Repeat customer rate is the foundation of customer retention. It measures the percentage of customers willing to make a second purchase from you. Measuring the number of customers that are willing to buy from you again is an excellent way to measure the success of your customer retention strategy. The higher your repeat customer rate, the more likely your customers to return to your store.

Although measuring retention metrics can involve complicated calculations, calculating retention rates require two pieces of information:

1. Number of customers with more than one purchase

The refers to the number of customers who have made more than one purchase in a specific period. Consider looking at the record for an entire year.

2. Number of Unique Customers

This is the number of customers that purchased from your store in a specific time frame. Keep in mind that this is different from several orders.

2. Purchase Frequency

Purchase frequency calculates how often your customers return to buy from your store. It is essential to calculate purchase frequency since repeat purchases from customers are primarily responsible for a significant portion of a company’s annual revenue 0 depending on the product category.

Calculating the store’s purchase frequency is similar to calculating the repeat purchase rates. You can calculate purchase frequency by dividing the store’s total number of orders by the number of unique customers.

Purchase frequency formula =

# of Orders Placed / # Unique Customers

3. Average order value

The Average Order Value refers to the amount of money a customer spends in your on each transaction. Simply put, it determines how much each customer’s purchase is worth. Like purchase frequency, your average order value should be calculated using the time frame you set for your repeat purchase rate,

To calculate your average order value, divide your real revenue by the number of orders your store processed.

The formula for average order value =

Total Revenue Earned / # Orders Placed

4. Customer lifetime value

Customer lifetime value is the total amount of money a customer is expected to spend on your products or services during the lifetime of an average business relationship. It is an essential metric that can help you understand how much each of your customers is worth. Whatever you do, the ultimate goal of your customer retention plan is to increase your customer value.

You must calculate your purchase frequency and average order value to calculate your customer lifetime value. When you have this information, you can multiply these two values together to understand the power of retention marketing

The formula for customer value =

Purchase Frequency x Average Order Value

5. Churn Rate

The churn rate, or the attrition rate, is the Rate at which customers stop doing business with a company over a given period. It is the percentage of customers who have stopped being your customers during any given period. The following are some of the reasons your customer churn rate can increase:

  • If they found a cheaper or better alternative
  • You failed to meet the customer’s expectations, especially when they have a terrible experience with a product or customer service.
  • Network failures
  • If their payment method has expired, if it’s a subscription service.

Below is the formula for calculating your churn rate

customer retention strategies

How to Retain Customers?

Here are some of the effective methods that companies can use to retain customers:

1. Provide a personalized customer experience

The key to improving your customer retention strategy is nurturing your existing customers and encouraging them to buy from you again. To do this, you must first understand that no two customers are the same or have the exact needs. Hence when selling to your customers, you must ensure that you tailor your solution to the specific needs and pain points of your customers.

Avoid providing a one-size fits all solution for customers looking for specific products or services that can cater to their specific needs. For this reason, keep your marketing services relevant and personalized to every customer.

Customers who feel their needs are being met will feel more inclined to continue doing business with you.

2. Create a strong onboarding experience

Customer onboarding is getting new customers set up with your product or service. This is the stage where new customers become acquainted with using your product, understanding the value your product can offer them and where your product fits into their lives. Creating a robust onboarding process is the best time to leave a positive, memorable first impression on your customers and get them hitched to your company.

Hence, you must ensure you get everything right early because horrible experiences or hiccups in the initial onboarding, such as mishandling information, poor customer support, false information, or poor product quality, can affect your customer interaction with your business.

Consider implementing different customer onboarding strategies to impress your client and get them to choose your business over your competitors.

3. Build trust with your customers

Trust is a fundamental concept that businesses need to build long-lasting relationships with their clients. Also, since 81% of customers say trust is essential to their decision, you must always follow through on your brand promise. Always fulfill all your promise and obligations to your customers to help build their trust and reliability in your brand.

4. Create and maintain a customer communication calendar

So many things can happen during a customer lifecycle. One of the most significant is customers falling out and slowly losing interest in your brand, especially after a few sales have been achieved.

Hence, you need to create a customer communication calendar to keep track of all communication with clients and set dates and times to reach out to them after the customer stops interacting with your brand to re-establish your relationship.

5. Create a customer feedback loop

An exciting way to increase customer retention is by creating a process to obtain customer feedback. Since it’s hard to improve your customer service or product quality if you are not well-informed about the concerns or challenges your customers face, the customer feedback loop comes in.

It creates a system for collecting, analyzing, and distributing customer reviews and surveys. Once you have created this system, look for the survey tools you can use to collect customer feedback and integrate it into the system.

6. Send Newsletters

A newsletter is a periodic email sent to subscribers sharing the latest product updates, industry news, or curated content from the topics you’re signed up for. It is a simple and cost-effective way of building relationships with customers to retain them. You can use email automation to send updates or offers to all customers at once or use an RDD feed.

As simple as it looks, sending newsletters on specific days increases brand recognition and reminds customers of your brand every time they open their inboxes.

7. Develop a customer education program

Educating your customers is an excellent way to invest in your customer base and give back to them. A simple and cost-effective way of developing a customer education program is by creating various self-service tools like a knowledge base and a community forum.

Customers can use features to locate solutions to solve their problems without necessarily contacting your customer support team.

8. Start a customer retention program

A customer retention program combines several strategies to meet customer expectations and boost loyalty. Customer retention enables companies to derive more value from their product, encourage customers to share feedback, and build a loyal customer base to create a community of like-minded customers or product users.

We will discuss the customer retention strategies you can adopt to increase your customer retention rate.

15 Customer Retention Strategies & Examples

Below are fifteen customer retention strategies with practical examples to retain your customers.

1. Acknowledge and Apologize When You Make a Mistake

The easiest and more truthful way of retaining customers is to acknowledge and apologize to your customers when you make a mistake. Since they are inevitable no matter how careful you are, show your sincerity to your customers. Remember that failure to apologize when wrong can make you lose your valued customers.

Example: HubSpot

customer retention rate

HubSpot experienced an outage during INBOUND 2018, impacting many of its enterprise customers. After fixing this problem, their COO and VP of Customer Success apologized to their clients and explained what went wrong, how the problem was fixed, and measures that have been put in place to avoid such incidents in the future

2. Leverage personalization

An effective way of retaining customers is to personalize your communication and marketing materials to fit your client’s needs and treat them like humans with distinctive needs and pain points. This way, you show you care about your customers while also showing the human side of your brand.

Example: Tesco

customer retention definition

Tesco, one of the UK’s finest supermarket giants, created an exceptional customer service plan using Twitter to interact with customers and solve their complaints with a human touch. They also use this platform to add personality to their customer interactions.

3. Inspire your customers with your brand mission

Your brand mission is a statement communicating your brand’s purpose, objectives, and how you plan to serve its audience.

It is an action-oriented plan that gives your customers an idea of what your brand does and the impacts it plans to make on the general public and the world. Having an inspiring brand mission can increase your customer loyalty and repeat customers. Essentially, you can inspire your customers using your brand values and mission.

Example: Invisible Children

what is customer retention

Invisible Children is a non-profit organization that raises awareness about violence affecting communities and families across Central Africa. Its mission is to end violence and exploitation facing the world’s most isolated and vulnerable communities. This clear mission statement can easily motivate people to donate to the cause.

4. Make your business convenient

An easy way to improve customer retention is by making your business convenient for your customers – making it easy for them to access and buy from you without stress.

Example: Starbucks

customer retention strategy

Starbucks introduced the “Mobile Order and Pay” feature in their app to enable customers to order their coffee before arriving at the shop, making it faster and more seamless.

5. Speak to your Customers

One of the most effective ways to retain customers is by listening and connecting with the customers. This way, you can better understand their needs, current situations, and challenges to solve their problem with your products.

Example: R&G Technologies

customer retention rate formula

Australian IT support firm R&G Technologies solidified its customer relationships with rapid response times and strict service level agreements that compel its support team to respond to its clients faster and consistently share customer satisfaction surveys giving its customers to share their experiences of what’s going well and what isn’t.

6. Create experiences to evoke positive feelings

An easy way to get your customer on your side is by creating an experience with your marketing campaigns to bring your customers closer to your brand. A great way to achieve this is to implement an experiential marketing process where you create an experience for your customers instead of approaching them through traditional marketing methods.

You can create an experience that helps your customer learn about your brand and its offerings while having fun.

Example: Coca-Cola

customer retention meaning
Figment Productions

During the 2012 summer Olympics, Coca-Cola launched a 70-day campaign that included the “Coca-Cola Beat Generator ” app that brought music, sport, and Coca Cola brand together.

They showcased this during their Olympics roadshow using samples and sounds from the game. users were able to take the MP3 recording with them to share on social media, which resulted in 16,500 visits to their website and 1.78 million Facebook impressions

7. Leverage on Social Proof

Social proof is a psychological and social phenomenon where customers rely on evidence of other people’s buying experience with your brand to buy from you. Often, the best way to get people hitched by your brand is by showing them what others think of it. This boosts their trust and reliability in your brand.

Example: Codeacademy

att customer retention

Codeacademy is an American Online Interactive platform offering clients free coding classes in 12 programming languages. It leveraged the power of testimonials and customer stories to show prospective customers the value of its products. By sharing these videos, other people can hear real stories of how their products helped their existing customers.

8. Offer Customer Support on the right channel

An effective way to build loyal customers is by understanding where your customers are/how best they use your products to offer them support when they most need it.

Example: Slack

customer retention software
Bleeping Computer

Slack doubles as a technology tool and business communication tool, and like every technology, Slack also experiences an Outage.

When this happened, most Slack users take to Twitter to share their current challenges with Slack and get updates from other Slack users. With a clear understanding that its users are most active on Twitter, Slack addresses the problem on Twitter and updates its users when their issue has been resolved.

9. Thank Your Customers

There’s no better way to get on the good books of your clients than appreciating them and showing them that you value their patronage. Thanking your customers regularly helps you build a memorable and loved brand.

Example: Zappos

customer retention metrics

Clothing and shoe eCommerce site Zappos is well known for its exceptional customer service by thanking its customers for showing that they care about them and sending them gifts.

10. Suprise your customers

Looking for a new and effective to excite your customers? Then consider surprising or delighting them by sending them gifts or adding benefits to their services that help them have an unforgettable experience with your brand.

Example: Chewy

improve customer retention

Chewy is a pet supply eCommerce store that leverages the fact that people love their pets and are always willing to buy things for their pets to delight its customers by giving them gifts and cards for their pets.

11. Become a part of your customer’s lifestyle

An excellent way to increase your company’s customer retention rate is by offering your customer much more than the product or service.

You can make your product a part of your customer’s lifestyle to transform your brand into a company that inspires your audience and encourage them to be associated with your brand

Example: CashApp

customer retention cost

CashApp is a mobile payment service in the US and UK that allows users to transfer money to another using the app. This app creates a lifestyle where customers can conveniently send and receive money from their friends, colleagues, and acquaintances during a night out or daily interactions.

12. Build a community around your products

An effective way to build loyal customers is to build and manage a community of customers where you share regular product updates, news, and interaction groups.

Example: Flo

increase customer retention

Flo is a women’s health app that enables menstruation tracking and cycle prediction and provides regular information about conception, pregnancy, early motherhood, and menopause.

An interesting feature of Flo is its in-app community. It encourages users to discuss and pairs them with a virtual health assistant and anonymous chat rooms where users can discreetly discuss and find answers to their health challenges.

13. Build trust with customers

Trust-building is a proven and tested method of building and maintaining customer loyalty. Although there are many ways to build customer trust, one of the best ways to achieve this is by showing your customer are valuable and can solve their problems.

Example: Classy Curlies

customer retention marketing

Classy Curlies build customers’ trust by showing them how to independently accomplish the company’s mission with DIY kits and tutorials on caring for their hair and skin on the website.

14. Offer customer incentives before ending their membership

There’s nothing unusual about your customers ending their subscription, free trial, or membership with your company.

This is most common with free trials; there’s a high likelihood that your clients have set a specific time to cancel their plan before getting charged again. To reduce this, you should offer them a juicy offer they can’t refuse and encourage them to renew the subscription.

Example: Adobe

define customer retention

Adobe offers its users access to Creative Cloud Apps on a monthly subscription which keeps clients hooked on the service for one year at a time. Even when they choose to cancel the plan, they can receive up to two months without payments to keep their Creative Cloud service.

15. Use gamification and referral programs

Last on our list is offering your pre-existing loyal customers incentives and a performance board to encourage them to bring in more customers. This creates a win-win situation for both your company and existing customers.

Example: MeUndies

customer retention examples

MeUndies created a referral program that offers $20 to customers for every friend they refer to while the friends get 20% off their first purchase. The gamification elements use a nudge button to show far complete the buying experience the friend is.

5 Client Retention Program Ideas

Below are the top five client/customer retention program ideas that you can use to increase your customer retention.

1. Onboarding program

A customer onboarding program is a process of teaching new customers the value of your product or service. It mostly happens when customers sign up for your products and experience their first success using your product or service.

2. Customer Loyalty Program

A Customer loyalty program, or a rewards program, is a brand retention strategy that helps businesses retain customers and encourage them to continue doing business with your brand. The key focus of this program is to reward customers for every purchase and commitment made to your brand.

3. Corporate Social Responsibility Program

Corporate social responsibility is a business management model or concept where companies create ways to be socially accountable to themselves, their stakeholders, and the general public by creating environmental, philanthropic, ethical, and economic projects that support community growth and success.

4. Customer Advisory Board

A customer advisory board (CAB) is a group of critical customers that a company invite for meeting regularly to offer feedback on a product or service and to give their overall impression of the company. These high-level hand-picked customers can provide in-depth market insights and guidance on corporate strategies and work together to create solutions for the company.

5. Beta Testing Group

A Beta testing group represents a group of test users selected by the product team to evaluate product performance in real-time. These groups are also created to measure customer satisfaction with a product.


Customer retention strategies are critical to business success. It helps you understand how to connect with your customers and provide the best value for your products or services. Although there are many customer retention tactics that you can use, we advise you to put effort into building and maintaining long-lasting personal relationships with your clients to help you serve them better.

We have provided a list of 15 customer retention techniques from which you can gain inspiration to grow your business relationships and loyal customer base. Take note of all the programs and strategies shared above, and remember that the ultimate pathway to increase customer retention is by enhancing your product or service to serve your clients’ needs when they need it.