What is Customer Retention? Definition, Importance, Examples

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  • November 13, 2022 / AT: 11:08 AM
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Customer retention helps you create beautiful relationships with your customers. You do not just have a website or store; they trust you with your money because you are valued before them. According to a study, the cost of attracting a new customer is equivalent to 5 times satisfied and happy with one of the current customers. Encouraging satisfied customers to buy from retailers other than the ones they are currently buying requires a lot of effort and effort. Unfortunately, most theories focus on marketing practices, attract new customers, and do not care much about protecting existing customers. It’s customary to focus on selling rather than building strong relationships. Instead of focusing on customer relationships, the focus is on sales and pre-sales.

customer retention


What is customer retention?

The definition of customer retention in marketing is the process of attracting existing customers to continue to purchase products or services from your business. The best customer retention tactics will enable you to establish lasting relationships with consumers who are loyal to your brand. They can even become your ambassadors and introduce you to your friends. You sold a product or service to a consumer, what happens after this? This is when you have to create and implement customer retention strategies.

The importance of customer retention for online businesses

You may have heard that keeping customers is more comfortable and cheaper than attracting them. The latest statistics show that this is true. For one thing, you spend five times more money to save money. Also, at best, the likelihood of your sales to an existing customer is at least 40% higher than someone who has not already bought you. When you offer a new product, loyal customers will have a 50 percent chance of doing it (source). These statistics should be sufficient to force you to build and test the customer retention strategy.

An example to illustrate the importance of customer retention

Nowadays, most companies have met customer satisfaction and maintenance. A recent study suggests that if companies can reduce their lost customers by up to 5%, their profitability will increase from 25% to 85%. Unfortunately, corporate accounting systems cannot show the value and usefulness of loyal customers. For example, a company examines the cost of acquiring a new customer and achieves the following results:

Consider that the average cost each time a vendor returns to a customer is $300 for his recruitment (including salaries, claims, benefits, and other expenses), And the average cost to convert a potential customer to the real customer is four times. So the cost of bringing a new customer is $ 1,200.

((4 × 300) =1.200)

This estimate is lower than the truth. Because we have not considered costs such as advertising, operations, planning, etc. in the calculations. Now assume that the company has met the customer’s average life expectancy as follows:

The annual sales revenue to the customer is $ 5,000 and the average number of years of his loyalty is two years, with a profit of 10%. The customer benefits during the relationship with the company are $ 1,000.

((10% × 2 × 5,000) = 1,000 $)

Since the cost of attracting a new customer is more than the customer’s benefit over his lifetime, it’s clear that the company is spending more than it’s worth to attract new customers. The company goes bankrupt in these cases, except to attract new customers:

1) Need fewer referrals.

2) Pay less for each visit.

3) The new customer purchase share can grow annually.

4) Keep customers longer.

5) Sell products with higher profits.

How to Calculate and Improve Customer Retention Rate?

To calculate customer retention, we need to consider the various criteria that are referred to below:

  • Calculate the total number of customers at the beginning of the period. (S)
  • The number of customers at the end of a period (E)
  • The number of new customers acquired during that period (N)

By knowing these criteria, you can easily obtain a formula for calculating customer retention. That’s the formula:

CRR = ((E-N)/S) * 100

An example to calculate customer retention:

Let’s say you had 100 customers at the start of the one-month period you’re tracking (S). During that period, you lost 6 customers, but you gained 18 (N) new customers. This means that at the end of the period, you had 100 of your original customers, plus 12 new customers, so you now have 112 customers (E) at the end of the period. Input those numbers into the formula:

CRR = ((112-18)/100) X 100

CRR = 94%

Enhance customer retention with this strategy and techniques

As you know that the importance of customer retention, I offer several customer support strategies and techniques to take care of your customers and bring them back.

1.  Set up your sales goals

Before you reach any marketing strategy, you need a goal. First, calculate the number of your customers, measure your customer, and consider the type of product that you sell. Some products are suitable for customer retention, such as products that are used every day. If you want your customers to try different products, you should add the same suggestions or order more than you already have.

2. Know what the customer is looking for

Get information on how people interact with your website and business, anticipating the path that customers go to buy. Start with these questions:

How did people know about your business?

Do they search through Google search to reach you?

Are they looking for you in social media?

Do you receive a large number of clients?

When you know these, you can find out how they make their decisions. You can focus on your perspective and analyze them. Once you understand the customer’s need, you can optimize each step, improve customer satisfaction in the buying process, and ultimately help maintain customer satisfaction.

3. Take the right step right from the start

To keep the customer always the first impression is essential; if the customer does not have a pleasant experience during his purchase, this person probably will not continue to work with you. It is not challenging to commemorate your customers. To ensure that the delivery process of the product or service is done correctly, you can send a “Thank you for your purchase” email.

4. Provide after-sales services and avoid negative feedback

After the customer makes a purchase from your website or in person, try to provide him with free services, in addition to attracting his trust and loyalty to his product or service, you can avoid potential negative feedback that may be offered. Do. Putting negative feedback on the website or hearing it by other people can cause many potential and actual customers to be lost.

5.Reduce obstacles

Have you ever figured out how to buy a product from Amazon? If you are a regular customer and have a credit card or other payment method in the file, you can purchase the product with just one or two clicks. Make barriers less for your customers, and they’ll want to buy from you again.

6. Build an Online Reputation

Build Online Reputation for all businesses is essential to keep new customers able to maintain their old customers. Online reputation in the customer creates the feeling that your company is dynamic. This reputation will also help you to strengthen your customer loyalty, as it can easily access your website and get your answer if there is a problem. To build an online reputation, it is necessary to provide useful and relevant content for the company, as well as attracting positive review from customers.

7. Have a good relationship with customers

If you do not communicate with a friend for a long time, the connection gets worse. The same thing applies to customer retention, and if you do not continue to interact in different ways, they will not even crash into your site.

8.Understanding the problems of your customers

Also if you have a fantastic product in the world, if you do not solve the problem, many customers will probably not buy your product. Most importantly, you need to know which customer is most profitable.

9. Enjoy your customers with a loyalty program

Loyalty programs seem simple, but they can have a significant impact on customer retention. If your customers know they are rewarded for returning to your online store, they will have to do it. You do not need a complex, fantasy or reward system for people, make sure you provide something valuable (like a special offer).

10.  Ask for review

Ask your customers to give a review on your website if they are satisfied with your product or service. Requesting feedback from the customer will make a sincerer connection. Also, if the customer did a review, if it was a positive review, thank him, but the review was negative, try to solve his problem and give him a good response. In responding to customers, you need to be very careful because if you react slowly to it, in addition to losing it, you may fail several new customers as customers today buy and use services and products Different all the readings are read carefully. You can use the services of Upperly to get positive reviews and avoiding negative reviews.


Customer retention is possible in two ways. One is to create serious barriers to their diversion, including the need for higher investment, increased research costs, discounts paid to loyal customers, and the like, which cause customers to switch from the seller to They tend to show less tendency. A better solution is to pay attention to the needs of customers. Creating customer loyalty is called “affiliate marketing,” which is all the steps that companies do to value their customers for better service and better service. This makes it harder for competitors to compete with lower sales prices and … the barriers to customer turnover.

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