What is Customer Retention?

Customer retention, or client retention, refers to the capacity of an organization to turn customers into recurring or long-term clients in order to foster repeat business.

How Do You Calculate the Customer Retention Rate?

The customer retention rate is the percentage of customers that remain loyal to an organization over a certain period of time.

The customer retention rate can be calculated with the following formula:

(Number of customers at the end of the period – Number of customers at the beginning of the period) ÷ Number of new customers over the period x 100

Why Is Customer Retention Important?

Improving customer retention increases the lifetime value of customers, boosts revenues, and helps build the brand of the company.

Retaining customers is also more cost-effective than attracting new customers. The cost of acquiring a new customer can be 5 to 25 times higher than keeping an existing one.

What Are Examples of Customer Retention Strategies?

Strategies to improve customer retention include:

  • Providing excellent customer service
  • Personalizing interactions with customers
  • Investing in employee training
  • Gathering and acting on customer feedback
  • Creating a loyalty program
  • Publishing a company newsletter

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