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What Is Customer Retention?

What Is Customer Retention?

Last Updated:  
March 18, 2024
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Customer retention is less expensive and less laborious than customer acquisition. After all, think of all the money, time, and energy you’ve spent strategizing your marketing, social media, and branding efforts. You’ve invested a lot to win over your customers, and you want to keep as many of them around as possible.

To make the most of your current customer relationships, you must understand what customer retention is and why it’s essential to your company’s growth. You need to know how to find your customer retention rate. And you need to figure out a practical retention strategy that helps your business demolish its growth goals. 

You’ve come to the right place. Below, Triple Whale has given you the keys to fostering customer relationships and boosting your bottom line in the process.

How Do You Define Customer Retention?   

At its core, customer retention is your business's ability to keep its customers over time. Represented by a percentage, this metric measures how many customers you retain over a given period. 

Customer acquisition and churn both impact your customer retention rate (CRR). Churn refers to when customers fail to return to your company, close a contract, or cancel a subscription. 

You can calculate your CRR monthly, quarterly, or yearly. Know, however, that your best chance of getting a big picture of your retention is by reviewing a year's worth of data.

Why Is Customer Retention Important?   

Measuring your customer retention reveals two primary elements that can prove invaluable to your company’s long-term success. 

  1. How many new customers you can acquire
  2. Your ability to satisfy existing customers

Improving your customer retention can significantly boost your return on investment (ROI) and loyalty while also helping you expand your customer base. 

Consider also, retention is much simpler and cheaper than acquisition. Not only does it require a lot of time and money to acquire new customers, but returning customers typically purchase more often and spend more money with each purchase. 

Plus, happy customers are quick to refer others to your business. A slight increase in your customer retention can significantly impact your total revenue. 

How Can I Calculate My Customer Retention Rate?

Now, let's talk about how you can determine your CRR. 

Customer Retention Formula    

The primary customer retention rate formula is:

((E-N)/S) x 100

E represents the number of customers at the end of a period, while N is the number of customers acquired during the same period. S represents how many customers you had at the start of the period. 

In other words, you can find your retention rate by assessing how many customers remain at the end of the determined period and comparing it to how many customers you had at the beginning. 

While it plays a role, the number of customers you acquire during the period is the least important factor in calculating a retention rate. It is used to subtract from the total number of customers, which is divided by the number of customers at the beginning. That number is then multiplied by 100 to deliver a percentage.

Customer Churn Rate    

Another essential metric to consider when determining how well your business keeps existing customers satisfied is your churn rate. This percentage reveals how many customers have left your business, whether in the form of canceling a subscription (or not renewing it) or neglecting to come back for more purchases. 

As with customer retention rate, you calculate churn rate over a determined time period, particularly the same period you measure customer retention.

While no companies want customer churn, minimizing it is vital to those who rely on their customers' recurring payments. To find your customer churn rate, divide the number of lost customers by the number of total customers at the end of the period and multiply it by 100. So, if you had 125 customers at the beginning of the year and 20 of them left by the end, you would divide 20 by 125 to get 0.16 (16%). 

There are plenty of tools available that will automatically calculate your churn rate so that you can focus on other aspects of your business. It’s also worth noting that you should find ways to decrease your churn rate if it is alarming. 

Revisiting your onboarding strategy for new customers, improving your customer service, requesting customer feedback, and communicating with customers consistently can all do wonders for helping you retain more customers.

Customer Lifetime Value (CLV)   

Essentially, customer lifetime value (CLV) shows you how profitable a specific customer or segment is throughout their prolonged relationship with your company. Calculating CLV can be complex because you can perform it at a business, customer service, or individual level. When in doubt, however, this is the formula you want to use: customer value X average customer lifespan. 

CLV shows up as a monetary value and reveals the amount you should expect the average customer to spend at your company throughout their lifetime. Whether you are making decisions on which investments to make into customer experience improvements, revamping your customer acquisition strategy, or any number of other company decisions, your CLV can be an excellent frame of reference. 

How Can I Improve My Customer Retention?

Every company loses customers, and it’s often due to poor customer service or product quality. It’s critical to retain your customers so that you can prevent your business from losing lots of money. 

Upping your customer service game is a significant first step in improving customer retention, but there are other things you can do as well.

Display Efficient Customer Service   

These days, most customers believe that businesses should deeply understand their expectations and needs. Quality and affordability used to be enough, but consumers now have more choices than ever and will simply buy from another company if you don’t satisfy their needs.

Consumers expect personalized, proactive interactions and service to have a seamless experience across various channels. If you meet these expectations, you must learn what your customers want. Send out surveys and open your platforms to reviews so that you can evaluate them and identify where you need to improve. 

Remember not to promise consumers something you cannot deliver. Your long-term success depends on building customer trust. You must create strategies around promises that you can uphold, and you should over-deliver when possible. 

Customer satisfaction results in customer retention, so try to go above and beyond for your customers. 

Offer Loyalty Discounts and Subscriptions

Customers love subscriptions these days, and if you can figure out how to incorporate them into your loyalty program, you can win the hearts of more and more customers. For instance, your subscriptions should give unique benefits to your subscribers. 

Be sure to provide fast and free shipping, easy returns, and a range of rewards. Also, try to engage your members and encourage them to promote your brand across multiple channels. This engagement can help your subscribers feel like they belong to a community while expanding your brand’s reach.

Along with offering a variety of rewards, give your members different ways to earn rewards. For instance, you could give them a discounted rate for social engagement or referrals or set them up on a points-for-purchase model that rewards them for each purchase. 

And consider making your subscription program personal by allowing your subscribers to create their profiles. Along with helping you gather customer data more efficiently, personalizing your program can deepen your customer relationships. 

Utilize Omnichannel Messaging and Support

Customers love to engage with businesses across multiple channels, and your company needs to make the most of that fact. A customer should transition seamlessly between your website and social media, whether on a computer, tablet, or phone. 

When interacting with your company, you can meet their needs with personalized service if you understand your customers' journey. Take time to analyze how customers are engaging with your brand across multiple channels so that you can adjust your strategies to enhance their experience. Doing so will boost customer satisfaction and retention. 

Research your target market to map out the customer journey; this involves learning about their previous interactions, conversation history, and other factors that will help you make intelligent decisions in the future. You will also want to identify which channels your customers prefer for connecting with your company. And use these channels for delivering 24/7 customer support.

Revisit Your Value Proposition

Few things are more important than having a well-thought-out value proposition for your brand. If your value proposition is compelling, it will help you create an impactful brand strategy that enables you to deliver on your promises and achieve your goals over time. 

If you are revisiting your value proposition, it means you already have one. Fortunately, you don't have to start from scratch or entirely reconstruct your proposal. Nonetheless, you should proactively and thoughtfully approach this process to evaluate the reasons, factors, and assumptions your original proposition was based upon and how you can improve it for your current position in the market. 

The key is to ensure that your value proposition is still relevant, valid, complete and that your team feels confident about it. Keeping these factors in mind will guide you to making any necessary modifications or enhancements. 

Upsell Your Customers

Not to be confused with cross-selling, upselling is a technique that companies use to encourage customers to upgrade a purchase to boost the value of that purchase for the business. Typically, this means convincing a customer to purchase a similar product that costs more because it offers better quality or additional features. 

The key to successful upselling is to think about your customers’ goals in the process. Your customers feel like you are trying to help them rather than simply make an extra buck. That’s why it tends to work best with existing customers with whom you have already built trust. 

To upsell successfully, you must understand each customer’s needs to develop an effective sales pitch and deliver it at the right time. And if the higher-priced product costs significantly more, you might consider offering a free trial to provide your customers with time to recognize the value in the purchase. 

Retarget Your Customers

Some of your customer churn rates may involve people who have left your business due to everyday situations unrelated to customer satisfaction. For example, a customer might visit your website and exit before purchasing because they got interrupted by someone or something. Those are the types of situations where retargeting can prove effective. 

Essentially, customer retargeting is a marketing tactic that companies use to re-engage previous customers who have not returned to their business for some time. When developing your retargeting strategy, make sure your advertisement is eye-catching and includes a clear and concise call-to-action (CTA). 

If you are dealing with recent visitors, consider including special offers for items they have previously viewed on your site. Putting a link into the CTA can provide your customers direct access to the product or service they have previously shown interest in.


While customer acquisition is important, customer retention is downright critical because it can result in more sales with less money, time, and energy spent upfront. By understanding customer retention and learning how to calculate your retention rate, you will gain valuable data to guide you to better decision-making in the future.

Remember to consider the tips above for improving your customer retention, and always remain open-minded to other tactics you can employ to satisfy your existing customers.

Visit Triple Whale for more ecommerce tips and information.


What Is Customer Retention? Importance, Metrics & Strategies | NetSuite 

How to Calculate Churn Rate in 5 Easy Steps [Definition + Formula] | HubSpot 

Seven Ways To Make Your Subscription Loyalty Program Irresistible | Forbes

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