Customer retention is the concept of turning existing customers into repeat customers who continue to purchase from your company instead of turning to competitors. Customer retention strategies typically focus on building brand loyalty, increasing customer satisfaction, and strengthening customer relationships so that shoppers continue to choose your business over alternative options. Increasing customer retention is a proven method for increasing your company's bottom line profits.

Deciding how much to focus on a customer retention program depends on where your company is in its lifecycle. Newer companies need to grow their existing customer base and tend to invest more resources into customer acquisition than retention. More established companies with a solid existing customer base benefit from investing resources into a customer retention marketing strategy.

Below are just three of the many reasons why improving customer retention has a positive influence on a business. 

1. __Customer retention leads to referrals__. Loyal customers who consistently purchase from your company are more likely to post positive customer feedback online and give you free advertising via word-of-mouth to their friends, family, and social networks. 
2. __Customer retention cuts costs__. It is generally more expensive to obtain a new customer than it is to hold onto a current customer. Better customer retention leads to a decrease in the amount of money you need to spend on advertising and marketing.
3. __Customer retention increases revenue__. There's a clear correlation between customer retention and customer lifetime value, which is a metric signifying the total amount of money you expect to make from a customer throughout their relationship with your company. When you increase customer retention, you also increase your customer lifetime value, which has a positive impact on your profitability.
Before you develop a customer retention strategy, it’s helpful to measure your customer retention rate, customer churn rate, and repeat customer rate.

1. __Customer retention rate__: Customer retention rate measures the percentage of a company's customers who continue to do business with the company over a certain time period.
2. __Customer churn rate__: Churn rate is a way to measure the percentage of customers lost over a certain time period. 
3. __Repeat customer rate__: This metric measures the percentage of customers who made more than one purchase from your business over a given period of time. The higher this percentage the better.
Calculate your company’s customer retention rate using the following formula:

In the formula, E is the number of customers at the end of a given period of time, N signifies the number of new customers acquired during a given period of time, and S is the number of customers at the start of a given period of time.

For example, say you're measuring retention rate for a one year period. At the start of that year you had 100 customers (S). Throughout the year, you gained 40 new customers (N), but lost 10 existing customers. That means at the end of the year you had 130 customers (E). To find your customer retention rate, calculate:

__130 - 40 ÷ 100 = 0.90__

This means your customer retention rate for the year was 90 percent.
A high churn rate reflects poorly on customer retention and signifies that you need to take steps to improve your customer experience. To find your company’s churn rate, use this formula:

For example, say you run a subscription-based business. During a one year period, 75 of your customers canceled their subscription and 300 new customers signed up for your service. To find your customer churn rate, calculate:

__75 ÷ 300 = 0.25__

This means your customer churn rate for the year was 25 percent.
To measure the percentage of customers who made more than one purchase from your business over a given period of time, use the following formula:

In the formula, unique customers refers to different customers who made a purchase as opposed to different purchases, which could potentially be from the same customer. 

For example, in a given year say you had 500 total unique customers and 175 of them made 2 or more purchases. To find the customer retention rate, calculate:

__175 ÷ 500 = 0.35__

That means in this one year time period, 35 percent of your customers were repeat customers.
There are numerous strategies you can adopt to increase customer retention. Try employing more than one of these strategies to give your business the best chance at achieving a high customer retention rate.

1. __Understand your customers__. A successful customer retention strategy revolves around understanding your customer's needs. One of the best tools to accomplish this is [customer relationship management](https://www.masterclass.com/articles/crm-databases) (CRM) software. CRM software lets you create profiles of your customer base, evaluate customer engagement, and calculate customer experience metrics in order to thoroughly understand the buyer's journey.
2. __Create an effective email marketing campaign__. Once a customer makes their first purchase and opts in to receive promotional emails, it opens the door for a constant line of communication through email marketing. Email marketing is great for announcing new products, promoting upcoming events, offering subscriber discounts and sales, and building community around your brand. Effective email marketing campaigns can boost your eCommerce by using deals and promotions to drive customer engagement and keep customers coming back again and again.
3. __Create a customer loyalty program__. One of the easiest ways to create long-term customer relationships is to use customer loyalty programs. These programs promote continued customer engagement after a customer has already made their first purchase. Referral and rewards programs can generate additional customer interactions and make it worth their while to keep returning to your brand.
4. __Make customer support a priority__. To obtain repeat buyers you should aim to exceed customer expectations when it comes to your support system. Make sure it's never difficult for customers to get in touch with you. Have clear, easy-to-find contact instructions on your website, and go out of your way to reach out to users on social media when they post questions and comments. Respond quickly to support queries (even if only to say you received their message) and resolve their issues in a timely manner. 
5. __Invite customer feedback__. Your customers should feel like you want to hear their opinions. When you invite feedback and actually listen to it, it not only makes them feel valued, but it shows that your relationship is a two-way street.
Get the [MasterClass Annual Membership](https://www.masterclass.com) for exclusive access to video lessons taught by business luminaries, including Daniel Pink, Chris Voss, Robin Roberts, Sara Blakely, Bob Iger, Howard Schultz, Anna Wintour, and more.
It’s essential for businesses to focus on ways to keep acquired customers satisfied and coming back for more.

It’s essential for businesses to focus on ways to keep acquired customers satisfied and coming back for more.

Guide to Customer Retention: 5 Customer Retention Strategies

Customer retention is the concept of turning existing customers into repeat customers who continue to purchase from your company instead of turning to competitors. Customer retention strategies typically focus on building brand loyalty, increasing customer satisfaction, and strengthening customer relationships so that shoppers continue to choose your business over alternative options. Increasing customer retention is a proven method for increasing your company&#39;s bottom line profits.Deciding how much to focus on a customer retention program depends on where your company is in its lifecycle. Newer companies need to grow their existing customer base and tend to invest more resources into customer acquisition than retention. More established companies with a solid existing customer base benefit from investing resources into a customer retention marketing strategy.

What Is Customer Retention? 

Below are just three of the many reasons why improving customer retention has a positive influence on a business. <ol class="mc-m-4"><li class="mc-my-4"> 1. Customer retention leads to referrals. Loyal customers who consistently purchase from your company are more likely to post positive customer feedback online and give you free advertising via word-of-mouth to their friends, family, and social networks. </li><li class="mc-my-4"> 2. Customer retention cuts costs. It is generally more expensive to obtain a new customer than it is to hold onto a current customer. Better customer retention leads to a decrease in the amount of money you need to spend on advertising and marketing. </li><li class="mc-my-4"> 3. Customer retention increases revenue. There&#39;s a clear correlation between customer retention and customer lifetime value, which is a metric signifying the total amount of money you expect to make from a customer throughout their relationship with your company. When you increase customer retention, you also increase your customer lifetime value, which has a positive impact on your profitability. </li></ol>

3 Benefits of Customer Retention

Before you develop a customer retention strategy, it’s helpful to measure your customer retention rate, customer churn rate, and repeat customer rate.<ol class="mc-m-4"><li class="mc-my-4"> 1. Customer retention rate: Customer retention rate measures the percentage of a company&#39;s customers who continue to do business with the company over a certain time period. </li><li class="mc-my-4"> 2. Customer churn rate: Churn rate is a way to measure the percentage of customers lost over a certain time period. </li><li class="mc-my-4"> 3. Repeat customer rate: This metric measures the percentage of customers who made more than one purchase from your business over a given period of time. The higher this percentage the better. </li></ol>

3 Important Customer Retention Metrics 

Calculate your company’s customer retention rate using the following formula:

How to Calculate Customer Retention Rate

In the formula, E is the number of customers at the end of a given period of time, N signifies the number of new customers acquired during a given period of time, and S is the number of customers at the start of a given period of time.For example, say you&#39;re measuring retention rate for a one year period. At the start of that year you had 100 customers (S). Throughout the year, you gained 40 new customers (N), but lost 10 existing customers. That means at the end of the year you had 130 customers (E). To find your customer retention rate, calculate:130 - 40 ÷ 100 = 0.90This means your customer retention rate for the year was 90 percent.

A high churn rate reflects poorly on customer retention and signifies that you need to take steps to improve your customer experience. To find your company’s churn rate, use this formula:

How to Calculate Churn Rate

For example, say you run a subscription-based business. During a one year period, 75 of your customers canceled their subscription and 300 new customers signed up for your service. To find your customer churn rate, calculate:75 ÷ 300 = 0.25This means your customer churn rate for the year was 25 percent.

To measure the percentage of customers who made more than one purchase from your business over a given period of time, use the following formula:

How to Calculate Repeat Customer Rate

In the formula, unique customers refers to different customers who made a purchase as opposed to different purchases, which could potentially be from the same customer. For example, in a given year say you had 500 total unique customers and 175 of them made 2 or more purchases. To find the customer retention rate, calculate:175 ÷ 500 = 0.35That means in this one year time period, 35 percent of your customers were repeat customers.

There are numerous strategies you can adopt to increase customer retention. Try employing more than one of these strategies to give your business the best chance at achieving a high customer retention rate.<ol class="mc-m-4"><li class="mc-my-4"> 1. Understand your customers. A successful customer retention strategy revolves around understanding your customer&#39;s needs. One of the best tools to accomplish this is <a href='https://www.masterclass.com/articles/crm-databases' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/crm-databases","linkCopy":"customer relationship management","category":null}'>customer relationship management</a> (CRM) software. CRM software lets you create profiles of your customer base, evaluate customer engagement, and calculate customer experience metrics in order to thoroughly understand the buyer&#39;s journey. </li><li class="mc-my-4"> 2. Create an effective email marketing campaign. Once a customer makes their first purchase and opts in to receive promotional emails, it opens the door for a constant line of communication through email marketing. Email marketing is great for announcing new products, promoting upcoming events, offering subscriber discounts and sales, and building community around your brand. Effective email marketing campaigns can boost your eCommerce by using deals and promotions to drive customer engagement and keep customers coming back again and again. </li><li class="mc-my-4"> 3. Create a customer loyalty program. One of the easiest ways to create long-term customer relationships is to use customer loyalty programs. These programs promote continued customer engagement after a customer has already made their first purchase. Referral and rewards programs can generate additional customer interactions and make it worth their while to keep returning to your brand. </li><li class="mc-my-4"> 4. Make customer support a priority. To obtain repeat buyers you should aim to exceed customer expectations when it comes to your support system. Make sure it&#39;s never difficult for customers to get in touch with you. Have clear, easy-to-find contact instructions on your website, and go out of your way to reach out to users on social media when they post questions and comments. Respond quickly to support queries (even if only to say you received their message) and resolve their issues in a timely manner. </li><li class="mc-my-4"> 5. Invite customer feedback. Your customers should feel like you want to hear their opinions. When you invite feedback and actually listen to it, it not only makes them feel valued, but it shows that your relationship is a two-way street. </li></ol>

5 Customer Retention Strategies

Get the <a href='https://www.masterclass.com' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com","linkCopy":"MasterClass Annual Membership","category":null}'>MasterClass Annual Membership</a> for exclusive access to video lessons taught by business luminaries, including Daniel Pink, Chris Voss, Robin Roberts, Sara Blakely, Bob Iger, Howard Schultz, Anna Wintour, and more.

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It’s essential for businesses to focus on ways to keep acquired customers satisfied and coming back for more.

It’s essential for businesses to focus on ways to keep acquired customers satisfied and coming back for more.
