What is Customer Retention and Why is it so Important?

What is Customer Retention?     

Customer Retention is the set of post-sales activities you do, to ensure your customers become your repeat customers and eventually your raving fans.

And irrespective of the methods and procedures you use to retain customers, the final goal always remains the same, transform first-time customers into repetitive ones so as to increase their Lifetime Value (LTV). 

Why Is Customer Retention Important?

Customer retention is extremely important as it helps you comprehend the level of satisfaction your customers have with your product or service. Along with that, it also helps to identify red flags that may turn off your new customers. 

Furthermore, concentrating on this vital aspect offers you a variety of additional advantages, such as:

  •  Retaining the existing customers is way inexpensive than finding new leads and converting them
  •  As per the research, loyal customers are likely to spend almost 23% more than an average customer
  • Taking the utmost care of the current customer lot can leave a positive impact on your business as retaining 5% of customers can increase your profit by almost 25% to 95%
  •  Also, loyal customers don’t think twice before marketing your brand amongst their peers, acquaintances, friends, and family, leading to more customers and increased sales

How to Calculate Customer Retention Rates?

There are several different ways for companies to calculate customer retention rates. Majorly, it is based on the time period that you are examining. Let’s understand this with an example. Suppose you have 4000 existing customers over a period of four months. 

During this time, 1500 return to buy more from your site. Now, this is the data that will help you calculate the rate. This calculation can be done with the customer retention formula, which is:

Number of customers at the end of the period – Number of customers

acquired during period / Number of customers at the start of period X 100 

Strategies to Increase Customer Retention:

Make a good first impression:

Ever heard of the phrase, “the the first impression is the last”? That should be exactly the case when it comes to your relationship with customers.

While you might be ready to give numerous chances to others, they are not going to do the same with you, especially when they are investing money in your brand. 

One small mistake can leave a massive, negative impact on the foundation of your brand. Therefore, ensure that your every step is cautious and taken toward the benefit of your buyers. Admittedly, pleasing customers is a hard game, but you have no other choice than to ace it on the first go. 

If their first encounter with your brand and/or products or services is not satisfactory enough, they might not be ready to shop again with you. Thus, if you wish to retain customers, start by offering a good first experience. 

To ensure your customers get a seamless shopping experience use HumCommerce. It records your visitor’s screens as they move through your site. And if they encounter any issues, like see error messages, abandon their cart, etc. highlights these issues and present them to you, so you can fix the issues. This way you can be sure that you are constantly improving the user experience on your site. 

Don’t Leave Customers Hanging After the Sale:   

Once you have managed to convert a lead into a customer, what would be your next step? Are you going to leave them and move onto the next one? If that is what your strategy includes, you might be walking on a completely wrong path.  

For a brand that truly works for customers, after-sale services should be equally important as any other service provided by the company.

Once you have successfully turned a lead, hanging them mid-way should be a strict no. 

Instead, your pursuit to offer a satisfactory experience must begin right away. To do so, you can launch an online survey to get informative insight into what is working for your customers and what is not. 

Believe it or not, it is nearly impossible to please every customer. However, surveys can help you identify those patterns that you might have missed somehow. While asking them multiple-choice questions, add a few answer fields to enable customers to share their experiences. 

This way, analyzing possible dissatisfaction can help you instantly resolve issues for the betterment of your customers and the growth of the business. In the end, even your customers are going to appreciate the fact that you are interested in their opinions and problems. 

Keep the Engagement Consistent:

Nobody is interested in a brand that is accessible one day and disappears the next.

For a brand to be successful, you have to make your customers feel that they’re a part of you. And, the only way to do so is by keeping in touch.

Are there any new developments happening in your company? Let them know. 

Did you accomplish an exciting milestone? Are you coming up with a new service or a product? Did you partner with any reliable name lately?

Irrespective of what is happening, just make sure that your loyal customers are aware of the same. 

To make it a reality, keep your social media platforms updated.

Apart from posting engaging content, upload informative things as well.

Furthermore, you can also issue a monthly newsletter – either through an email or a physical copy – explaining everything happening with your brand. 

If you want, you can also highlight the latest developments on your website to let your visitors know. Consistent and uninterrupted engagement is going to develop trust and familiarity among your customers, which will contribute greatly to customer retention activities. 

Create Loyalty Programs 

Rewarding the loyalty of those who frequently buy from you gives enough reasons to continue shopping. It also helps them understand that your business is grateful and paying attention to the time and money customers are investing. 

If you think keeping a tab on top customers is going to be a time-consuming, arduous job, you can integrate a Customer Relationship Management (CRM) system. Having such a system in place will aid you with the process of identifying loyal customers and the ones that need to be prioritized. 

If possible, you can also create special loyalty programs for varying groups of customers and reward them accordingly. Another way you can adopt to make your customers invest more in your brand is by gamifying your rewards. 

Take airlines, for example. Often, they add miles to the accounts of frequent flyers to reward them in the best possible way. Likewise, you can reward your frequent buyers with special discounts, cashback, or offers. 

Moreover, to recognize their efforts, you can reward them with a badge. Remember how YouTube rewards its highest content creators with different colored buttons? All in all, the intention of a customer loyalty program is to motivate customers to purchase more from your brand and keep the retention rate higher.  

Offer Valuable Upsells:

In simple words, upselling refers to persuading customers to upgrade their existing product or purchase a better version. How would you do that? Suppose a customer is purchasing a smartphone from an online store. If he is interested in buying a 32GB storage model, the store may suggest a model with 64GB or 128GB. 

If you haven’t been upselling, you’re missing out on a lot of potentials to generate revenue. The possibility of selling to a new lead is 5% – 20%, while the number of an existing customer is as higher as 60%-70%. 

Considering that product recommendations can increase revenue anywhere between 10% to 30%, offering an appropriate upsell at the right time is a vital tactic for sales growth. Moreover, it can substantially increase the Average Order Value (AOV) along with the overall revenue. 

One of the best things about upselling is that not just it increases the average order value but also enhances Customer Lifetime Value.

This way, while being customers, they spend more time on your platform and with your brand. 

However, the key to a successful upsell is to find the perfect one. For instance, for an online store, there is a variety of upsell techniques, including customization, product protection, version upgrade, etc.

So, find the one that will work best for your brand. 

Keep Surprising Customers:

Who doesn’t love surprises? Think about it, wouldn’t the idea of receiving something unexpectedly fill you up with ecstasy? As far as nurturing your customers is concerned, you must come up with a valuable offer to give – without the knowledge of your customers. 

Even psychologically, it has been proven that surprises act in a good way for the brand. They bring pleasure, excitement and joy. Also, if you want customers to stay and invest their trust in your brand, you must go beyond standardized customer services. 

Basically, surprises are a way to motivate customers. You can also present them in the form of appreciation. In fact, you don’t have to gift anything luxurious and expensive. Something as simple as a handwritten note, stating its importance to your company, will do the magic. 

Apart from handwritten notes, you can also send your loyal customers brand-representing merchandise, such as magnetic stickers, t-shirts, mugs, pillows, pens, etc. Ultimately, your customers are going to love it as it shows how much you value them. 

Also, by surprising customers, you’ll be inspiring them to leave honest, positive feedback on the internet regarding your brand and products.

And that feedback, in all senses, is priceless.


Customer Retention is an important activity that should not be missed. You have to spend limited time and money in customer retention, but the potential ROI, positive word of mouth, and happy customers that it creates makes it a must do activity.

Editorial Staff

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