Customer retention refers to the rate at which customers stay with a business over a given period of time. It is a metric that measures customer loyalty, reflecting the ability of an organization to keep its customers over time. Customer retention is important because retained customers are more likely to engage in word-of-mouth marketing, become repeat buyers, and lead to increased profits. It is generally more cost-effective for businesses to maintain existing customers than to acquire new ones. Customer retention strategies include improving customer onboarding, using client feedback to constantly improve, understanding customer experience, and segmenting customers to deliver the right content at the right time
. The customer retention rate is calculated using the following formula:
Customer Retention Rate=(E−NS)×100\text{Customer Retention Rate}=\left(\frac{E-N}{S}\right)\times 100Customer Retention Rate=(SE−N)×100
Where:
- E = Number of customers at the end of a period
- N = Number of new customers acquired during that period
- S = Number of customers at the start of that period
