Customer Retention
May 23, 2023

Top 10 Benefits of Customer Retention

Benefits of Customer Retention

Customer retention offers companies huge benefits that go a long way in several key areas that are critical for any business. From savings in cost-per-acquisition and marketing to driving engagement and brand advocacy. Time and again, customer retention has proven its worth. It’s no wonder that 50% of marketers are now creating retention-boosting content. 

With that said, there’s still plenty of room for improvement. Many companies and even some industries as a whole, are still playing catch up when it comes to focusing on customer retention. Luckily for them an overwhelming amount of consumers expect deeper relationships and better experiences with the brand they shop with.  

Yet, as more competitors also shift focus to deliver on these expectations, the window of opportunity to put forward a compelling point of difference is closing. It’s a very real possibility that companies who miss the customer retention boat will also miss out on the benefits it offers.

In this blog post, we’ll aim to give you an overview of each of these benefits. By exploring how they boost customer retention, you’ll gain a deeper understanding of the positive impact that customer retention has on businesses and customers. 



Top 10 Benefits of Customer Retention

  1. Increased Customer Lifetime Value (LTV) 

  2. Cost-Effectiveness

  3. Positive Word-of-Mouth 

  4. Customer Loyalty and Trust 

  5. Competitive Advantage 

  6. Enhanced Customer Engagement 

  7. Reduced Churn Rate 

  8. Valuable Feedback and Insights 

  9. Cross-Selling and Upselling Opportunities 

  10. Sustainable Business Growth 


1) Increased Customer Lifetime Value (CLV)

Customer lifetime value is a metric that helps businesses estimate how much they’ll earn from the average customer. This provides a full view of the lifetime-value of customer relationships with the brand. 

Typically, the longer a brand retains a customer, the more they’ll spend. Which is why as retention increases so does customer lifetime value.

Indeed the average existing customer spends approximately 67% more than new ones. It’s clear to see why increased CLV – a benefit of higher customer retention – plays a significant role in successful business.  


Aside from a boost in higher profitability, CLV can also show businesses the strength of the customer experiences that they offer. As well as the effectiveness of their marketing efforts, offering insights into critical areas that need improvements, and determining and measuring more accurate segmentation lists and loyalty. 

All of which inform the strategies that businesses use for retaining customers. Customer retention strategies enhance overall CLV because they encourage brands to offer personalised, rewarding, seamless, and convenient experiences. 

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2) Cost-Effectiveness

Acquiring a new customer is 5 - 25 times more expensive than retaining existing customers! For example, the customer acquisition cost (CAC) in banking and insurance is around approximately £250.00 and £320 for tech firms. 

Yet, more loyal existing customers are on average, 22 times more valuable across several different retail sectors. If we apply this to the CAC for retail banks and tech products or services that equates to £5,500.00 and £7,040.00, respectively. 

So, what exactly makes retention more cost-effective than acquisition? 

Customer retention demonstrates several financial advantages. As we’ve already seen, an increase in customer lifetime value is just one benefit of customer retention. Retained customers are more likely to make repeat purchases and generate more revenue for businesses as a result. 

Retention also shortens sales cycles. Businesses need to build awareness, generate interest and then convert leads into customers. Existing customers on the other hand, are already familiar with the brand (we’ll delve more into this later). 

Which also means there’s no need for huge advertising campaigns, lead generation and other promotional activities. In other words, marketing costs are significantly reduced as a result of higher customer retention.

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3) Positive Word-of-Mouth

Word-of-mouth marketing is one of the most sought after benefits of customer retention. The ultimate form of customer loyalty has a huge impact on any brand’s reputation. Not to mention their bottom line! 

Increasing customer referrals generates 6 trillion dollars of annual consumer spending. WoM marketing and referrals directly result from overall higher customer satisfaction and delight. The customer retention strategies employed to make customers feel this way eventually leads to them referring friends, family and colleagues to your brand.

Not only is this a cost-effective way of acquiring new leads. Customers acquired through positive word-of-mouth are also more likely to stay with the business for longer. Over the course of which, their lifetime value increases. 

What’s more, the initial retention strategies that satisfy customers up to a point where they just have to refer others, will inevitably in time, delight newcomers to the brand as well. Which just goes to show how the impact of satisfying customers compounds over time. 


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4) Customer Loyalty and Trust

Customer retention and customer loyalty are synonymous in the field of managing customer relationships. On the one hand, retention is the ability of a business to keep its current customers over a given amount of time. 

Retention strategies include excellent customer service, resolving customer complaints quickly, and personalising the overall customer experience.

Over 90% of consumers, for example, state they’d repeatedly buy from a brand that offers excellent customer service.

Repeat purchases are a hallmark of a retained customer teetering on the edge of full-fledged loyalty. 

On the other hand, customer loyalty is the sentiment towards the brand. So, when a customer is satisfied with the brand overall, trust is improved, and their rapport increases. What follows goes way beyond repeat purchases. An emotional connection towards the brand emerges. 

As a result, loyal customers are willing to refer others to the brand. Which again, needs to be said; brand advocacy is the ultimate expression of customer loyalty and commitment. And it’s always the result or outcomes of successful customer retention efforts.


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5) Competitive Advantage

Competitive differentiation refers to the unique characteristics of a brand’s product or service. Businesses market these distinctive features, which sets them apart from industry competitors. Offerings are more valuable and appealing to customers as a direct result of the retention strategies implemented by the company. 

Getting a competitive advantage via retention takes building strong relationships with customers. Furthermore, a focus on implementing strategies that enhance the customer experience takes precedence. Naturally, in response to these retention efforts, customers not only express loyalty through referrals. They exhibit loyalty in other behaviours too. Such as becoming even more resistant to the acquisition tactics and efforts of competitors. 

Aside from insulating themselves from competitors, companies also stand to gain an increasingly stable customer base. Thereby mitigating the negative impacts of any market fluctuations or activities by competitors. Such stability provides highly competitive businesses with strong retention, a solid foundation for future growth, sustainability in compounding retention strategies, and long term consistency. 

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6) Enhanced Customer Engagement

Customer retention and increased engagement have a symbiotic relationship. An article on Gallup showed that companies who engage more with their B2B customers, reported 63% lower customer churn.

Engaged customers stay loyal to a brand or business and that leads to higher customer retention rates as a result. In the same vein, customer retention efforts also contribute to better engagement levels.

Emotional connections play a central role in how much customers engage with a brand. If customers feel valued, trust that the brand understands them, and overall satisfaction with the experience, this encourages repeat purchases and more interactions with the brand. 

Using customer loyalty programmes is a great way retention strategy for optimising engagement with the brand. Customer relationships with brands skyrocket in value as a result of loyalty programmes.

Almost three quarters of consumers say their membership in a loyalty programme is central to their relationship with the brand. 

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7) Reduced Churn Rate

The impact of customer churn on business growth cannot be understated. In the first year that a SaaS startup hits the market, they tend to see a 15% churn rate. Yet, companies who quickly resolve complaints and issues on social media can expect to see 20-40% more growth. Yet, according to the same article, those brands who ignore social media actually see a 15% rise in churn. 

So, what’s the actual cost of churn? That depends on the business. The numbers will vary drastically. On average, it’s estimated that the global average cost of losing a customer is $243! But it’s not just a cost in value, either. 

Companies that refuse to address churn or don’t know how to, risk irreversible damage to their brand’s reputation and image. Just as retention strategies lead to a self-sustaining retention cycle, customer churn grows more critical and quickly deteriorates the situation. 


Want retention strategies that cut churn down to size? Find them here. 


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8) Valuable Feedback and Insights

Retained customers are an excellent source of valuable insights and feedback. This helps brands improve their products, services, and customer experiences. By  leveraging this feedback, businesses make targeted enhancements where they are needed most.

Addressing pain points in the process that increases customer satisfaction and the likelihood that they’ll spread the word to other leads.

In fact, 77% of customers favour those brands who consider their feedback and implement changes on the back of it. 


Aside from gaining valuable insights by implementing retention strategies that encourage customer feedback, you’re also showing the world you’ve got nothing to hide. Customer feedback is a great, cost-effective source of customer acquisition too.  

As consumer trust is at an all time low, many prospects conduct research before they buy.

An incredible 98% of consumers seek out reviews before they make a purchase decision!

No doubt you’ll want to market positive social proof wherever you can if you’ve exceeded expectations with effective retention strategies. 


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9) Cross-Selling and Upselling Opportunities

Existing customers demonstrate trust in the brand when they make previous purchases. In this instance, they are much more likely to convert and make additional purchases.

Studies show that companies are 70% more effective in cross-selling to their existing customers. 

New customers, on the other hand, are still in the early stages of learning to trust the brand. That’s where stronger retention as a result of delivering an enhanced customer experience really begins to pay off though. Especially when dedicated communities and a highly engaged social media audience is present. 

The new customers will see for themselves the positive feedback and word-of-mouth marketing from highly satisfied customers. If the product’s good, the overall customer experience fantastic, then the chances that cross-selling retains new customers go up by an impressive 90%


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10) Sustainable Business Growth

Retaining customers plays a vital role in the long term success of any business. Establishing and maintaining a loyal customer base contributes to several factors that drive overall business success.

Just a 5% increase in retention could net businesses a profit growth of anywhere between 25-95% 


It’s for that reason why customer retention is directly linked to revenue growth. Acquiring new customers is often more expensive than retaining existing ones. But by retaining customers, businesses benefit from repeat purchases, higher transaction volumes, and increased customer lifetime value. Which results in sustainable revenue growth, crucial for long term success and profitability.

Since customer retention is more cost-effective, it requires fewer resources and marketing efforts to keep existing customers satisfied and engaged compared to acquiring new customers. By focusing on retention, businesses optimise marketing budgets and allocate resources more effectively towards better products, unrivalled services, and widely celebrated customer experiences.


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Long Term Success Depends on Better Customer Retention

Customer retention is powerful because of the numerous benefits it brings to businesses across industries. You can also see how successful different industries are at retaining customers: 

Insight & Analysis: Find out Average Customer Retention Rate by Industry

By focusing on retaining existing customers, businesses increase customer lifetime value (CLV) and maximise their revenue. Not only is that more cost-effective than acquiring new customers, it also leads to positive word-of-mouth. Customer acquisition that also enhances brand reputation.

Then there’s the loyalty and trust that customer retention fosters. Creating a competitive advantage over rivals in the market by consistently delivering exceptional customer experiences. Businesses build strong relationships that go beyond price considerations. In doing so, they reduce customer and revenue churn rates and stabilise the customer base in fluctuating and uncertain markets.

The valuable feedback and insights retained customers provide, drives innovation and leads to more cross-selling and upselling opportunities. Stronger retention also means brands can nurture relationships and engage with them on a regular basis. Proactively identifying their needs and staying one step ahead of shifting expectations.  

Think the time’s right to cultivate loyalty, enhance your brand’s reputation or establish a solid foundation of sustainable growth? Contact us today. 

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