Customer Retention
May 16, 2023

What is Customer Retention? Knowing When Customers are Truly Loyal

What is Customer Retention?

In this blog, we’ll cover the basics of customer retention. Looking at in relation to the customer lifecycle, touching on key metrics, and the benefits it brings to businesses. We’ll also consider the customer retention process, how it helps structure long term strategic goals, short term objectives, which of these you should prioritise, and much more!

Retaining customers is an important part of any successful business. Now that’s more true than any time before. Mostly due to the fact that consumer expectations have changed. In response, companies are switching focus from acquisition to retention on an industry-wide scale.





What it Customer Retention?

Customer retention refers to a company’s ability to keep its customers for a specific period of time. This is an important metric for nearly all B2B and B2C businesses as it measures customer loyalty. High customer retention means customers are repeatedly purchasing a company’s product or service. 

On the other hand, low or declining customer retention denotes poor or wavering customer loyalty. This is often due to a complete lack of customer retention strategies or the implementation of poorly designed ones. The result of which leads to customers abandoning the company and switching to competitors. This is known as customer churn or attrition – the antithesis of customer retention. 

In order to win repeat customers and mitigate churn, companies must create a customer retention process. 

Importance of Customer Retention in Business

The landscape of consumer expectations has significantly shifted in the past decade. Loyal customers want more than quality products or services. They want to feel appreciated and valued. As evidenced in this chart by Marigold, which shows a growing trend towards:

  • Consistency in excellent service 

  • Rewards for loyalty and surprises to delight them

  • To feel they can trust brands to use their data responsibly 

  • To be treated as an individual and develop relationships with the brands they use 

  • The VIP treatment 

    By Marketing Charts
    Brands retain customers that communicate messages about customer experience and rewards.


Companies that fail to meet these consumer demands will struggle to insulate their customer base from competitors. That’s what makes customer retention important. The opportunity to differentiate from competitors and exceed the expectations of loyal customers. Which in the long run yields huge benefits, such as cost-effective acquisition via referrals, repeat purchases, and effective upselling and cross-selling. 

It should come as no surprise then that the top five brands in most sectors have a retention rate of 94%

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The Basics of Customer Retention

An overall retention strategy is needed to see the same success as top performing brands. However, before a strategy is planned and put into action, the basics of customer retention should be covered first. Every business has its own set of unique challenges. Factors that need careful consideration when planning a customer retention strategy.

Understanding the customer lifecycle

The customer lifecycle is a tried and tested way of gauging loyalty. Retention is the final stage before a customer can safely be categorised as “loyal”.

How a company retains customers depends on several things they’ve already done in the customer lifecycle.

  • What outbound methods has the company used to reach leads? 

  • Which acquisition techniques were used during the customer consideration stage? 

  • Are features such as a smooth onboarding process already in place at the point of conversion?

All of these factors will shape some of the retention techniques. Of course, there’s also universal methods of retaining customers, such as customer support and excellent customer service. But that’s just good practice.

Brands that reach leads using social media marketing on the other hand, could retain customers by building stronger connections on their channels. 

Likewise, a smooth onboarding process is typically cited as a powerful retention technique. But if a brand already has seamless onboarding in place it doesn’t need to be included in the short term objectives. Unless, it isn’t working. If that’s the case, the lifecycle stage as a whole, will fail.

Every part of the customer lifecycle therefore should work as intended before your attempts to optimise the retention stage. 

Key metrics to measure customer retention

The key metrics of customer retention includes: 

  • Customer retention rate (CRR) 

  • Customer churn rate 

  • Customer lifetime value (CLV) 

  • Net promoter score (NPS) 

  • Customer loyalty index 

  • Repeat purchase rate 

Although these are the fundamental metrics, there are more ways companies measure customer retention. These metrics (some of which may be used as KPIs) will be part of the customer retention process. We will look at formulas, which ones you should use, as well as metrics and KPIs in more general terms in another blog soon.

Benefits of customer retention

In the midst of economic headwinds, consumers are feeling the pinch. As a result, they expect brands to offer more bang for their buck. This has forced marketers to review their cost-benefit analysis.

Customer acquisition is proving too costly to attract consumers who are limiting their spending. The only viable alternative for growth is retention.

Which is why across industries 67% of marketers are shifting focus from acquisition to retention. 

Aside from the benefit of being more cost-effective than acquisition, retention demonstrates viability in other key areas too: 

  • It helps brand build loyalty 

  • Increase referrals through word-of-mouth marketing 

  • Increases higher profit margins as a result of effective cross-sells and upsells

  • Reduces customer churn even during financially difficult times 

  • Works well with other strategies to drive engagement 

  • Marks out the brand from competitors 

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The Customer Retention Process Flow  

A customer retention process flow is the method companies adopt to improve customer retention rates. Factors such as the business model, purchase frequency, target audience, the customer journey and even your company’s products or services, are just some examples of what should be considered. 

Factors in a customer retention process may vary from company to company. However, the structure or body of a customer retention process should always include an overall strategic goal and a series of short term tasks or objectives. 

The desired outcomes of both goals and objectives will also vary between companies as they are tied to specific KPIs and metrics. 


When do customers become loyal? 

Repeat purchases are just one indication that customers are becoming loyal. Therefore, an uplift in repeat purchase rate would be the perfect KPI to measure time-bound retention rates, for example.

With that said, timescales in particular could prove to be a tricky goal to accomplish in the customer retention process. Some companies might struggle to identify when customers are much more likely to be retained. Hence, the importance of fully understanding consumer behaviours (like repeat purchases) at each stage of your customer lifecycle.

Long term goals 

Long term goals are the overall strategic outcome of the retention process flow. These are numeric KPIs that allow companies to measure some of the aforementioned metrics above. A retention KPI could also be linked to long term goals such as improving app retention on customers’ mobile phones. 

Short term objectives 

Objectives are tactical, shorter, actionable steps that serve the overall, strategic, longer term goal. They are the sequence of steps between point A and B, with the latter being the retention goal. Companies use metrics to measure the performance of objectives. 

Although these metrics shouldn’t be labelled as KPIs (as these are quantified against strategies as whole).

For example, going back to the example above; a company wants to improve the retention of its app on customers’ mobile phones. That’s the long term goal and would have a KPI (such as 25% uplift in app retention). 

But to get there, the company needs to delegate short term objectives. This could vary. For example, the tech team needs to prevent crashes by 90%. This is a metric that in the long run hopefully contributes to the overall KPI.  


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Expectations, Trust, Satisfaction and Retention  

The essential factors when planning a customer retention process flow, eventually coalesce into a system that: 

  • Meets customer expectations 
  • Builds trust with customers 
  • Boost customer satisfaction 
  • Will improve customer retention 

Meeting customer expectations

Personalisation and excellent customer service are essential for delivering valuable experiences expected by consumers.

In fact,
91% of consumers claim they would shop with brands that personalises recommendations and makes relevant offers. 


Similarly, more than 65% of consumers today expect higher standards of customer service compared to 3-5 years ago. Meeting these expectations are absolutely essential to improve customer retention. The dividends they eventually yield in terms of retention cannot be understated. 

As target audiences are always a mosaic of individual preferences and expectations. Where one customer prefers email the other wants to be contacted by text. Yet by discovering preferences such as these, companies deepen the customer experience and begin to build something a lot of consumers feel is missing…trust.  

You can see how different industries meet customer customer expectations in this article about customer retention by industry

Building trust 

Companies that consistently meet customer expectations, build trust and develop customer relationships. Trust can be seen as the bridge between newly acquired customers and long term retention.

Yet, customer trust is in short supply. In spite of 80% of consumers saying it’s a major factor in their purchasing decisions 


Customer retention strategies are designed to build customer trust. Seamless onboarding processes show customers they’re dealing with professionals, the moment they make their first purchase. Companies capable of rapidly resolving complaints are also more likely to retain appeased customers

Keeping a clean track record with existing customers leads to overall higher satisfaction and thereby retention. It’s the job of the customer retention process to usher customers from expectation to satisfaction. 

Making an impact with customer satisfaction

Customer satisfaction is essential for customer retention. The end result of overall satisfaction is felt more profoundly by customers because they benefit directly from quick deliveries, swift complaint resolutions, seamless usability, convenience and flexibility. 

A high quality service isn’t just a compelling reason for customers to stay. In fact, retention isn’t just the end goal of satisfaction, either. Satisfied customers are happier, which means they’re more willing to refer their friends and family. 

A customer acquired through a referral has a 37% higher retention rate than any other leads. The reason for this is obvious. 

Why Retention is a self-sustaining cost-effective wonder tool 

If you’ve implemented strategies to boost retention, you’ve satisfied customers to a level that your competitors could only dream of achieving. By doing that, you’ve earned your customers’ trust. So much so in fact, they trust you can deliver for their friends and family too. And of course, you’re going to deliver. 

Because you’ve built a top quality service that exceeds customer expectations. Precisely the reason why newly referred leads stick around for longer. Plus, as a bonus for increasing customer retention (and referrals) you significantly reduce acquisition costs. 


Reap the Rewards of Better Retention 

Shifting focus to customer retention naturally leads to the implementation of strategies that give businesses numerous opportunities. From compelling points of difference, to optimising the retention stage of the customer lifecycle. 

Retention demonstrates its importance now more than ever. Particularly with the landscape of consumer expectations shifting towards value. Its ability to mitigate the cost of acquisition, drive referral rates, as well as crucial financial KPIs, makes it a wonder weapon against customer churn and shrinking margins. It’s clear why optimising customer retention is quickly becoming top priority for so many companies. 

Losing customers faster than you’re getting them? Need advice on planning out your customer retention process flow? Whatever your retention problem may be, we’re here to help.  

Contact us


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