Customer Retention


Your customers are the lifeblood of your enterprise. You work tirelessly to provide them with value for their time and money, in the hopes of establishing a long and fruitful relationship. You do so because you know that the environment we all operate in is fiercely competitive and a customer lost is your rival’s gain.

Top brands put great effort into their customer retention practices because they are well aware of the many benefits of cultivating an engaged and devoted customer base. Brand loyalists are a key differentiator in the marketplace today. Look no further than the hordes of super fans that line up for the latest Apple product every year.

The media unfailingly covers these events, providing free exposure that you can be certain Samsung and Google would much prefer was directed at their brands. Anyone who misses the broadcast coverage is still potentially going to hear about it on their social media feeds. Repeat customers develop dynamic connections with their brands of choice and they share that devotion with others.

Your Most Valuable Customer

Beyond goodwill, awareness building, and differentiated positioning, customer retention also makes a measurable impact on profitability. According to a frequently cited study by the Harvard Business School, just a five-percent increase in customer retention can lift profits by a staggering 25 to 95-percent. That helps explain why Gartner’s 2017-2018 CMO Spend Survey reported that top brands are investing twice as much in customer retention as they are in customer acquisition.

There are several reasons why profitability and repeat customers are so strongly linked. Studies repeatedly show that retained customers spend more and transact more frequently than newcomers. Once they find a brand that suits them, the decision making process is truncated. There is less need to ‘kick the tires’ when you’ve already had several good experiences with a company and its offerings.

Satisfaction is Not Enough, You Have to Delight

So, given the clear importance of retaining customers, how are today’s most successful brands achieving that goal? They are doing it by taking a longer view of their relationships with customers. Preventing customer defections starts at the very first contact and continues through the entire lifecycle of the relationship. At every meaningful touchpoint, they are making certain that their customers aren’t just satisfied, but delighted.

Top brands are investing twice as much in customer retention as they are in customer acquisition.

Customer satisfaction is broadly considered to be achieved by meeting expectations in a commercial relationship. Customer delight is going above and beyond those expectations and providing value and service that surprises and creates enduring positive associations.

In the modern marketplace, customer satisfaction is the bare minimum. It keeps you afloat, but growth requires going beyond that nominal benchmark and delivering delight. Positive emotional reactions generate the goodwill and earned media that distinguishes brands from their competitors, bringing in new customers and strengthening bonds with existing ones.

Delight is created one interaction at a time. It can be the result of the benefits of the product or service itself, but just as often derives from effective customer relationship management. A product that works even better than advertised can delight, but so can a thoughtful, well-prepared representative who knows their customer and tailors interactions to their personalized needs. In any relationship, commercial or otherwise, sincere gestures that indicate a personal interest go a long way towards building ties that bind.

Avoiding Defections

Customer delight is a big component in the relational switching costs that deter people from defecting to another brand, but other factors are relevant as well. Financial costs, such as lost reward points or fees to prematurely terminate a contract, also play into the customer’s calculation. Procedural switching costs like the time and effort it would take to find a new vendor and become acclimated to them also prevent defections. Additionally, the feelings of uncertainty of moving from a familiar product or service to an unknown will result in reluctance to change.

Even with all those barriers, relational costs are still considered the predominant factor in customer retention because even if it will take time and money to switch, a perennially dissatisfied patron is eventually going to do so. That is why it is so important to do the little things to keep a current customer happy.

Know The Metrics for Customer Retention

Your customer retention rate is calculated by subtracting the number of customers you acquired during a given time period from the total number of customers you are servicing at the end of that period, and then dividing that figure by the number of customers you were servicing at the start.

For example, if you started the fiscal quarter with 150 customers, gained 15 by the end of the quarter, and lost just five customers, your retention rate would be a very healthy 97-percent [(160-15) / 150 = 0.966)].

Just a five-percent increase in customer retention can lift profits by a staggering 25 to 95-percent.

Keeping track of your retention rate will help inform your customer relationship management strategies. A falling rate signals it’s time to devote more resources to servicing existing customers and auditing ones who have chosen to depart.

The Importance of Feedback

Churned customers are under no obligation to answer your questions, but many are still willing to fill out a simple survey to explain their reasons for leaving. That data is invaluable. It helps businesses find patterns in the types of customers they are failing to retain, as well as revealing internal conduct that could be causing defections.

You might find that you’re not delighting your customers because you haven’t properly set their expectations, setting yourself up for failure by overpromising and under delivering. Or, perhaps you aren’t taking advantage of all your touchpoints to effectively communicate and provide value.

Solicit feedback from existing and departing customers whenever possible to discover these issues before they start affecting your bottom line. A deep understanding of customer behavior and motivation is essential for providing the seamless, consistent, and superlative customer experience that wins repeat business and brand loyalty.


Building brand advocates, encouraging repeat purchasers, and ensuring the expectations of your customer base are being exceeded are not only potent differentiation strategies, they are very real drivers of profitability.

Every brand needs to grow to survive. A major part of business growth is maintaining the customer base that you need to build upon. To that end, integrate retention planning into every aspect of your business, monitor customer behavior and feedback at all touchpoints, and ensure your best customers keep coming back.