{"id":30883,"date":"2023-03-20T08:28:57","date_gmt":"2023-03-20T15:28:57","guid":{"rendered":"https:\/\/alejandrorioja.com\/?p=30883"},"modified":"2023-10-16T16:41:43","modified_gmt":"2023-10-16T23:41:43","slug":"why-customer-retention-matters-and-how-to-calculate-it","status":"publish","type":"post","link":"https:\/\/alejandrorioja.com\/why-customer-retention-matters-and-how-to-calculate-it\/","title":{"rendered":"Why Customer Retention Matters And How To Calculate It?"},"content":{"rendered":"\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__align-left uagb-block-2016f790\"><h4 class=\"uagb-notice-title\">Summary<\/h4><div class=\"uagb-notice-text\"><br>Business owners like you may use different methods to determine your company&#8217;s performance. One of the key performance indicators or KPIs you can utilize in your company is the customer retention rate. The customer retention rate indicates that your company might have a huge customer base that is loyal to your brand or has a low percentage of satisfied customers.\u00a0<br><br>Calculating customer retention is important, as customer retention rates can benefit your business in different aspects. These aspects include profit, lowering business costs, staying ahead of the competition, obtaining free-of-charge ambassadors, etc.\u00a0<br><br>Besides, you can always improve your customer retention strategy when you figure out that the percentage of your repeated buyer is lower than expected. Therefore, to strengthen your brand to your customer base, use a customer retention rate formula to know when and where to execute your strategies.\u00a0<\/div><\/div>\n\n\n\n<p>Customers are the vital spark of your business; without them, you may not succeed in your entrepreneurial journey. That&#8217;s why giving extra care and emphasis to them is important because they can boost your business image and profit.<\/p>\n\n\n\n<p>Customer decision-making is enhanced, product or service use is maximized, and service problems are avoided because of the effective customer engagement you will establish. Mutual trust is created, and new business opportunities are created when you are actively involved with your customers&#8217; wants and needs for your company.<\/p>\n\n\n\n<p>Different methods exist to assess your company&#8217;s performance to your customer base. But, one of the key performance indicators I researched that would be best is the customer retention rate. Customer retention rate is a percentage of your repeated buyers.&nbsp;<\/p>\n\n\n\n<p>In this article, I\u2019ll explain the customer retention rate and how to calculate this type of KPI. So, keep reading to learn how this will impact your business.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"flex-video widescreen youtube\"><iframe loading=\"lazy\" title=\"Customer Retention 101: How To Increase The Lifetime Value Of A Customer\" width=\"1170\" height=\"658\" src=\"https:\/\/www.youtube.com\/embed\/Y6IBkNNkfJg?feature=oembed&showinfo=0&rel=0&modestbranding=1&iv_load_policy=3&playsinline=1&enablejsapi=1\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">What is Customer Retention?<\/h2>\n\n\n\n<p>Customer retention describes the efforts made by businesses and other entities to keep their current customers rather than having them leave for competitors. Programs designed to increase customer and brand loyalty are common components of retention strategies with the overarching objective of keeping as many customers as possible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is Customer Retention Rate?<\/h2>\n\n\n\n<p>Retaining present customers indicates a profitable company strategy, measured by the retention rate. Customer retention measures more than just the percentage of repeat buyers.&nbsp;<\/p>\n\n\n\n<p>Generally, customer retention can also reveal how satisfied those buyers are with their experiences, how actively they participate in the brand&#8217;s ecosystem, and how emotionally invested they are.<\/p>\n\n\n\n<p>A customer&#8217;s first purchase is the starting point for customer retention metrics, considering the consumer&#8217;s subsequent contacts with the business. After customer retention is calculated, businesses may analyze data on elements of customer success and experience.&nbsp;<\/p>\n\n\n\n<p>For instance, if a company sees a customer retention decline, it can investigate the issue further and possibly change its product line. Obtaining a new customer is significantly costlier than keeping an old one, so keeping your existing customers is important.&nbsp;<\/p>\n\n\n\n<p>Additionally, customers kept around would possibly advocate for your brand through recommendations and reviews.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Importance of Customer Retention Rate<\/h2>\n\n\n\n<p>As mentioned above, the customer retention rate aims to know or measure the percentage of customers who repeat their purchase of your products or services. That&#8217;s why customer retention rate is important for your company because you will know where and when to focus your company&#8217;s strategies.&nbsp;<\/p>\n\n\n\n<p>If you focus your company entirely on widening your customer base rather than customer retention, then it is feasible that you will lose your repeat buyers. Customer retention has an impact on the short-term and long-term success of your business.&nbsp;<\/p>\n\n\n\n<p>Generally, the major reasons for this impact include the following:<\/p>\n\n\n\n<ol>\n<li>Customer retention usually costs a lot cheaper than expanding your customer base. It is because if you plan on broadening your base of customers, it will take a lot of marketing costs.<\/li>\n\n\n\n<li>A higher customer retention rate means your customer base is loyal to your brand. Customers being loyal to your brand means they will repeat their purchase, leading to increased profit.<\/li>\n\n\n\n<li>Customers who are satisfied with your products\/services will lead them to refer to your brand for free in marketing.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">How to Calculate Customer Retention Rate?<\/h2>\n\n\n\n<p>By computing your company&#8217;s customer retention rate, you will determine how many customers you retain and lose over a certain period. You can find out your customer retention rate by a percentage with a maximum of 100%.&nbsp;<\/p>\n\n\n\n<p>The formula would be; CRR = [(E-N)\/S] x 100 = Customer Retention Rate where:<\/p>\n\n\n\n<ol>\n<li>E means the customer number at the end of the period you chose to calculate.<\/li>\n\n\n\n<li>N is based on your new customers added in a certain period you want to calculate.<\/li>\n\n\n\n<li>S is equal to the customer number at the start of the period.<\/li>\n<\/ol>\n\n\n\n<p>Here\u2019s how to simpler understand how the customer retention rate is computed:&nbsp;<\/p>\n\n\n\n<p>For instance, you want to know the customer retention rate you acquired from the previous month. Suppose that by the start of the month; you have 150 customers; in a month, you gain 40 customers and lose 7. Therefore, you will calculate your customer retention rate by&nbsp; [(183-40)\/150] x 100; if you calculate this in the formula given, the outcome would be 95.&nbsp;<\/p>\n\n\n\n<p>As a result, your customer retention rate should be 95%. Remember that the best customer retention rate should be 100%, but the average would be 70% to 80% across industries.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Benefits of Customer Retention<\/h2>\n\n\n\n<p>Customer retention benefits your company in many ways. Below are some of the benefits of customer retention to your company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased Profits<\/h3>\n\n\n\n<p>Investment in customer loyalty saves money and creates higher profits. <a href=\"https:\/\/www.linkedin.com\/pulse\/why-engaged-customers-your-best-facts-figures-value-chetna-bansal\/\" target=\"_blank\" rel=\"noreferrer noopener\">According to the study<\/a>, an engaged customer base spends an average of 60% more on each purchase and is five times more inclined to claim that the brand is the only one they&#8217;ll buy in the future. They bring in an extra 23% in sales and profit compared to the ordinary consumer.<\/p>\n\n\n\n<p>Also, with increased customer retention, businesses can make more money by concentrating on special promotions. Your business can provide add-ons or upgrades to active buyers to increase revenue per customer.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Lower Costs<\/h3>\n\n\n\n<p>The cost of obtaining new customers might be compensated by maintaining existing ones. Remember that customer retention costs less to maintain existing consumers than to find and attract new ones. Also, marketing to regulars saves time spent researching new potential clients.<\/p>\n\n\n\n<p>A potential customer can cost somewhere between four to ten times as much as an existing one to gain. Whatever method you use to reduce it, it&#8217;s evident that successful companies prioritize customer retention.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Obtain a Customer Base Ambassador<\/h3>\n\n\n\n<p>Retaining customers increases word-of-mouth advertising and loyalty. Consistent and loyal buyers are more inclined to recommend your business to others, spread the news, and help increase your earnings. Everyone knows the value of word-of-mouth advertising, so take advantage of it by spreading the word about your business. It&#8217;s important to make use of that information when you find it.&nbsp;<\/p>\n\n\n\n<p>Testimonials are more credible than a promotional campaign, so include several of your loyal customer&#8217;s reviews in your marketing plans to convince potential buyers to try your product or service.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5 Ways to Improve Customer Retention Rate<\/h2>\n\n\n\n<p>Below are five ways to improve your company&#8217;s customer retention rate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Engage With Customers<\/h3>\n\n\n\n<p>The success of your effort to keep customers around is proportional to the level of involvement you receive from them. So, the higher the retention rate, the more satisfied your customers are with your service. Poor client engagement is just one of the numerous issues a high turnover rate might reveal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Give Churning Customers Extra Attention<\/h3>\n\n\n\n<p>A company&#8217;s customer churn rate is the percentage of its total customer base that stops purchasing from that company. For businesses, lowering churn means seeing a significant increase in revenue much more quickly.<\/p>\n\n\n\n<p>The churn rate considers factors like the average time between purchases and the number of times a customer has made a transaction. By monitoring data like customers&#8217; buying frequency and repeat purchases, companies can better understand how many consumers have left and why.<\/p>\n\n\n\n<p>Your business can use the quantitative and qualitative information obtained by analyzing your churn rate to know your customers better and prevent them from leaving. You can avoid many customers&#8217; decisions not to leave, and the satisfaction of current ones increases through proactive measures, such as upselling, reaching their expectations, creating promotions, etc.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Enhance Customer Support<\/h3>\n\n\n\n<p>It would be best if you enhance your customer support. Companies that are customer-focused and provide excellent service are more likely to see repeat purchase from their customers.&nbsp;<\/p>\n\n\n\n<p>Customers take note of helpful, friendly, and personable service no matter where they shop, whether it&#8217;s a posh internet retail store or a hectic supermarket. There is an 82% chance of repeated purchases or renewing and a 97% chance of receiving favorable feedback when clients feel they obtained value from an engagement with customer service.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Gathering Customer Feedback<\/h3>\n\n\n\n<p>Customer retention can be maximized by gathering and responding to feedback from existing customers. In this scenario, conducting a good feedback form would be helpful to gain useful insights into the areas where your product excels and could be improved upon. As a result, you can adjust your product strategy to increase repeat business and satisfied customers.<\/p>\n\n\n\n<p>Customers are more likely to feel valued when their feedback is solicited directly. Additionally, they&#8217;ll be thrilled to hear you&#8217;ve already begun implementing their idea.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Products\/Services Evaluation<\/h3>\n\n\n\n<p>Regularly evaluating your products\/services to meet your target market&#8217;s needs would be best. Companies that care about their customers do not stand still for too long. They update their products regularly, adapt to market changes, and seek new ways to serve their audience better.&nbsp;<\/p>\n\n\n\n<p>Customers will remain loyal for longer if you show that you care by making little but regular adjustments to your operations and offerings.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">When Customers Come First, Businesses Flourish<\/h2>\n\n\n\n<p>Customers are vital to your business because they might cause it to succeed or fail. By giving importance and concentration to your customer retention rate, your business will flourish because you prioritize your customers, which increases your company&#8217;s profit.<\/p>\n\n\n\n<p>Additionally, when you care for your customers well, you open the door to more significant opportunities for your business. That&#8217;s why it&#8217;s crucial to your company&#8217;s continued growth that you consistently exceed your customers&#8217; expectations.<\/p>\n\n\n\n<p>Now that you know how to calculate a customer retention rate and the meaning and importance of this type of KPI. Hopefully, you learned a lot from this post, and if you want more about these kinds of articles, check my previous writings, which I\u2019m sure would be helpful for you.<\/p>\n\n\n\n<ol>\n<li><a href=\"https:\/\/alejandrorioja.com\/growth-marketing-strategies-guide\/\" target=\"_blank\" rel=\"noreferrer noopener\">Growth Marketing Strategies Guide<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/alejandrorioja.com\/the-balancing-act-of-meeting-customer-expectations\/\" target=\"_blank\" rel=\"noreferrer noopener\">The Balancing Act of Meeting The Customer&#8217;s Expectations<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/alejandrorioja.com\/grow-customer-base\/\" target=\"_blank\" rel=\"noreferrer noopener\">How To Grow Your Customer Base with 3 Easy Steps<\/a><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Customers are the vital spark of your business; without them, you may not succeed in your entrepreneurial journey. That&#8217;s why giving extra care and emphasis to them is important because they can boost your business image and profit. Customer decision-making is enhanced, product or service use is maximized, and service problems are avoided because of&hellip;<\/p>\n","protected":false},"author":1,"featured_media":30886,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","om_disable_all_campaigns":false,"_uag_custom_page_level_css":"","footnotes":""},"categories":[64],"tags":[],"lang":"en","translations":{"en":30883},"uagb_featured_image_src":{"full":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",1200,675,false],"thumbnail":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",128,72,false],"medium":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",1200,675,false],"medium_large":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-768x432.png",768,432,true],"large":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",1200,675,false],"1536x1536":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",1200,675,false],"2048x2048":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It.png",1200,675,false],"post-thumbnail":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-80x75.png",80,75,true],"goodlife-thumbnail":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-80x75.png",80,75,true],"goodlife-grid":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x270.png",320,270,true],"goodlife-latest":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x225.png",320,225,true],"goodlife-latestshort":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x170.png",320,170,true],"goodlife-vertical":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x420.png",320,420,true],"goodlife-gallery":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x150.png",320,150,true],"goodlife-galleryvertical":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-320x350.png",320,350,true],"goodlife-poststyle1":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-770x433.png",770,433,true],"goodlife-thumbnail-small":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-40x150.png",40,150,true],"goodlife-thumbnail-2x":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-160x150.png",160,150,true],"goodlife-thumbnail-mini":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-20x18.png",20,18,true],"goodlife-grid-small":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-160x540.png",160,540,true],"goodlife-grid-2x":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-640x540.png",640,540,true],"goodlife-grid-mini":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-20x16.png",20,16,true],"goodlife-latest-small":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-160x450.png",160,450,true],"goodlife-latest-2x":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-640x450.png",640,450,true],"goodlife-latest-mini":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-20x14.png",20,14,true],"goodlife-latestshort-small":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-160x340.png",160,340,true],"goodlife-latestshort-2x":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-640x340.png",640,340,true],"goodlife-latestshort-mini":["https:\/\/alejandrorioja.com\/wp-content\/uploads\/2023\/03\/Why-Customer-Retention-Matters-And-How-To-Calculate-It-20x10.png",20,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Rioja","author_link":"https:\/\/alejandrorioja.com\/author\/alerioja\/"},"uagb_comment_info":2,"uagb_excerpt":"Customers are the vital spark of your business; without them, you may not succeed in your entrepreneurial journey. That&#8217;s why giving extra care and emphasis to them is important because they can boost your business image and profit. Customer decision-making is enhanced, product or service use is maximized, and service problems are avoided because of&hellip;","pll_sync_post":[],"_links":{"self":[{"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/posts\/30883"}],"collection":[{"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/comments?post=30883"}],"version-history":[{"count":1,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/posts\/30883\/revisions"}],"predecessor-version":[{"id":30885,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/posts\/30883\/revisions\/30885"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/media\/30886"}],"wp:attachment":[{"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/media?parent=30883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/categories?post=30883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/alejandrorioja.com\/wp-json\/wp\/v2\/tags?post=30883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}