Customer Retention

Discover the top customer retention strategies used by the most successful companies to draw in new business, bolster profits, improve organizational reputation, and ultimately earn the long-term loyalty of customers.

Pradeep Vasudev
May 9, 2022
9 min read

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Table of Contents

What is customer retention?

Customer retention refers to all the practices a business implements to keep clients coming back for their products or services. Companies commonly use loyalty programs, promotions, lead nurture email campaigns, and other such methods to keep people interested in their brand. Retention strategies usually involve using key metrics — including customer churn rate, retention rate, and customer lifetime value — which are continuously monitored to discover shortcomings in customer service and ultimately improve the customer experience

Use the following content to learn more about customer retention strategies and the tools you can use to measure and improve retention within your organization.

Why is customer retention important?

According to statistics from Small Business Trends, the likelihood of selling to a new customer is between 5% and 20%, while those odds skyrocket to between 60% and 70% for an existing customer. Additionally, the Harvard Business Review has reported that it is 5 to 25 times more costly to obtain a new customer than to retain one. For most companies, the bulk of profits come from the customers with whom they’ve built trust and nurtured over time, which makes customer retention an invaluable practice for financial stability.

Modern consumers expect brands to be highly engaged and provide personalized experiences. So, if companies don’t make any effort to retain customers, they may easily be lured away by more competitive offers and better experiences. 

As a result, many businesses are shifting their efforts from acquisition to retention with a customer-focused approach. 

Customer retention benefits

As mentioned previously, loyal customers are a larger and more consistent source of revenue, and it’s more cost-effective to retain them than to find new customers. However, you may not know that customer retention also yields highly actionable feedback.

When you build customer loyalty, those happy customers are likely to recommend your products and services to others you may not have reached otherwise. This word-of-mouth communication can, in turn, lead to increased customer acquisition, as these prospects are introduced to your brand and convert to paying customers. Loyal customers become force multipliers for your brand, as advocates and influencers, to widen your acquisition reach.

Learn more: Happy customers buy more

Helps your company stand out:

Prospects are often deluged with information from brick-and-mortar stores, e-commerce platforms, or social media channels. Brands need to differentiate in order to be seen and remembered by consumers. One approach is to have clear marketing messaging that emphasizes deeper and longer-term customer engagement, rather than a one-time transaction. 

Leaves more room for mistakes and experimentation:

Consumers will take their business elsewhere after a bad customer experience. Conversely, loyal customers who know your brand and trust your employees are likely to stay with you even after a misstep. 

Learn more: CX priorities in 2022: tips to provide a positive customer experience

Makes life better for employees: 

Your employees will enjoy their jobs more and experience less stress when they have solid relationships with repeat customers based on trust. Creating a happier workplace can also contribute to increased productivity and better customer engagement overall.

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Customer retention metrics

Customer retention is measured using several metrics. You can measure as many as you’d like to capture a broad range of insights that guide your company goals and retention efforts.


What It Measures


Retention rate

The rate at which businesses retain customers over a specific time period

Annual retention rate = (# customers at end of year - new customers gained) / # customers at start of year

Customer churn rate

The rate at which customers cease doing business with your company

Annual churn rate = (# customers at start of year - # customers at end of year) / # customers at start of year

Revenue churn rate

The rate at which businesses lose revenue from current customers

Revenue churn rate = (churned monthly recurring revenue) / (monthly recurring revenue at the beginning of the period)

Customer lifetime value

Total revenue from an individual customer

Customer lifetime value = Value of customer* customer's average lifespan Value of customer purchase value
average* average purchase quantity

Loyal customer rate

Total number of customers repeating a purchase over a set time period

Loyal customer rate = # repeat customers/ total # customers

Repeat purchase ratio 

The rate at which customers return for an additional purchase

Repeat purchase ratio = # returning customers / total # customers

Time between purchases

The amount of time it takes, on average, for a customer to make another purchase

Time between purchases = sum of purchase rates / # repeat customers

Existing customer revenue growth rate

The rate at which a company is growing as a result of purchases from existing customers

Existing customer revenue (growth rate = end monthly recurring revenue - beginning monthly recurring revenue) / beginning monthly recurring revenue

How to measure your customer retention rate

Your customer retention rate (CRR) is the most important retention figure for your company, representing a percentage based on how many customers you’ve retained over a set period of time. The variables include:

(S): The number of customers at the start of the predetermined time frame
(E): The number of customers at the end of the predetermined time frame
(N): The number of customers acquired throughout the predetermined time frame

The formula is as follows:

Customer Retention 2

Here is an example of how this formula is calculated:

Let’s say your business starts with 150 clients at the beginning of the month. Over the course of the month, you lose 10 customers, but you acquire 30 new customers. 

Customer Retention 1

The solution indicates you have a 93% retention rate. Most businesses strive for a retention rate of 85% or more. In general, the higher the retention goal, the better — as long as you have a plan in place for achieving it. Listed below are some ways you can achieve high retention rates.

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How to increase customer retention

One of the biggest mistakes businesses make is using a one-size-fits-all approach to customer retention strategies. The purpose of retention marketing is — and has always been — to keep your current customers interested and engaged with your brand. These days, technology is heightening consumer expectations further. Customers now want their interactions to be fast, useful, and personal. Here are a few ways you can start meeting customer expectations and earning a higher retention rate.

1. Tell a compelling brand story

Earning loyal customers entails much more than providing quality products or services. To gain trust, brands should have an inspiring brand story and mission statement that captures the hearts of consumers and makes them fall in love with your company. When you convey your company values to your customers and prove your devotion to those values, it helps them better understand what you’re all about and develop a sense of brand loyalty to your business.

Learn more: The 3 habits of highly authentic brands

2. Utilize social media channels

When companies listen to what their customers are saying about them across social media channels, they can gain important insights about what customers want and don’t want, which will help with retention efforts. What’s more, when customers contact a business through social media, they expect an immediate response and a personalized experience. Response time is a huge factor in retention rates, and social media gives businesses the tools to meet consumers where they are and provide instant resolutions to their concerns. 

Learn more: 4 ways social listening reports unlock the business value of customer experience

3. Improve the onboarding process

Onboarding is the perfect time to inform customers about all the product or service features and benefits. If customers don’t get this information upfront in its entirety, it may lead to higher churn rates. Consider providing additional training to give people the information and tools they need to reduce churn and improve customer satisfaction.

4. Allow customers to provide feedback

If you’re struggling with customer retention, gathering feedback is the best way to improve. Listening to your customers through surveys or reviews allows them to tell you exactly why they decided to stop giving you their business, so you don’t repeat the same mistakes in the future. Surveys can be as general or specific as you want, but you’ll probably extract more useful data from detailed questions. More specifically, you should ask about the customer’s experience with your team, services, or product, and about their preferred method of communication. This can tell you how customers prefer to receive solutions to their problems.

Learn more: How To Turn Your Customers Into A Community Of Brand Advocates

5. Follow up after a purchase

A company’s work isn’t finished just because a customer has completed a transaction. Suppose you want to keep people in the sales funnel and turn them into repeat customers. In that case, follow up with them to offer assistance, provide additional information regarding the product or service, thank them for their purchase, or ask them about their buying experience.  

6. Gain a clearer understanding of the customer journey

If you don’t know why a customer engages with and purchases from your brand, providing a better user experience for retention purposes may be difficult. Many businesses map the customer journey by tracking customer interactions with their company across all platforms and touchpoints leading up to a purchase. Brands tend to find that this journey is nonlinear, and knowing the twists and turns in the buying journey often gives them information about buyer decisions. This data can help them shorten the path to conversion, customize the experience to the individual, and keep customers coming back for a seamless, personalized brand experience. 

Consider the following questions to help you better understand the current customer journey:

  • How are people finding your business?

    • Are they coming predominantly from referrals?

    • Are they social media followers?

    • Are they using Google to find your services, or are customers finding you through blog posts?

Learn more: 5 Travel Brands That Truly Get Great Customer Experience

7. Reward customers for their loyalty

Customers tend to be loyal to brands offering discounts and rewards for repeat purchases. Incorporating a customer retention program that includes incentives such as discount codes, loyalty programs, and promotional offers will give them a reason to continue making purchases from your company. You can offer your loyalty program through a tiered reward program or a point-accrual system. But the loyalty program needs to recognize that not all customers are the same. Make sure you customize it to the customer and their values by allowing them to select from a variety of options when claiming their rewards. These reward programs do more than just reward the customer; they also offer a customized experience necessary for retention.

8. Utilize customer feedback for product and service improvements and developments

It’s easy for product or service providers to get attached to what they’ve pioneered. They might feel hesitant to change it. You may have created a revolutionary product, but it will not sell well unless it fills a hole in the market and benefits the target customer. Use surveys, customer reviews, and social media to find out what people are saying, what they need, and their pain points with your brand. Once you understand the customer’s needs better, use that information to tweak your offerings and influence new product development. You’ll retain more customers and increase your odds of repeat purchases and upselling by listening to and implementing customer requests. 

Learn more: Are you getting the most out of your product insights? Here are 19 use cases.

9. Offer regular updates on news and industry updates

Consider keeping your customers in the loop on current company happenings, upcoming initiatives, and industry news through a recurring newsletter. It makes your client base feel close and connected to your business and shows the value of your offerings.

10. Show an interest in educating your customers

Education is another great way to retain customers. An evergreen educational content hub on your company website can help build trust. Investing in your customers, while establishing yourself as a trusted expert, makes a customer-centric organization.

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Simplify Customer Retention With Sprinklr

Sprinklr’s unified customer experience management platform takes the guesswork out of what your customers want. Leverage our industry-leading AI to gain deeper insights into the experience you’re providing and what you could be doing to retain more people. Request a demo today to see how Sprinklr can empower you to meet the demands of your customers.

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