What is Customer Retention?

Customer retention is the ability of a company to retain its customers over a period of time. It is both a measure of customer loyalty and the capacity of the business to keep customers satisfied with good service and quality of the product sold.
The best customer for any business is the returning one. It shows that the customer is happy with both the service and the product but there are other benefits too.
For that reason, customer retention is the most effective way to grow a business. One might think that the answer is to sell to more customers, but that’s only one piece of the puzzle which is less important than customer retention.
Returning customers are always cheaper to the businesses since the acquisition cost of each new user is more than retaining it. Businesses need to spend more on advertising or incentives such as discounts or giveaways. On the other hand, a happy customer could spread the word about a product and service to the potential customers for free!

Why is customer retention important?

Customer retention is important to any growing company because it measures not only how successful they are at acquiring new customers, but how successful they are at satisfying existing customers, says Hubspot.
Retention vs Acquisition Costs
Bain and Company reports that attracting new customers will cost your company 6-7 times more than keeping an existing customer!
So it is easier and cost-effective to retain customers compared to acquiring new ones. Additionally, returning customers buy more frequently and spend more, and refer friends and family.
Only a 5% increase in customer retention can increase company revenue by 25-95%. So it is very clear that retaining customers brings business a lot of ROI.
Retail Revenue Drivers
Most of the retailers are well aware of this, according to KPMG, senior US retail executives believe that customer retention will be the most significant driver of their company’s revenue growth over the next 1-3 years.
To summarize, here are the top 3 reasons why customer retention is critical to company growth and success:
1. Better conversion rates
If your new customers have a great product or service experience, they’ll more likely buy from you again. You have already built a relationship of trust and confidence. You know them and their needs, therefore it is easier for you to identify their needs.

2. Lower marketing costs
Do you remember how much time you waited for your first sale? Or how much marketing spend you did? You do not need to do this again for your current customers. You will probably spend much less time and money on convincing them that you are the one they should buy from.
3. Higher profits
Since you do not have the acquisition cost to reach out to those users, it is easier for you to get in touch with them. In addition to that, they will be less focused on price compared to new customers, so you might not need as many promotions that you would usually use to attract new customers.

What is customer retention rate?

Customer retention rate is calculated using the following formula:
Retention Formula
Imagine you start the month with 50 customers, gain 10 new customers and have 20 customers churn. Your retention will be 60% and it is calculated as follows ((40-10)/50) x 100.
You can calculate this rate for different periods according to needs of your business and have a better insight and understanding of your churned users. Maybe a more focused audit of your churned customers will reveal some “bitter truth” about your product or service?
You might find that customers with certain similarities in terms of demographic data or order content might have similar reasons for churn. Then you can consider having an audit or revisiting your process to solve these problems.

What is attrition (churn) rate?

Basically, attrition rate compliments retention rate. One is about retaining customers and the other is about churning. For that reason, the attrition rate is also commonly referred to as the “churn rate”.
For example, if a business has a 75% retention rate, it has a 25% attrition (churn) rate.
As companies dedicate time, resources, and creativity to improve customer retention, it makes a customer happy, as well as bringing the companies more success.

7 tips to improve customer retention

1. Use case studies and testimonials

Share case studies that reveal your service or product’s impact and style of communication combined with the results you achieved for customers. Additionally, sharing detailed testimonials from other customers would also strengthen your point.

2. Make positive memories memorable

People tend to remember negative memories more vividly, compared to positive ones. So focus on the positive experiences of the users and create a story of success and positive emotions for the user to remember your brand.

3. Ask for feedback

Sounds easy, but most of the business do not ask for feedback, instead they only focus customer experience once a problem gets vocal by a customer. A better approach would be being proactive and tracking customer experience by asking the right questions, giving out small surveys to users or tracking some key metrics.

For example, one proactive way to ask user feedback is to ask for a review of your app. With Countly Star Rating plugin, it is super-easy to collect 1 to 5 point based star rating from your mobile app, which can be visualised in a cumulative and time series report.

4. Take a look at the customer lifecycle

Have you ever taken a close look at how many emails a customer receives, from who and how frequently? What was the last email the customer get? Mapping out the communication to the user helps you understand the perspective of the user, whether the user received enough emails about your business, from correct channels, or getting too many emails which could be considered as noise.

5. Build a customer loyalty program

One of the best ways to improve customer retention is to build a loyalty or rewards program. This program may include bonus points, gamification tactics or some user-generated content for the users.

6. Build a referral program

In addition to the loyalty program, it might be a good idea to build a referral program for your users. You can tune your referral rewards in order to increase or decrease the benefit for the users to adjust their incentive.

7. Make it personal

In a study from the Journal of Applied Social Psychology, researchers revealed that waiters and waitresses could increase their tips by 23% by simply returning to tables with the second set of mints or candies. The conclusion is that this creates a personalized experience, which results in more tips for the waiters and waitresses. So you can think of personalizing your product or service in some ways to improve customer retention.


Customer Retention is the most effective way to grow a business and it is one of the keys to success. Acquiring new customers are always more expensive and takes more effort than retaining them. Therefore it is crucial for business, to try to keep the retention rate up, with the tips mentioned here or more, in order to have better conversion rates, lower marketing costs, and higher profits.
Countly Demo:
Enterprise Edition
Please fill in your details to get a customized demo of Countly, and get answers to all your product analytics questions.
Contact Countly
(Enterprise Edition)
Please fill in this form so that we can set up a call to better understand your requirements and show you how Countly can help you become truly data-driven.
Countly Academic Program
Let's build tomorrow's analytics and marketing know-how together.
Become a Countly Partner
Let's deliver secure product analytics and marketing to the masses together.
Please provide your full name.
Please provide your work email address.
Please provide the name of your company.
Please provide your role.
Number of employees/members in your company.
Where is your company headquartered?
Please share any additional information that you can share about your application/project and analytics needs.
Web/Google search for ‘product analytics’
Web/Google search for ‘analytics solutions’
Received a recommendation/referral from one of your customers
Saw your advert on YouTube or Google and visited the website
Received an email about Countly from Countly
I already use Countly Community Edition
I found you on a B2B Software review website (G2, Capterra etc.)
Please select one or more of the below options to tell us how you heard about Countly.

I have read and agree to the Terms of Service and Privacy Policy
Subscribe me to Countly Newsletter
Contact Us
Try Countly Enterprise
Sign up for a free, 30-day trial of Countly Enterprise Edition.

For your trial, you can choose among United States, Europe and Singapore as your service location to send and store your analytics data in our servers in that location.

After your trial, you can choose to continue with a Countly Enterprise hosted or on-premise deployment.

If you prefer a on-premise trial, please contact our sales team for the next steps.

United States
Countly Enterprise hosted customers can choose among following deployment locations;

United States, Brazil, United Kingdom, Germany, Belgium, India, Taiwan, Japan, Singapore and Australia.
I have read and agree to the Terms of Service and Privacy Policy
Subscribe me to Countly Newsletter
Create my trial account