Businesses with repeat customers are healthy businesses. If your customers are coming back again and again, that must be a sign that you’re doing something right. Increasing customer retention isn’t just about creating warm, fuzzy feelings; it also has a dramatic impact on the bottom line. Increasing your customer retention can drive revenue and profitability.
We’ll give you all the information you need to turn your business into a customer retention machine, including what customer retention is, why it matters, and how to improve it. Whether you’re looking to start and scale a new business or improve retention for an existing business, we’ve got you covered.
Table of Contents
How Customer Retention Increases Profitability
How to Measure Customer Satisfaction
7 Customer Retention Strategies
5 Steps to Solve Customer Retention Problems
What Is Customer Retention?
Customer retention refers to a business’s ability to turn new and existing customers into loyal repeat customers. Retention is the process of reducing your business’s customer churn rate and increasing your customer lifetime value.
Are you wondering what the heck a customer churn rate or customer lifetime value is? Let’s take a beat and break those down.
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Customer Churn Rate
Your customer churn rate is the rate at which customers stop shopping with/doing business with your company. Customer churn rate is pretty much the opposite of your customer retention rate, and it’s also commonly referred to as your “customer churn” or “rate of attrition.”
To calculate your churn rate, you can use the following simple formula:
Customer Churn Rate = (Lost Customers / Total Customers at the Start of the Measured Period) x 100
Dividing your lost customers by the total customers you had at the beginning (of the period you’re measuring) will yield a decimal point. By multiplying that number by 100, you render the solution as a percentage point.
Let’s take a look at an example. If you had 1500 customers at the beginning of the year, and over the course of the year, you lost 128, we would calculate your customer churn rate by dividing 128/1500. The solution is .085, which we would then multiply by 100 for a percentage. In this case, your customer attrition rate would be 8.5%. According to Statista, the churn rate for general retail businesses in 2020 was 24%.
Customer Lifetime Value (CLV)
Your customer lifetime value (CLV) is a measurement of how much business a customer does with your company throughout the entire relationship, giving you a sense of how much that relationship is “worth” to your business. Loyal customers will likely have a high CLV, whereas an unsatisfied customer will have a lower CLV. The goal for all businesses is to maximize CLV so that your business and marketing efforts are working… Read more in the article Increasing customer retention…
Source: ( foundr.com / Financementality.com )
