A loyal customer is always better than two new ones. We give you a rundown of how to ace customer retention strategies.

Customers are the heart of any business. But does more mean better? Not necessarily. . Keeping existing customers results in a greater return on investment. In fact, it costs 5 to 25 times less to retain a returning customer rather than find a new one.

As costs continue to rise, finding strategies to nurture a robust customer base is crucial. Loyal customers can be the key ingredient to keep a business healthy. To help you crack the customer retention code, we’ll walk you through the concept, why it’s so important and how to do it.

What is customer retention and why is it important?

Customer retention is a business metric used to determine customer loyalty over time and understand how successful you are at retaining customers. In short, you’re measuring how good you are at stopping customers from taking their money elsewhere. Here’s why it’s so paramount to your business’s health:

  • It drives sales and makes your business model sustainable and defensible: you can’t always rely on chasing leads or hunting down new customers. It’s a smarter use of your time and effort to find ways of keeping customers coming back.
  • It expands the average shopping basket size up: loyal customers are more likely to buy more when they trust your brand. Existing customers are 50% more likely than new customers to buy new products. Therefore, you can be confident product launches will land well with your customer base.
  • Great way to build your reputation: it’s all a virtuous cycle. The more you take care of your branding and foster customer loyalty, the more likely it is your customers will recommend you through word of mouth with their network. This will give you valuable brand building and authority.
  • Cuts down on costs: it’s much more cost efficient to keep a loyal customer than find a new one. Think about it – you don’t have to invest vast quantities into marketing because your customers already trust and know who you are. 92% of consumers believe suggestions from friends and family more than advertising. A customer loyal base will therefore be your most cost-effective marketing machine.
  • It’s a fantastic introspective exercise: the more you want to improve your customer retention, the more you’re forced to think about how optimised your customer experience is. This will help reveal cracks and weaknesses that need fixing.

What is the Customer Retention Rate and how do you work it out?

Despite how important and simple it is to calculate your Customer Retention Rate, 44% of businesses fail to do it. There’s no specific number of times you should be measuring it, but it’s good to do it around times when you’re launching new campaigns or products to understand your performance. Although having 100% customer retention rate is ideal, this isn’t always realistic and varies by industry. For instance, retail has an average customer retention rate of 63% whereas insurance has an average 83% retention rate.

Here’s what to do to calculate your customer retention rate.

  1. Subtract the total number of customers from new customers
  2. Divide that number by the number of customers acquired at the beginning of the period you’re measuring

The formula should look something like this:

(New Customers – Total number of customers) / Number of customers acquired at the beginning of period you’re measuring

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5 customer retention strategies that work

Getting your customer retention strategies right is crucial. If you’re unsure of where to get started, here are 5 ideas:

  • Create a strong onboarding experience: customers will remember any customer service hiccups when they first encounter your brand. Therefore, you want to ensure the onboarding process and customer service is as smooth as possible. Have well-timed email triggers, follow-up messaging, self-service knowledge bases, and anything else that will make customers trust your brands.
  • Provide a personalised customer experience: no one-size will fit all customers. In fact, 99% of marketers say personalisation helps advance customer relationships, which is a key ingredient needed to nurture customer loyalty. The more attentive and personalised your customer experience is, the more likely it is that customers will want to continue business with your brand.
  • Implement a customer feedback loop: try to genuinely understand what customers want and what troubles them with strong feedback loops. You can use things like surveys, user testing, and focus groups to collect data that can be shared with your wider organisation to optimise customer experience. Pick out trends in customer behaviour and understand how your sales funnel can be improved.
  • Empower customers with convenience: the easier it is to go from finding an item to clicking “check out” the easier it’ll be to keep customers happy. Convenient customer experiences will help you stand out from the competition and will persuade customers to come back again.
  • Use subscriptions to bolster the experience: customers will be more inclined to repeat purchases from your business if they get special treatment through subscriptions over one-time buyers. For instance, you might want to give subscribers speedy delivery, gifts, period discounts, and vouchers to thank them for their loyalty.

Customer retention strategies: what you shouldn’t do

The last thing you want to do is fall into the pit of thinking you are using customer retention strategies, when in reality, you’re doing the complete opposite. Here’s what not to do:

  • Solving for convenience instead of the customer’s needs: the amount of times you’ve heard ‘that’s our company police’ are probably too many to count. That’s a symptom of a customer service team that wants to conveniently and quickly get rid of a customer, rather than genuinely solve the problem. These types of interactions leave your customer frustrated and looking for an alternative brand. Therefore, you want to ensure you keep customers happy by training your customer service team to be genuinely helpful and dedicated to best not easy solutions.
  • Trying to buy customer loyalty → although subscription models are a great loyal customer perk, you shouldn’t use discounts and gifts to make up for a bad customer experience. It’ll be like using a band aid to cover up a massive water leak. It takes about 12 positive experiences to make up for one poor one. Instead, you want to try and find ways to personalise customer experience.
  • Prioritising speed over quality when it comes to customer support → although no customer ever complained about a speedy customer service call, they definitely complained about receiving the wrong customer support. If you quickly give potential loyal customers a wrong answer, their trust in your brand will be tarnished. Therefore, you want to make sure to emphasise the quality of your support, over its speed.
  • Providing the same service to every customer → although giving every customer the same support seems fair, to the customer this will feel like you don’t care enough about their specific concern. Therefore, you want to make sure you’re customising and personalising customer experience for each individual user.
  • Not diversifying your new customer service channels → it’s not just about email and phones anymore. More and more customers are resorting to social media to find and connect with their favourite brands, and your customer experience strategy should reflect that. Make sure you have someone monitoring your comments section on social media and responding to your DMs. The more approachable your brand is, the more likely it is that customers will want to bring their business back to you.


What’s better than a new customer? It’s not supposed to be a trick question – it’s a returning and loyal customer. Loyal customers trust your brand, are more likely to recommend you to their friends and family, and will be more hyped and ready to buy new products. In short, they’re a sustainable investment that will keep your account books looking healthy.

Cracking the customer retention code is therefore crucial to succeeding in business. But it’s also the key to making lives easier for customers. After all, who wants to keep looking for the perfect product online for hours when your favourite brand already offers it?

Source: Startups