How to Measure Customer Retention

Far too many businesses struggle with keeping their existing customers and instead go far beyond finding new ones for replacement. Of course, that trick should be in full swing in your business. However, it would add up if you keep losing your customers at unacceptable rates. A little-known secret that most mega companies use is trying everything possible to retain their existing customers. Most companies go far ahead with customer loyalties to intrigue more, but creating a factor of obsession is the ultimate trick for maintaining a loyal customer base.

Perhaps you’re successful with it and want to measure your progress; how on earth would you do that? Measuring customer retention isn’t challenging as long as you have tangible valuations of the various metrics involved, so no complex math. This indepth article will break it all down for you bit by bit, explaining how to measure customer retention.

What Does Customer Retention Imply?

Customer retention is a business’s ability to maintain a specific number of customers over a specific period while keeping them fully engaged. That means selling products and rendering services that satisfy them so they’ll hardly contemplate moving to other businesses and competitors in your niche. A more precise way to foster hight customer retention is creating a customer obsession, which in all honesty, needs your focused effort to achieve it. Customer retention is every business’s or company’s goal since it’s what guarantees a stable market for the goods and services you offer.

How to Measure Customer Retention

Measuring customer retention is a one-fits-all approach and cuts across virtually every business. That’s because customers have a value in numbers and don’t vary regardless of gender, age, or where they come from – a customer is a customer. Therefore, a few things must be in place before measuring your customer retention to make it less elusive and more realistic. You should therefore consider these few things before calculating your business’s customer retention.

Determine What Defines Success for You

Every business entity has its goals and targets as far as customer retention is concerned. Therefore, it’s ideal for determining your aims to inform your goals better. Some businesses are okay with losing a few customers and gaining triple the numbers. Others hardly focus on finding new ones but seek to maintain the existing ones. That all lies within the spectrum of success, and knowing where you lie will help you measure results.

Identify the Customer Retention Metrics

The customer retention metrics are cross-cutting to every business and include the customer cycles, length of purchases, or the number of customers churning. These metrics help you to concretely measure your success and how customer retention is for you. Not knowing the metrics to go for can be similar to running your numbers on a spin while desperately hoping for results.

Get the Data to Calculate Your Metrics

Once you have the customer retention metrics up your sleeve, it’s quite a breeze to calculate your business’s customer retention rate. You, therefore, need conclusive information on the customers at the beginning of a period (S), those acquired during that period (N), and the numbers at the end of each period (E). Afterward, you can use the customer retention rate formula to get the final numbers.

Calculating the Customer Retention Rate (CRR)

As mentioned before, getting results with empirical and measurable values from the customer populations at varied periods of running a business is relatively easy. The calculations afterward are easy to make to arrive at a percentage rate. But first, you must identify your span for determining this rate. Usually, businesses measure their customer retention rates monthly, but still, a few do it weekly, quarterly, or annually.

Here’s the formula for measuring any business’s customer retention rate (CRR).

(Number of clients at the end of a period) – (Number of new clients acquired during that period)

/ X 100

Number of clients at the beginning of the period

The customer retention rate formula should be:

[(E-N)/S]x100 = CRR

For accurate estimations, a business has to adhere to a strict data recording routine to get a more accurate picture of what goes around. Otherwise, the CRR would be somewhat delusional and sometimes misleading for progress instead of showing you how much behind you are. For your better understanding, here’s a reference business scenario.

1500 customers (End of the period) – 600 customers (Acquired)

/ X 100 = 90% CRR

1000 customers (Beginning of the period)

Judging by the numbers, this business lost a hundred customers and kept the nine hundred. This value isn’t terrible for a company because it only failed to keep hold of the ten percent. That begs the question; what’s the worst CRR your business can expect and the best you can dream of? Please read on to find out more.

Defining a Good and Bad Customer Retention Rate

Some companies have the edge in maintaining a high CCR, while others find themselves in an awkward position. For instance, a shipping business may not have customers making repeat requests for delivery compared to those rendering services online. The latter has an advantage because customers have a chance of logging in and making a repeat purchase compared to others operating on a face-to-face basis.

Therefore, there’s no specific definition of what’s good or bad for CCRs. It depends on how a business defines its success since some can have lower than expected CCRs but still consider that a win. Some companies can have higher than expected values but still take that as a loss of valuable customer base. A 90 percent CCR usually indicates that a business’s customer retention strategy is bearing fruit. However, any slight variation in this number still works and indicates success.

10 Ways to Maintain and Improve Your Business’s or Company’s Retention Rate

Retaining customers isn’t as easy as businesses may perceive, especially if the motive is to make a profit more than having satisfied customers. As it’s evident, most successful companies with high CCR make customers the focal point of their activities since that defines their success. Here’s what you can do to maintain and improve your business’s or company’s retention rate.

Use A Loyalty Program

Loyalty programs endear your business to your customers, and they’re twice likely to stick around than leave. These programs have become commonplace because they’re one of the most effective strategies businesses use to improve their CRRs. And, it’s quite a simple approach of offering perks and gifts to your customers for their loyalty to your company. You may opt to give an item for free for several things they purchase, and that offer should feel unique to them. It’s a surefire way to keep your customers happy and build a sense of belonging.

Evaluate Your Product

Remember, you’re in business to serve despite the urge to make profits a priority. The principle aim of establishing a company is to help ease things for your customers by giving them something they so much need in exchange for cash. Therefore, the products and services you render must measure up to their needs and meet expectations in all entirety. If your customers encounter any glitches as they use your products, it raises the concern of whether you focus on helping them meet their needs or you’re only focused on them giving them your money. If your products don’t appeal to your customers, you’ll hardly retain them.

Listen to What Others Say

People have varied views about using your products and interacting with your business. Some can be overly negative, while others express praises about their experiences doing business with you. However, it only becomes a concern if the disparage is way over the top and can indicate that something isn’t clicking right somewhere. Most businesses create a customer review section on their websites to solicit customers’ thoughts about their operations. That offers a more direct way of establishing whether or not their business is appealing enough is solving their customers’ problems. Of course, you may encounter a few biased ones, which doesn’t always imply a truth. However, if the negativity is too much, such that it eats away a chunk of your reputation, you must cross-check your business to see where things go wrong.

Check Your Online Presence

The digital era has ushered in a contemporary way of engaging customers since virtually every communication happens via the internet. The online space has become incredibly integral in businesses such that your absence in this digital space can be a red sign to your customers. If people first interact with your business, they’ll likely check your online presence, perhaps when making a repeat purchase. Or, they may want to engage you virtually than physically availing themselves in your brick-and-mortar location. If they find that you aren’t active enough, it is pretty challenging to interact with you and makes them more suspicious of your operations. That, therefore, hurts your chances of a high CRR.

Check the Prices

A viable way of playing by the trends is offering products and services at similar prices to your competitors. Your customers are more likely to gravitate where their money affords them the best, especially if the quality is identical or better. Therefore, you must remain all ears for any fluctuations and imminent changes in prices for similar products your competitors offer. Another essential thing with pricing is whether or not your products are a value for your customers’ money. If not, they’re twice likely to dump you for better quality services elsewhere, hurting your CRR.

Be Highly Responsive to Your Customers

Most customers segment a customer services section for a valid reason since customers are always a priority for any success in a business. With them feeling less satisfied or appealed by your products or services, there’s no way you can drive in profits and see your company growing. Customers have varied needs and complaints you must address as soon as they lodge them. If perhaps it takes you forever and a day to respond, they’ll have to bounce away and find a more caring company or business elsewhere to engage. Besides, your customer care department must be more appreciative and receptive to their needs and be ready to serve them at all times diligently. That way, retaining your customers is relatively easy, and you definitely would have a high CRR at the end of each period.

Check Your Onboarding Capability

People are always ready to interact and have tons of views for you and your business. More precisely, customers that have had previous encounters with your business are easy to angle and keep them sticking around. Therefore, always be willing to offer more help and resources, including follow-up assistance on the products they’ve purchased from you. Onboarding also works for new customers ready to initiate initial contact with your business. It makes it pretty seamless phasing in and indisputably hypnotizes them into sticking around due to the reception you give them. Remember, how you initially engage your customers matters since it paints a picture of how far you’re willing to go to make them happy and keep them contented. That way, they’ll stick around for as long as you can serve them, boosting your chances of maintaining a high CRR.

Check Your Competition

Another noticeable thing in running a business is edging the competition from other entities offering similar services and products as yours. And as such, staying all ears and alert on how they operate helps you improve on the various aspects that give you the advantage. A little finesse can sometimes save you, and trying to be nosy might tip the balance in your favor. You can try engaging them as customers by making inquiries about a few things they offer or signing in for their weekly newsletter to grasp a thing or two. It helps you learn to improve your services and products so that they appeal to your customers and they won’t have to look elsewhere.

Deliver More Than What You Promise

Customers expect you to offer what you promise and nothing short of that. However, you can kick it a notch further by giving them more value than you initially promised, and they’ll likely appreciate it more and stick around. For instance, your customers may expect you to make a delivery two days after initiating an online product purchase. However, you may try working against the clock, delivering it within a day, especially if they anticipate it so much. Or, you could offer a much better quality product than what you advertise, perhaps, bigger and more improved. Customers are always down with surprises, and the more you rain it on them, the better the chances are for them to stick around.

Try Upselling or Cross-Selling Your Products

Sometimes, shopping can be bland for customers since retailers fail to be creative, thinking less beyond the box. That’s not only applicable in retail but numerous other businesses. Cross-selling involves pairing more complementary products such that customers can purchase an item and think about adding another related product. For instance, a retailer can sell a t-shirt and pair it with a baseball cap or some sneakers which complement their initial purchase. Customers are likely to make rash decisions when making product purchases and upselling and cross-selling can help with convenience. That keeps your customers around since it becomes more apparent that you understand their needs and can bundle up what they need on a one-stop basis.


Retaining customers isn’t easy, but it’s not impossible either. It becomes quite a breeze if you have a working strategy to make them stick around and never want to leave. Regardless, as much as you strive to keep hold of your customers, measuring your customer retention rates helps you with a clear picture of how much progress you’re making. Hopefully, this article will help you maintain the highest CRR and outmaneuver your competitors for an edge in the market.

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