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How Customer Retention Can Help Businesses Grow

Customer retention can be seen as a company's ability to maintain its existing customers by establishing strong relationships with them. Today, more people are planning to invest in start-ups, making it necessary for entrepreneurs to improve customer retention as a top-most goal.

The equation of ideal business growth includes not just the acquisition of new customers but also the retention of already existing customers. While you may acquire new customers based on effective marketing strategies, the loss of existing customers due to the potential lack of engagement with them can shake your business's base. This highlights the importance of customer retention for business management as well as growth.

What Is Customer Retention

Customer retention can simply be seen as a company's ability to maintain its existing customers by establishing strong relationships with them. Although this might sound like an easy task, customer retention is a complex process. This is because maintaining the existing customer base requires an increased level of active participation and consumer engagement than acquiring new customers.

Customer acquisition can be way more expensive and tedious than the cheaper and effective process of customer retention. The reason mainly lies in the fact that starting from scratch to generate progress demands effort, but maintaining progress requires consistency in the long run.

Now, this raises the question, "what is the 'ideal' customer retention rate? How many customers should be retained on average? It is important to understand that there is no ideal retention rate as it varies across industries. However, research has proved that these rates can vary from 55% to 84%. This suggests that you should set your expectations for retaining customers accordingly.

The purpose of customer retention programs and strategies is to increase the customer lifetime value (LTV). This value determines the total revenue generated from a customer's relationship with the company throughout their lifetime. Many strategies have been developed and refined over the years, mainly because the importance of customer retention has doubled in the digital era. These strategies work towards a simple goal of making the customers stay engaged with your company which will further boost its overall revenue and value in the market.

Importance of Customer Retention in 2021

With the increase in the e-commerce business and social media promotions, companies have recognized that increasing loyal customers is inevitable. Especially the COVID-19 lockdown has shed light on the changing consumer behaviors.

The most observable of these changes is the heightened use of social media and online websites for buying the product and service that can even be bought from the basic offline markets. Consumers no longer buy anything for the sake of it or pick random products. This is because people don't merely buy a product. They also add an asset of value to their life. They are a click away from switching to a new company that matches their needs and demands.

A customer-oriented vision of a business can make it more sensitive and attentive to its customers' needs, which in turn makes it more resilient to the competitors in the market. Thus, important customer retention benefits can help you recognize the trend of product development and refinement in the market to increase your company's retention rate.

Today, more people are planning to invest in start-ups, making it necessary for entrepreneurs to improve customer retention as a top-most goal. It also boosts the Return on Investment (ROI) without putting the company at a loss.

A good retention rate signifies an increased revenue generation, higher levels of customer satisfaction, and customer loyalty. A study has highlighted that engaged customers are likely to produce 1.7 times more revenue than general customers. Engaged employees and consumers can produce as much as 3.4 times the average revenue. Loyal customers can increase the overall revenue more than one-time customers and acts as a protective factor against the rainy days and the ever-increasing market competition.

Customer relationship would help you strengthen the bonds with your customers by providing them with genuine services and valuable products. Similar products may be offered by all the other brands, too. Still, the elements of customer feedback and follow-ups can guide you in differentiating your services from the mainstream market.

Customer Retention Management Strategies

Customer retention strategies aim to maintain the existing customer base, which is the after-process of providing services to your customers. These strategies strengthen customer relationships, which can increase their engagement with the organization.

It is important to note that none of these strategies should be considered enough in isolation. They serve different purposes and goals to collectively increase the customer retention rate if implemented consistently and accurately.


Some of the customer retention strategies are listed below:

  • Identifying the factors behind customer churn

Knowing why your customers are discontinuing the products and services being offered by your company can guide you about the exact gaps you need to work on. For instance, many people have shifted to online shopping in the current times. This information can guide you about the changes necessary to make your services and products more suitable for both online and offline customers alike.

  • Seeking customer feedback

Research highlights that customer satisfaction can independently account for as high as 71.7% variability in customer retention. Customer feedback can help you examine the potential match between their expectations and your company's services. Any mismatch between these can be easily identified by actively seeking and evaluating customer-generated feedback to improve your services and products.

Additionally, identifying the emotional values that the customers associate with your services can guide you in understanding their perspectives and expectations better, and using this understanding in business can help you increase customers.

  • Setting clear goals

It is common for customers to have generalized expectations from the market. However, it becomes impossible for companies to fulfill these expectations; thus, setting out your goals in advance will help your customers understand your services better. This will also improve your services' trust and inspire them to stay loyal to your business in the long term. Goals in terms of quantity and quality of service that an organization seeks to fulfill can guide consumers to buy from you.

  • Offering discounts and other benefits

People are constantly engaging in comparisons between the diverse range of services and products companies offer them. This has become more common in the age of social login, which makes it very easy for them to compare with other brands without having to step out of their houses. Even when a brand offers a decent amount of discount, people may still want to compare the offers with other brands in the market. Thus, you must understand the trends that are being followed by your competitors so that you can update yours accordingly.

  • Rewarding the loyal customers

Rewards are not just a product for the customers as there's a high chance that they will attach some value to the rewards provided by your company. This association between rewards and your company would increase your brand's reputation. Rewards can be of many forms; for instance, a customer who has been engaged with the company for a particular number of years can be offered a discount for their next purchase from your company. This can increase their motivation to continue buying from your company and recommend it to their friends.

  • Customer-oriented marketing

A customer-oriented marketing strategy has gained importance over the years because it focuses on the principles of communication, trust, and mutual prosperity. Writing weekly newsletters is an excellent example of customer-oriented marketing. Such small initiatives from the organization can motivate the consumers to trust your brand more than the other brands that lack effective communication. This is because these initiatives would allow you to put customer service in the spotlight and not just the one-way delivery of products and services to them.

  • Training the consumer retention team

The training and development programs specifically designed to improve customer retention can be increasingly useful for your company. They can help the team members understand the key elements in the process. The skill-building programs for training the team members can also prepare them for diverse consumer attitudes and demands. For instance, soft-skills training can be offered to the employees to help them communicate with the customers more effectively.


Customer acquisition and maintenance should not be seen as two mutually exclusive parts of the broader process of business growth. This is because the former can grow the business, while the latter is necessary for its expansion. Retaining the existing customers makes the business more recognizable as it focuses on creating brand loyalty and emotional bonding by prioritizing how the customers feel. Maintaining these customers becomes easy with customer loyalty programs, feedback, understanding customer churn patterns, and customer-oriented marketing.


Yash Rathi

Written by Yash Rathi

Analog by Birth - Digital by Choice, Director-Client Success at LoginRadius, Technology and fitness enthusiast, Quick Learner, Active Cyclist, loves challenges.

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