Definition: Customer retention is a business metric that measures the percentage of customers who subsequently return and make a purchase. Retention is an important assessment of a business's product quality, customer service, and ability to distinguish itself from competitors.
Repeat customers are the heart of an online business, given the marketing costs associated with bringing in new prospects and the significant rise in lifetime value associated with repeat purchasers. Customers who return to the same store are also more likely than average consumers to recommend a brand, making their net value almost limitless.
Businesses and research firms have spent millions of dollars studying consumer behavior and the factors that influence customer retention. The verdict? A mere five percent boost in customer retention has the potential to increase profits by anywhere from 25 percent to 95 percent. The compiled data clearly indicates that it is much more cost efficient to retain current customers than it is to seek out new ones. The impact of retention on a company's ability to stay in the black is tremendous.
Retaining customers is a challenging endeavor with no magic formula. It all comes down to providing a better experience that stands out in industry.