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What is customer retention? Why return shoppers matter

It’s every company’s dream to have a loyal customer base that sticks with them through thick and thin. Customers nowadays are looking for far more than just an excellent product. They want high quality service at every stage of their customer journey. 

A business that optimizes its customer experience by, for example, improving its customer service and using an advanced shipping process will increase its chance of retaining its customers for the long haul.

In this article, we will be looking at what customer retention is, why it’s important, and how you can increase it.  

What is Customer Retention?

Customer retention is a type of metric used in business to calculate the percentage of customers that carry out repeat purchases after their initial contact with your company. 

Here’s how you work it out: 

1. Find out how many customers you have at the start of a specific period. Let’s call this A.

2. Find out how many customers you have acquired during that specific period. Let’s call this B.

3. Find out how many customers you have at the end of the specific period. Let’s call this C.

Now, use this formula:

((C – B)/A)) x 100 = Customer retention rate (as a percentage).

Why is Customer Retention Important?

To acquire a customer, a company has to network, generate leads through marketing, develop a sales engagement strategy, and even work with influencers to promote the brand. Unsurprisingly, this can be incredibly costly. 

A loyal customer is worth far more than just the products or services that they purchase. That loyal customer has the ability to become your very own brand advocate. They might talk about your business with their family or share your products all over social media with their friends. 

This can be a very beneficial form of marketing for companies. Conversely, a customer who stops doing business with your company and spreads negativity to their friends and family can adversely affect your organization. Not only that, they may seek business with your direct competitors.

So, making sure you have return shoppers is crucial to the success of your business. Let’s have a look at the best strategies that you can implement to increase customer retention. 

How Can You Increase Customer Retention?

Using data to make informed decisions is crucial in business. For example, companies will carry out demand forecasting to predict the demand for their product or service. 

Using data to find out why customers are churning is the first and most crucial step in a well-developed customer retention strategy. This will allow you to hone in on and improve your areas of weakness.

Here are some of the best customer retention strategies that you can focus on:

1. Communication.

Improving your communication from reactive communication to proactive communication is an excellent way to show your customers that you care. This can be anything from shipping updates to explanatory videos of the product sent via email. 

The key here is to contact the customer before they have to contact you. It is also good to be consistent and concise with your communication. For example, using a customer onboarding template will allow you to ensure every new customer has all the necessary details. 

2. Feedback. 

Listening to customer feedback and implementing the appropriate changes makes the customer feel valued. Not only that, in most cases, customer feedback can give you insight into what it is customers want and how you can improve your business.

3. Reward schemes. 

Loyalty programs are an excellent technique for rewarding longevity. They work by providing incentives to the customer every time they make a purchase, write a review, etc. 

Those incentives often come in the form of points or badges that add up to a reward or discount. There’s no limit to how creative you can be with your loyalty program. The aim is just to make the customer feel like a VIP. 

4. Customer service. 

Your customer service agents are pivotal to a positive customer experience. Long wait times and agents that lack empathy can lead to high customer churn. On the other hand, great customer service and quick resolutions can just as easily turn a complaining customer into a loyal brand advocate. 

Clearly communicating, actively listening, using positive language, and keeping track of analytics are just some of the ways that you can improve your customer service and increase customer retention


The key to retaining your customers is going that extra mile to make them feel appreciated. Loyal customers have the potential to save your company time and money, and help your business to grow through word-of-mouth marketing. 

Understanding what it is making customers leave, and developing the right strategy to combat it, is essential if you want your business to continue expanding.

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