Create Customer Retention

The Key to Creating Breakthrough Customer Retention

Don't overlook customer retention.

If your company is like most, you are heavily focused on new customer acquisition. There's nothing wrong with that, but often times customer retention and loyalty get overlooked at the expense of new customer acquisition.

What good is acquiring new customers if you are having trouble retaining them?

Acquiring new customers and then retaining them really go hand in hand. You must have both in your business to maximize growth & profit, and to have a sustainable business long term. 

I'm going to give you the key to managing customer retention. 

How to Manage ​Customer Retention

Managing customer retention comes down to one word...


"What gets measured gets managed." - Peter Drucker

In order to measure your customer retention you need to know your customer retention rate, so let's take a look at this.

What is Customer Retention Rate (CRR)? 

Customer retention rate is the percentage of customers you keep relative to the number you had at the start of a given time period.

You should exclude newly acquired customers for the time period in your calculation. The most common time periods most businesses use are weekly, monthly, quarterly or yearly.

This will depend on the type of business you are in. Choose a time period that makes the most sense for your business.

How Do You Calculate Customer Retention Rate (CRR)?

In order to calculate customer retention rate, you need 3 numbers.

  1. CE = the number of customers at the end of a period.
  2. CN = the number of new customers acquired during a period.
  3. CS = the number of customers at the start of the period.

CRR = ((CE-CN)/CS) x 100

Let's look at an example to make things easy.

At the end of a given month, you have 115 customers (CE = 115). You acquired 25 new customers during the month (CN = 25).  At the start of the month, you had 100 customers (CS = 100).

In this case, CRR = ((115-25)/100) x 100 = 90%

So 90% of your customers remained onboard during the month. Now it's your turn. Take a few minutes to calculate your customer retention rate. 

Why Should You Measure Customer Retention Rate (CRR)? 

If you don't know this key metric, you will have no idea whether your customer retention efforts are having an impact.

You must have a baseline as a point of reference. Don't put the cart before the horse and immediately implement tactics without first knowing how you currently stack up.

This is a fairly simple calculation, but it's really important and will provide you with a lot of information about your business.

Your customer retention rate is directly impacted by your quality of customer service and your customer loyalty. It will give you a good indicator of how you are performing in these areas and whether the customer retention programs you have in place are effective.

By not measuring CRR and not focusing on programs to retain customers, your business is not growing as fast as it should. You could be negatively impacting your bottom line and you don't even know it!

What Is a Good Customer Retention Rate (CRR)?

This can vary by industry, but I think a good goal to start with is something over 90% . By tracking this number for your business you'll eventually get a great idea what YOUR target number should be.

You'll also be able to measure whether the customer retention programs you implement are effective and what else you need to do to improve.

What's Next? 

Now that you know what your CRR is, it's time to put some tactics in place to improve it. Here are a few articles we put together you might find helpful:

  1. 7 Incredibly Effective Customer Loyalty Strategies for Your Small Business
  2. Customer Retention Tips to Supercharge Your Small Business

Did you find this helpful?
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Header Image Courtesy of Pexels

About the Author Tim Fitzpatrick

Tim Fitzpatrick is the President of Rialto Marketing. At Rialto Marketing, we help service businesses simplify marketing so they can grow with less stress. We do this by creating and implementing a plan to communicate the right message to the right people. Marketing shouldn't be difficult. All you need is the RIGHT plan.

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