Customer Retention Terms: What is Customer Retention?

Customer Retention: An assessment of how loyal customers are to a business.

Customer Retention Strategy: The strategies that companies create to keep their customers coming back for more.

Customer Retention Strategy Goals: The goal of your customer retention strategies are to keep your current customers. These interactions include buying products/services, receiving email promotions, engaging with branded content, and referring friends.

Bonus Customer Retention Terms:

Churn: Churn is when customers stop purchasing products or services from your company.

Churn Rate: The simplest calculation for churn rate is: The number of customers lost during a specific time frame divided by the total number of customers within that time frame.

Importance of Having a Customer Retention Strategy


The old mindset of marketers that used a multichannel marketing strategy was: cast a wide net and you’ll catch a lot of fish.

But much like the definition of a multichannel marketing strategy has changed, so has this mindset.

Multichannel marketers now see that it’s about using different touchpoints to interact with customers and create a more personalized experience. These experiences keep customers happy, make them feel like they’re getting to know your brand, remind them about the benefits of your products, and keep them coming back for more.

Marketers are now aware of the impact a low customer retention rate can have on the growth of their organization and are doing anything they can to keep their customers around.

Read on to find out the benefits of a high customer retention rate, how you can improve your customer retention rate and examples of customer retention programs in action!

Here are the reasons using a customer retention strategy is important for your business!

Keeping Customers Happy and Increasing Revenue

Now a marketer’s mindset is all about keeping your current customers happy and loyal.

According to Business Insider, a survey conducted with multiple CEOs concluded that creating better customer experiences was their 2nd most important priority, right behind the number priority of revenue.


However, we’ve discovered that the happiness of your customers is directly related to the revenue of your business. When customers leave, they take a chunk of this revenue with them.  

Marketers used to believe that continuously obtaining more customers was quick, effective, and inexpensive.

However, it’s actually much more expensive to try to continuously obtain more customers rather than keep the old one’s happy.

According to NGData, “customer retention often is faster and, on average, costs up to seven times less than customer acquisition”

Actually, “80% of your future profits will come from just 20% of your existing customers.”

Improving User Experience and Your Credibility

Customer retention strategies are usually designed around making the user experience better for the customer.

According to Kolsky, 67% of consumers list bad customer experiences as one of their primary reasons for stopping interacting with a business.

Furthermore, according to  Zendesk, 85% of consumers wanted to warn others about doing business with a company they had a bad experience with.

The more pleasant and easy it is for a customer to interact with your business, the more likely they are going to want to use your product or service again and again.

It’s also more likely that a pleasant and easy experience with your brand will improve your brand’s credibility and encourage customers to recommend your brands to their friends and family.

According to Harvard Business Review, “23% of customers who had a good customer experience told 10+ people.”

Your business can improve user experience by:

  • Making your product/service easy-to-use: A frustrating product or service is an obvious reason to stop using a brand. Perform user testing to see how you can improve your product or service for a better user experience.

According to  Harvard Business Review, “Providing customers with short tutorials on product features before hanging up can reduce churn by 6%.”

  • Perform A/B Testing: A/B split testing is when a company tests two ideas against each other. This can be anywhere from posts on Instagram to website designs to calls-to-actions. The point is to see which idea gets the best response from customers.
  • Understand what your customers want to see: Provide your customers with content and designs that they actually want to see and use. Stay on top of trending topics by using platforms like Buzzsumo and Crazy Egg.

According to Altimeter, 57% of marketers reported custom content was their top  marketing priority for 2014.

Improving Customer Service and Loyalty


Customer service is all about keeping the customer happy. To reduce churn it’s important to provide exceptional customer experience.

According to American Express “59% of consumers would try a new brand or company for a better service experience.”

To reduce churn and bad customer service companies have to work hard to make their brands interactions with customers all amazing.

Your business can improve interactions by:

  • Improving Consistency: Ensuring that your presence across all communication channels is consistent will reduce customer frustrations because customers will receive exactly what they expect from your brand.
  • Asking for Customer Feedback: What better source to find pain points of your customers than from the customers themselves? Asking customers what your business can improve for them will help you determine what can be done to reduce churn.
  • Make Customer Service apart of Your Social Media Strategy: Improve your social media efforts by adding customer service to your social media strategy.

According to Lonely Brand, “a whopping 88% of consumers are less likely to buy from companies who leave complaints on social media unanswered.”

  • Train your staff to be more friendly: Improving customer service is a great excuse to train your customer service staff to be more friendly. This is great for your churn rate and to just spread positivity in this world!

According to  RightNow, “73% of consumers say friendly customer service representatives can make them fall in love with a brand.”

Bonus Customer Retention Statistics

Here are more customer retention statistics to get you excited about your customer retention strategy!

  • According to Institute of Customer Service,  “10% increase in a company’s customer satisfaction score leads to a 12% increase in trust from customers.”
  • According to Temkin Group, “Loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering.”
  • According to Kolsky, “50% of customers naturally churn every 5 years. However, only 1 out of 26 unhappy customers complain; the rest simply churn.”

Customer Retention Campaigns In Action: Two Case Studies To Prove It Works!



In 2008 Massachusetts Governor Deval Patrick launched the “managed competition” plan that’s goal was to entice new insurance companies to enter the market.

This change, although good news for customers because it may mean lower rates, was bad news for existing insurance companies in the market.

So also in  2008 the insurance company MetLife, launched a customer retention campaigns that’s goal was to remind customers of their value.

The campaign involved sending postcards, customer publications and letters to existing customers. The content of these postcards, publications, and letters included information about how their auto policy is the best-in-class and the value of their various features and benefits.

However, MetLife did not apply the same campaign to all of their existing customers. The key to the campaign’s success was dividing their customers into segments.

Bob Lundgren, VP of Marketing for MetLife Auto and Home says “You can’t send a 24-year-old the same kind of CRM material that you’re sending to a 64-year-old, so the message has been tailored, and the next test is how well we can lift response rates based on life stage segmentation.”

MetLife determined segmentation based on:

  • Length of the customer relationship
  • The channel through which the customer bought their policies
  • The products the customer bought
  • The profitability of the customer

The Results:

MetLife saw a lift in retention of about .87% among those Massachusetts customers who had received the letters.

Rob Roche the cross-sell manager and marketer for MetLife Auto and Home comments, “In our business, that’s really good. Traditional companies have retention between .80 and .90%, so if you can get a lift of one point, that’s great.”

Furthermore, Roche discovered that this campaign actually saved MetLife money.

Porter Airlines


The Canadian company Porter Airlines showed customers their value by providing the perks and comforts of business-class services for everyone!

Porter launched a customer retention campaign where they sent each member of their loyalty program (called VIPorter) a gift through the mail along with seat sale promotions.

Similar to MetLife, Porter divided their customers into groups based on their frequency of travel.

Porter used three mailing services to send the gifts and promotions:

  1. Addressed Admail
  2. Lettermail
  3. Expedited Parcel

Porter tracked each mail service carefully.

The Results

Customers truly enjoyed the personal touch of the gifts and promotions. They enjoyed the personal touches so much that they actually got in touch with Porter to tell them how happy they were.

James Positano, Porter’s Manager of Loyalty and Relationship Marketing, says, “There’s no doubt that the gifts and letters connected with customers and drove the campaign’s success. Many VIPorter members got in touch with us to say how impressed they were to receive personalized letters.”

Furthermore, Porter discovered that the most economical service, Admail, received the highest sales revenue contributing to almost 50% of the campaigns overall revenue.


The main takeaway from this article is that the more effort marketers put into maintaining positive customer relationships, the more likely customer are going to stick around.

The purpose of this is simple from a business standpoint: It’s less expensive to maintain old relationships than to create new ones and happy customers recommend your business to their peers.

To improve customer retention you have to design your strategy and devote your resources to creating a better customer experience.