Customer Retention


What is customer retention?

Author profile image
Team Storyly
January 12, 2024
0 min read

What Is Customer Retention?

Customer retention is the ability of businesses to keep customers with them and prevent them from turning toward competitors in their industry. When measuring customer retention, businesses will look at how many customers they retain over a specific period. 

High customer retention translates to good customer loyalty, ensuring that companies benefit from repeat business from these particular customers. 

Many factors can influence customer retention and ensure that customers don't fall off. For example, you may offer a deal for products that help set you apart from competitors. You may also simply provide products and services of superior quality compared to your competitors.

You can measure customer retention based on the metrics collected when customers interact with you after their initial purchase. Based on how well your business is retaining customers according to the data gathered, you can make any necessary changes to your marketing, sales, customer service, product design, or other efforts to keep your customers on board.

What Is An Example of a Successful Customer Retention Campaign?

Many brands work on optimizing customer retention to ensure that they have a lasting appeal that keeps people coming back to them. One of the most common examples of a successful customer retention campaign is launching a subscription program. A subscription program means that customers pay a recurring price for a product or service instead of making a one-time purchase. Starting a subscription-based reward program can increase the number of committed customers and thereby generate more revenue. With such programs, you can offer premium products or services, discount coupons or special benefits to your customers and build long-term relationships. 

But the subscription model is not suitable for all digital businesses. Another successful practice of increasing customer retention is introducing a loyalty program. With a loyalty program, businesses can reward customers that continuously engage with the brand. As a customer buys a product or service, you may offer points or rewards to them to incentivize repeat purchases. This can differentiate your brand from competitors and build customer trust. 

Why Is Customer Retention Important?

Customer retention is important for several reasons, all of which contribute to the overall success and growth of a business. Some of the key reasons include:

Stronger Customer Relationships

Customer retention focuses on nurturing and maintaining positive relationships with customers. By prioritizing customer satisfaction, businesses can better understand customer needs, identify areas for improvement, and enhance the overall customer experience. This fosters trust and loyalty, leading to long-term business success.


It is well-established that acquiring new customers is more expensive than retaining existing ones. By focusing on customer retention, businesses can save on marketing and advertising expenses while generating consistent revenue from repeat customers. This contributes to a healthier bottom line and allows businesses to allocate resources more efficiently.

Increased Lifetime Value

Customers who feel valued and satisfied with a company's products or services are more likely to continue patronizing that business over time. This increases their lifetime value (LTV), which is a key metric for businesses in evaluating profitability. Higher LTV means customers are contributing more to the company's revenue and growth.

Positive Word-of-Mouth Marketing

Satisfied and loyal customers often become brand advocates, sharing their positive experiences with friends, family, and colleagues. This word-of-mouth marketing is invaluable, as it helps attract new customers without the need for additional advertising. It also contributes to a strong brand reputation and recognition.

Better Feedback and Insights

Retained customers provide a valuable source of feedback and insights on a company's products and services. By maintaining open channels of communication with these customers, businesses can gather information to improve their offerings and make data-driven decisions. This leads to innovation and continuous improvement, ultimately benefiting the company and its customers.

Greater Competitive Advantage

Customer retention can help businesses gain a competitive edge in their respective markets. Companies with a strong base of loyal customers are better positioned to withstand market fluctuations and challenges. Furthermore, higher customer retention often correlates with a more favorable market position, allowing businesses to maintain and even expand their market share.

Key Customer Retention Metrics

  • Customer Churn Rate: This metric represents the percentage of customers who stopped doing business with a company over a specific period.
  • Repeat Purchase Rate: This metric represents the percentage of customers who made more than one purchase from a company over a specific period.
  • Customer Lifetime Value (CLV): This metric represents the total amount of money a customer is expected to spend on a company's products or services over their entire lifetime.
  • Net Promoter Score (NPS): This metric measures the likelihood of customers to recommend a company to others.
  • Customer Satisfaction Score (CSAT): This metric measures customer satisfaction with a company's products or services.
  • Customer Effort Score (CES): This metric measures how easy it is for customers to do business with a company.

Average Order Value (AOV): This metric represents the average amount of money spent by customers on each order.

How to Measure Customer Retention

You can measure your customer retention by calculating your company's customer retention rate. This entails taking the following key steps:

  1. Determine the number of customers you have by the end of a specific period, whether this is a week, month, quarter, year, or another window.
  2. Subtract the number of customers you've acquired within that period.
  3. Divide the resulting number by the number of customers you started with at the beginning of the designated window.
  4. Multiply this total by 100.

Customer Retention Formula

To further illustrate how you can calculate customer retention, you can follow this formula:

Customers at the end of the period - New customers acquired within the period / Customers you had at the start of the period x 100

For example, you might have 1,500 customers at the end of a quarter, with 1,000 customers acquired within that period. You may have also had 700 customers at the start of the period, indicating a loss of 200 throughout the period. With these numbers, you would have a customer retention rate of just over 71 percent, which is a decent retention rate that leaves room for improvement.

The visual illustrates the formula for calculating customer retention rate. The formula is as follows: [(Customers at the end of the period - New customers acquired within the period) / Customers you had at the start of the period] x 100
Formula for Customer Retention Rate

What Is the Average Customer Retention Rate?

The average customer retention rate varies from industry to industry. The following are some average customer retention rates across industries, according to data from Statista:

  • Retail — 63%
  • Telecom — 78%
  • IT Services — 81%
  • Insurance — 83%
  • Professional Services — 84%
  • Media — 84%

If you're wondering what a good customer retention rate looks like in your industry, take a look at the industry average. Your individual business goals should also factor into the ideal customer retention rate.

Ways to Increase Customer Retention

There are many strategies you can use to boost customer retention. Some of the most effective strategies include:

Improve User Onboarding

One potential factor that can lead people to drop off is unclear or otherwise inconvenient onboarding. People should be able to easily get into an app or website and begin using the platform. You can keep customers invested by creating a personalized and efficient onboarding experience that helps users access the features that are most useful to them.

Use Client Feedback to Improve Your Product

Another way to boost retention is to collect feedback from your customers and use it to improve your product offerings. People like it when brands request their input, as it shows that those brands value their customers' opinions and user experience. You can also request feedback in several ways, from customer surveys following an initial purchase to polls and other posts on social media platforms.

Understand Your Client's Journey

You should understand the specific journey your customers take from the moment they first encounter your brand to the time they make one or more purchases. Using the right tools, you can map the client journey and determine if any bottlenecks are preventing customers from progressing. You can then make any necessary changes to encourage people to move toward an initial purchase and repeat business.

Create Great Social Media Support and Endorsements

Social media is an invaluable tool for businesses across all industries. There's a platform for everyone, whether your audiences are on Facebook, Instagram, LinkedIn, Twitter, or another popular site. On each platform you use, you should generate plenty of support from influencers and existing customers, as this can go a long way in building customer retention and loyalty. Even endorsements from micro-influencers with small audiences can be a huge help to your business, as these influencers tend to have loyal audiences who trust their recommendations. 

Segment Customers to Understand Their Needs and Deliver the Correct Content

You might have a broad audience you'd like to target all at once with certain content, but it pays to segment audiences into different groups. You can build audience segments by looking into the different types of customers you have and developing buyer personas around them. These personas can represent each segment based on factors such as demographics, psychographics (buyer behaviors), lifestyle, age, gender, and more. You can then use these personas to guide your content and ensure your messaging resonates with each audience segment. This will help make sure your customers feel as though you're speaking directly to them with your content, driving retention as a result.

Use Email Marketing to Encourage Inactive Users

Email marketing is another key tool you should use to connect with your audiences. Millions of people still use email today and regularly check their inboxes. If you notice that users aren't engaging with your platform, brand, or products, you can send emails of all types. Some email correspondence could include product recommendations based on users' purchase history, notifications of relevant discounts and sales periods, and abandoned cart reminders that ensure people don't forget about you.

Create a Personalized Customer Loyalty Program

Loyalty programs give customers plenty of incentive to stay on board with your brand. People enjoy rewards for their loyalty, particularly when the rewards appeal specifically to them. You can satisfy this need by developing a customer loyalty program with personalized rewards. As users purchase items, they can gain rewards points that they can then redeem for products they're truly interested in getting. You can also update rewards over time to keep your offerings fresh and keep the loyalty program new and appealing to your customers.

Use Referral Programs

You can also increase retention via referral programs. Consider offering your existing customers rewards for referring others to your brand and offerings. For example, you might offer a $10 discount on a product for every new customer your customers successfully refer. Customers can do so by generating a personalized link that goes back to their account and registers each new customer acquired through the link. 

With the right strategies in place, you can retain more customers and keep them loyal to your brand. Looking for a tool to help with your customer retention efforts? Consider integrating Storyly, which allows you to reach users within your app or your website through full-screen, interactive Stories. Sign up for our platform for free or reach out to us today. 


Team Storyly

Group of experts from Storyly's team who writes about their proficiency.