It’s long been cited that keeping customers is cheaper and more cost effective than attracting new ones. But that shouldn’t come as a surprise; loyal customers spend more money, drive higher customer lifetime value, and have the power to bring new customers into the fold on the strength of word of mouth recommendations.
All of which make keeping an eye on customer retention a more than worthwhile pursuit.
Here’s everything you need to know about how to prioritize customer retention, including strategies that lead to long-term customer success, how to collect more loyal customers, and what one simple calculation can mean for your business as a whole.
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What is customer retention?
Customer retention is a metric that measures the number of customers that stay with your business over a period of time, expressed as a percentage.
Put simply, your retention rate is the number of active customers remaining at the end of a period, divided by the total active customers at the start of that period.
This is the inverse of customer churn, which measures the proportion of customers that have been lost over time.
Why is customer retention important?
While customer acquisition—the process of winning new customers—is key to any business, customer retention acts as a marker that things are either going well, or going wrong. This is especially important because losing customers can be incredibly costly.
Retaining customers over the long term is both how you’ll improve your business’ core KPIs and a practice that—by simply taking the right steps—tends to yield a host of other benefits.
By focusing on ways to increase customer retention, you’ll also:
Improve customer satisfaction
Existing customers who are incentivized to stick around—that is, the ones who feel listened to, understood, and valued—are much more likely to feel satisfied with your services. Satisfied customers become loyal customers, a cohort who’re likely to recommend your brand to their peers, and strengthens acquisition without additional spend.
Identify areas for improvement
Customer feedback, when conducted through the lens of improving retention, is an incredibly important resource for continuous improvement across the business—especially in closing experience gaps you might not otherwise realize were there. If you can uncover and fix issues to do with purchases, usage, the digital journey, or even poor customer service, you’ll be able to make strides that not only improve customer retention, but a host of other KPIs, too.
Save money
Understanding why customers churn takes resources, but it's almost always less expensive than replacing them. It’s famously up to seven times more expensive to attract a new customer than it is to keep an existing one, so building retention—and brand loyalty—is well worthwhile.
In short? Understanding, monitoring, and building retention is an essential part of meeting customer expectations and growing as a business.
How to calculate your customer retention rate
You measure customer retention by calculating how many loyal customers you have retained over a specific period of time. It helps you to understand your customer churn and customer acquisition.
To calculate your retention rate:
- Take the number of customers you have at the end of a defined period.
- Subtract the number of new customers acquired during that same period.
- Divide that figure by the number of customers you had at the start of the period.
- Multiply by 100.
If you’ve initiated a new customer retention strategy during this period, compare the rate for your chosen period with another to see if there has been an improvement.
What does good customer retention look like?
It’s hard to pin a definitive number on ideal customer retention—it’s a holistic metric, after all. Some customers simply aren’t profitable by nature, some cost too much to retain, and—ultimately—organizations have finite resources. So it’s about prioritizing investments appropriately rather than striving blindly for 100% retention.
Industry benchmarks are a useful reference point. According to research by Propel, here's how retention rates in 2026 range from 93% in Media and Streaming, to just 25% in Travel and Hospitality, with an average of 75%.
Retention blockers: What makes people churn?
If customer retention is the antithesis of churn, then it pays to understand what causes people to leave a business in search of competitors.
There are four kinds of churn drivers to watch out for, each with two sub-categories:
Service failures
Service failures occur when any interaction or service falls short of customer expectations.
Ordinary: Long wait times, a poor-performing website, lost luggage, products out of stock, poor product experiences, or missed delivery dates.
Catastrophic: Identity theft from a company database, an altercation with a staff member, or a credit card decline for an important client dinner.
Failure to compete
A competing product or service outstrips what your business has to offer.
Inadvertent: Being blind to the existence of competitor offerings, the value competitors offer, or the value customers seek.
Intentional: A conscious choice is made not to compete with a direct or indirect competitor.
Category retirement
This occurs when a product or service is no longer needed by a customer or market segment.
Inevitable: This happens when a product or service is targeted at one specific part of the customer journey, which the customer then moves past.
Avoidable: Customers sometimes simply leave a category when a suitable substitute arises—it might be the case that the product in question has failed to adapt to their evolving needs.
Structural barriers
Roadblocks that prevent customers from acting as they normally would when choosing products or services.
Organic: Pricing or store locations that naturally exclude certain clients.
Synthetic: Unpredictable barriers that stop a business from reaching their customer, like changes to legislation, or IP disputes.
Important customer retention metrics to consider
While customer retention is a key metric itself, it exists in the same sphere as—and informs—a set of other related KPIs. Here are a few to keep track of when you’re exploring this space.
Customer churn rate
As the natural opposite of customer retention, churn shows how many customers chose not to stay with your business. A climbing customer churn rate is a big red flag.
Customer Lifetime Value (LTV or CLV)
This is a calculation of the total revenue a single customer will bring to your business throughout their relationship. An increase in customer lifetime value means retention efforts are working.
Net Revenue Retention (NRR)
NRR is a focal point for subscription-based businesses. It shines a light on how much revenue is growing or shrinking from your existing customer base, as people either upgrade or downgrade their plans. A downward trend (NRR below 100%) suggests people might be at risk of churn.
Repeat Purchase Rate (RPR)
Repeat customers are the lifeblood of retail and ecommerce businesses. Repeat business means loyalty, showing that customers are coming back after a positive first purchase.
Net Promoter Score (NPS)
NPS asks "On a scale of 0 to 10, how likely are you to recommend us?" The resulting survey score helps you understand how you’re doing in relation to the rest of your industry.
Customer Satisfaction Score (CSAT)
CSAT asks “How would you rate your overall satisfaction with the [goods/service] you received, out of 5?” CSAT questions can be tailored to specific parts of your business, helping you to find out where customers feel satisfied and where they don’t.
12 effective customer retention strategies
Here are 12 effective ways to strengthen your customer retention program—and give customers more reasons to stay.
1. Keep an eye on short term and long-term retention
The experience a customer has with the first brand purchase they make can be pretty formative; if your customers have a positive first experience, they’re much more likely to return. So it’s important to evaluate whether your customer journey is smooth, from initial contact to product or service delivery. Are your platforms easy to navigate? Are there any pain points or journey breaks that can disrupt the experience? A high level of customer service should be provided across the customer’s lifetime.
It’s not just about that initial customer experience, though—it’s important to follow up with emails, messages, and notifications to keep customers engaged past their first purchase. Delivering relevant information after their first buy—like self-service troubleshooting or complementary products—can help keep customers engaged long-term.
2. Build brand trust (slowly)
Trust is a fundamental part of customer loyalty, and it isn’t built overnight. More importantly, trust leads to more purchases over time. But trust, and customer satisfaction as a byproduct, go way beyond the ability to provide what a customer needs—this also encompasses whether expectations were met (and exceeded) across the customer experience.
That means being able to listen to signals that flag experience gaps and poor performance, and working transparently to systematically close them. In other words? Trust is the result of quality and a commitment to doing things better.
3. Offer a personalized customer experience
Customers aren’t looking to be treated as just another number. Personalized customer experiences—like more relevant messaging in advertising, tailored emails with product suggestions, and customer loyalty program rewards—go a long way to building retention, loyalty, and CLV over time.
Customers who truly feel heard, understood, and valued, are more likely to return and continue to choose you over your competitors.
4. Be proactive in communication
Rather than waiting for customers to come back to you, make sure you’ve implemented a communication program that prompts return visits. From company newsletters and renewal messages to bespoke brand offers, it’s a good move to automate emails and other communication that can re-engage customers and remind them to return.
5. Collect customer feedback and implement changes
Through direct feedback like customer surveys, and indirect feedback like digital heuristics, contact center analytics and listening tools, your audience will tell you the changes that need to be made to reduce churn. So make sure you’re listening on an individual level and at scale to what customers are telling you, using conversational analytics to understand the emotion, effort, intent and sentiment behind their words.
Conversational analytics can help you isolate customer pain points that happen in individual conversations, but it’s important to collate all trends and signals—across touchpoints—in one place for more robust insights. With an in-depth understanding of what’s impacting the customer experience, you can make changes that will help you to retain more customers.
To create a customer feedback loop, send out messaging thanking customers for their input, and inform them (via email campaign, social posts, or in-app notifications) of the changes you’ve made to help them see that their feedback has had an impact. This will encourage customers to come back, as they know your brand listens to what they have to say.
6. Empower your frontline to deliver great service
Your customer service team has the power to turn any bad experience around. Do this right, and they’ll effectively convince customers to give your brand another chance.
But your representatives need to be empowered to fulfill customer needs and go the extra mile to repair customer interactions. Using customer service tools built to anticipate needs can help bolster every customer service interaction with added context, empathy, and resolution efficiencies.
7. Offer customers additional service without extra brand effort
Customers appreciate when brands can anticipate questions and queries they might have about their experience. Creating a self-help knowledge base, like an FAQs or community forum, can help customers feel as though they have the information they need to proceed with a purchase.
It might not be the first thing you think of when considering customer retention strategies, but well-stocked self-service options allow your customer to educate themselves about your offering—and understand the difference between you and your competitors more easily.
8. Create rewards for loyal customers
Encourage customers to come back with a customer loyalty program that entices them to stay. You can choose from a range of customer loyalty tactics, like promotional prices, sending out bonus items, offering discounts for commitments to buy on repeat, and more. You can also offer their friends and family a discount for choosing your brand, helping you acquire new customers without having to do the outreach yourself.
9. Offer omnichannel support
Giving customers the chance to meet you on their own terms means they’re more likely to come back. Make sure you not only reach out on multiple channels with targeting and retargeting strategies, but also offer them the ability to ask for support cross-channel. What’s really important here is that they can move between channels without having to repeat their inquiries. Truly omnichannel customer service software bridges these divides, bringing context and customer histories along at every step.
10. Choose quality over speed
It’s not how fast you can do something—it’s how well you can do it. Even though customers are looking for rapid service, if that service is bad or unsatisfactory, then they’re unlikely to return.
Ensure you don’t lose your loyal customers because of a negative interaction in the pursuit of closing more tickets or shifting more units at a scale that’s unsustainable. Instead, treat each customer as though they’re your very first one, then nurture that relationship as if it could be your last.
11. Give them an unexpected perk
Everyone loves a nice surprise delivered out of the blue. Customer retention can be strengthened when you offer an unexpected perk, like a discount or a free item. Though it might seem like one of the more frivolous retention strategies of the bunch, customers who feel they get more than they bargained for are more likely to stick around for longer.
12. Provide a subscription model
The subscription model is proving to be ubiquitous across tech businesses for a reason; it’s a simple way to ensure existing customers stay for the long haul. You can help retain customers using a subscription for an oft-used service, like free delivery, or providing product or services on a regular basis. If you can make it clear that loyal customers get preferential treatment over one-time buyers, it will help to convince customers to move over to the new model.
Great customer retention examples
Retention strategies tend to look different depending on the industry, the customer, and the maturity of the program. Here's how two organizations from different sectors turned customer signals into measurable retention outcomes.
Elevance Health
When member signals live in silos, retention becomes hard to curate. Elevance Health was receiving Consumer Assessment of Healthcare Providers and Systems (CAHPS) insights 18 months after the fact—by which point members had already disengaged or disenrolled. By unifying these signals across surveys, calls, and chat—and building a single real-time view—the team moved from reporting on what happened to acting on what's happening now. The outcomes were pretty dramatic: 50% fewer voluntary disenrollments among members reached, and more than 3,700 Medicare members retained.
ServiceNow
A detractor score is only an early churn signal if someone acts on it. To enable that kind of proactive change, ServiceNow coupled 17 survey programs to 31 action workflows, routing every piece of customer feedback to the right team automatically. With this system in place, a low NPS score now reaches success managers the same day. Issues are resolved faster, relationships are recovered, and customer accounts grow in value—by as much as 25%. Across the business, customers who receive proactive follow-up score 12 NPS points higher year over year than those who don't. And that leads to stronger, longer lasting retention.
How to boost customer retention: Four key takeaways
TL;DR? If you only take a few things away from this article about customer retention, make them these salient points:
Keep your metrics up to date
If you want to impact customer retention, you’d better know what your customer retention rate is over the last month, quarter and year—and how that compares to the previous corresponding period. CX professionals who try to improve retention without these benchmarks in place will find it impossible to understand if there’s been any real positive change.
Build retention by understanding churn
It’s important to think about the other side of the retention equation: what are the reasons for customer churn? We outlined the four main churn drivers in this article; which of those reasons are addressable in your business?
Make smart retention investments
Increasing customer retention is not an excuse for making bad business decisions. As with any investment, you’ll need to determine whether what’s being proposed is worth it, whether that investment could be better spent elsewhere, or whether changes will actually cause a different subset of customers to churn. It’s not always true that retention costs less than acquisition, so you need to have a rock solid quantitative model around investment that can help you prioritize.
Employ the right tools for the job
Ultimately, if you want to turn customers into fans, you’ll need the right software. That means adding customer experience management software to your tech stack that can keep track of retention and customer churn rates 24/7, as well as generate actionable insights from every touchpoint, and every interaction—as they occur.
Qualtrics® is a platform designed to do exactly that. It turns typically disparate data sets into clear actions that help brands build exceptional customer service workflows and supercharge their customer retention efforts.
