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The ability of a company to keep its customers over a specified time period (i.e. annually, quarterly, monthly). Customer retention begins with the first instance of contact between a business and a customer, and continues throughout the entire lifetime of a relationship. Customer retention rate is critical for sustaining and growing any business and directly impacts profitability. According to Bain & Company, increasing customer retention by 5% can lead to a 25-95% profit increase. Since retention costs less than acquiring new customers, it is highly beneficial for a company’s bottom line.
Successful customer retention involves practices and procedures that meet and exceed customer expectations in order to generate loyal brand advocates over time. It is driven by customer satisfaction, customer delight, switching costs from one provider to another, and customer relationship management. High customer retention indicates a high degree of brand loyalty and high customer service standards.
