What is Customer Retention?

By Aniket Bose. Edited By Arjun Chandrasekar.


Customer retention delegates to a company’s ability to make their existing customers into continuous buyers and not letting them leave to a competitor. It shows whether a company’s product or service makes customers feel pleased. Customer retention is also the heart and soul of many subscription-based companies like Netflix and Amazon Prime Video. The process of how companies can retain their customers for a long time is through customer retention strategies that are established for building customer loyalty by providing rewards after a certain amount of time that the customer has been a part of the company.

What Exactly is Customer Retention?

Customer retention is significantly different from customer acquisition and lead generation, which most people get confused with. Customer retention primarily focuses on the companies’ existing customers that have already signed up for the service or product offered by the company. For companies to retain their customers, there is a lot more to it than just the transactions, it is also the relationship that the company builds with their customers over time. It has been researched that customers look at their relationships with companies and brands in a similar manner to their relationships with friends and family. Companies need to focus their attention on the buyer relationships with their existing customers so that they can build brand loyalty, which will result in more potential customers for the company. The more loyal a company’s brand is, the more likely the brand and company will be ready to face any unforeseen challenges and markets. 

Why is Customer Retention Important?

Generally, it is more cost-effective for companies to keep their existing customers happy compared to going out to acquire first-time customers, due to the marketing costs. According to the Harvard Business Review, for a company to acquire a new customer it can be about 5 to 25 times more expensive compared to retaining the existing customer of the company. It is not that important for companies to spend a lot of money on advertising and marketing because it is much easier for companies to make their existing customers turn into returning customers. The reason for this being cost-effective for companies is because the company’s existing customers already trust the brand from their previous purchases, so there is already existing brand loyalty, which means that the company doesn’t necessarily have to go out and obtain new customers. When companies are looking to obtain new customers, it requires them to do a lot more convincing and negotiation with that new potential customer just to make that first sale, hoping they will return.


Overall, customer retention doesn’t just give companies returning customers and returning sales, loyal customers to the company’s brand will do free marketing and advertising by recommending the company’s brand to their friends, family, colleagues, etc. Once companies are able to generate that cycle of engaged customers, then those companies can develop customer loyalty for their long-term success!

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