What is Customer Retention Management? Components, Metrics, and Importance

Customer retention management

According to Review24.com, 86% of the customers with great purchase experiences will likely buy from the same company again, and a 5% boost in customer retention management strategy can increase profit by 25% to 95%.

Here are a few reasons why businesses with a well-optimized customer retention management strategy will thrive 80% more than businesses with poor strategies:

  • Customers stick with brands they love.
  • People buy with emotions, and when you intentionally retain them, they feel satisfied to continue doing business with you.
  • Customers would rather spend money with a brand they know than a new brand.

So, the question is, is your business utilizing a compelling retention management strategy that customers would love to be a part of, or are you losing a market share because of your poor strategies?

Perhaps, your business is currently running with just a customer retention percentage of less than 25%, this means that you are not selling to about 75% of customers who have bought from you before.

Devising and leveraging the appropriate customer loyalty schemes could be that additional boost to your business and customer retention management strategy.

And not just the usual way of rewarding your customers intermittently. You need to initiate customer loyalty schemes that will aid your customer retention management strategy and birth results.

The problem which most companies are facing today is that they have not been able to discover who their real customers are.

[bctt tweet=”This problem which most companies are facing today is that they have found it difficult to have an insight into who their real customers are.” username=”DMSInstitute”]

Sometimes, you know that customers exhibit customer loyalty when they consistently purchase a certain product from a brand over an extended period of time. For example, many customers stick to a certain travel operator due to the positive experiences they have had with their products and services.

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Whatever the case may be, customer loyalty is the main object of customer relationship management.

What is Customer Retention Management?

customer retention strategy for businesses

Customer retention management is the process of a series of actions a business make use in nurturing and keeping the number of customers who repeatedly patronize a brand for a long time.

These strategies help you to gain more profit from your existing customer base when they buy more of your brand products or pay for more services. Most businesses use these strategies to grow and keep their existing customers to the loyalty level where they can either cross-sell, down-sell, or up-sell to these customers.

For instance, if you run a travel agency, and you make use of these customer retention management strategies effectively to turn your existing customers to returning customers, you can sell other related services like car-drop services, city tour services, or other hospitality-related services to them.

A company with this sound strategy can make more profit from the existing customer base while driving more first-time customers down their business funnel.

How to Measure Customer Retention Rate (and Why It’s Important to Track the Metrics)

a strategy on customer  experience management

One of the crucial questions to ask and accurately answer in a bid to improve customer retention strategies is what are the underlying metrics. What and what factors are responsible for what I am seeing with respect to my customers? How do I go about a proper evaluation? And how do I improve from what I am seeing in my results to where I desire?

All these answers stems from accurately tracking the results and analysing them. As this will help in knowing what tools to employ to achieve profitability. Let’s take a look at these metrics and why they matter in achieving your desired results.

#1 Repeat Customer Rate

This is the bedrock of customer retention, this metric gauges the percentage of customers willing to make a second purchase from your business. It reflects how effective your retention strategy has been. A higher rate signifies more customers returning to your store.

To calculate: Number of customers with more than one purchase / Number of unique customers.

Number of customers with more than one purchase is the the number of customers who have made more than one purchase in a specific period of time. While number of unique customers is the number of customers who purchased from your store within a distinct time frame. This is different from the number of orders.

#2 Purchase Frequency

This metric reveals how often customers return to make purchases from your store. Given that repeat customers often contribute significantly to annual revenue, it’s vital.

To calculate: Total number of orders / Number of unique customers.

#3 Average Order Value (AOV)

AOV quantifies the average amount a customer spends per transaction in your store. Maximizing AOV helps you know the efforts put into repeat purchase rate and purchase frequency.

To calculate: Yearly revenue / Number of orders

#4 Customer Lifetime Value

The ultimate goal of retention marketing is to increase customer value. To calculate it, you’ll need to understand purchase frequency and Average Order Value. Multiply these values to get the customer lifetime value.

To calculate: Purchase Frequency x Average Order Value

#5 Churn Rate

Churn rate denotes the percentage of customers who cease being your customers within a specific period. It’s crucial to keep this rate low and investigate why customers are leaving.

Those reasons could be:

Why You Should Devise a Customer Loyalty Scheme

Apart from the fact that it puts your customer retention management strategy in good limelight, there are a lot of benefits to devising a proper customer loyalty scheme.

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Through the customer loyalty scheme, you will be able to generate a lot of data pertaining to your customers. The data generated by a loyalty scheme can also be used to improve your bottom line, if you are able to utilize them very well.

customer retention strategy for nigeria businesses

With the scheme, you get to know your best clients and also underscore your worst customers.

Your loyalty scheme can significantly improve this scenario by rewarding customers and actively dissuading the worst.

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Interestingly, loyalty schemes can also be used to win back lapsed customers. These customers are much easier to win over than cold prospects. They know you and you know them, their buying history, and where and how to reach them. It could be more profitable to lose bad customers than to gain new ones.

While your best customers may be bringing in the lion’s share of your profit, your worst customers are the bargain-hunters that spend little and only buy discounted goods. The implication is that they can actually cost you more money.

Furthermore, another reason you must ensure that the customer loyalty scheme is designed for efficiency is that the program allows you to focus on your best and loyal customers which helps to focus on improving satisfaction.

A loyal customer’s endorsement is more powerful to friends and family than any advertising campaign. The long-run effect of that is that loyal customers are also good marketers.

How to Create a Customer Loyalty Scheme

In a bid to getting your customer retention right, you could make costly mistakes in the process of devising the proper customer loyalty scheme. Sometimes, most schemes do not work, sometimes it works but this is dependent on a huge factor.

Importantly, if you are devising an effective customer loyalty scheme, try as much as possible to define your objectives in clear terms.

Please do not make the mistake of misunderstanding the principles of loyalty or setting vague objectives. This creates an nothing but an imprecise, ineffective marketing which eventually leads to colossal loyalty programs.

Also, try to maximize the retention of the most profit per customer.

Remember that what you are doing is that you are trying to reward customers for behaving in the way that you want. Focus on specific goals. For instance, are you looking for repeat business or do you want your customers to spend more?

Customers like loyalty schemes because they feel they are getting rewarded for giving you their resources. So your scheme needs to offer customers something they will appreciate. However, it should also be devised with profit in mind.

However, let your scheme be simple to use and the rewards should be attractive and attainable. If customers have to spend a lot to get a small gift, they will feel cheated and it is not a good development for your business. At the same time, make sure you can recover the cost reasonably quickly.

How to Attract and Retain Customers

There are effective management strategies that would keep any organization accountable to track their effort in retaining their customers. And there are also some of the strategies that are outward in nature, where it is based on how customers feel about your brand, one of the best of customer retention management system you can use for any kind of business.

These are a few customer retention strategies that most businesses use inwardly and outwardly to compel their existing customers to stay loyal to their brand.

Now, read on while we break these strategies down and tell you how best you can use them to grow your business.

1. Offer Seasonal Discounts

According to convinceandconvert.com/, about 93% of shoppers use a coupon or discount code throughout the Year, this means that customers are always in search of deals that can help them save while shopping.

What smart businesses do in this case is to take advantage of customers’ need for deals, to increase their sales and also increase the rate at which a customer buys from you.

When you offer deals to people, you awaken the emotional part of their brain that is attached to your brand image in their mind. They feel you have them in mind, hence, the discount.

This is not to mean that you should use dark compelling strategies to draw your customers closer to you, but what lies in this is the effectiveness and the reward they gain from you for their loyalty. With that, you get to continue to have a host of customers who return back to you for more of your products and services.

2. Cultivate Engaging Email Connections

Emails offer a unique chance to establish strong customer relationships both pre and post the initial purchase. A fantastic approach is to kickstart with follow-up emails. About a week after a customer’s inaugural purchase, extend a gratitude-filled email acknowledging their patronage.

3. Set Customer Expectations and Over-Deliver

It’s always advisable to exceed the expectations of your customers.

Client care has gone past taking care of requests and objections, you additionally need to live up to their desires – in any event, when you didn’t get their input.

However, it’s difficult to fulfill promises for customers you scarcely know. In this way, become acquainted with your clients personally. Comprehend what they want most, and utilize these pointers to set desires.

As you set and meet client desires, you’re engaging them.

One of the approaches to set and meet client desires is to be straightforward when making a guarantee.

For instance, instead of promising a client that you can drive their email marketing campaigns out of promotion inbox, it’s safe to give a wider time at which they might start seeing results.

If it would take you a month to get them results, promise to get them results in 3 months, then deliver the results in a month or less, in that way, you’re not only removing chances of disappointments, you’re also impressing your clients with remarkable results in shorter time.

4. Boost Returns with Post-Purchase Discounts

Encourage return business by sweetening the deal with a discount code accompanying their first purchase. This tactic effectively entices customers to return, making discounts a potent tool for rekindling the interest of long-lost patrons.

5. Create KPI for Customer Service and Reward Your Team When They are Met

According to Peter Drucker, “you can’t manage what you don’t measure.” This is why it’s mandatory that if you must track and measure your customer retention strategy, you have to then assign a performance indicator to it, and reward your team for meeting these indicators.

Do this and watch your team put in the work to satisfy your customers, which in return tells on your sales and customer retention chart.

But how do you know exactly what to measure?

To have a bull’s eye on how your actions towards your customer retention strategy is working, there are scores to keep tab on and they are:

  • Customer satisfaction score

This is a measurement drawn from a simple survey which asks each customer to express their satisfaction based on a hierarchy of numbers, or characters in form of smileys. Your customers see this as a quick way to express their experiences, while you use this to measure how well your team are treating a customer.

  • Net Promoter Score

The score measures how likely your customers are to refer you to someone else. This forces your customers to intentionally pick out your best and worst qualities based on their experience, and from the report, you get to see which of the customer’s service strategy you failed at.

  • First Response Time

When your customers experience a fast response rate from you, chances are that they feel attracted to your brand and this also saves you from losing your potential customer to your competitors.

Most customers claim that they would prefer a fast response to their query even if they end up not buying from the brand, as opposed to delayed response that is satisfactory. That delay in response has nullified any great experience your customer might have with your brand.

6. Harness Customer Insights

Engaging with customers through feedback is key. By giving customers a platform to voice their opinions, you’re signaling that their input is invaluable. This, in turn, fosters a sense of investment, leading to increased loyalty. Customers who believe their feedback matters are more likely to remain devoted to your brand.


Your existing customer base is a valuable asset. They’re familiar with your brand, products, and appreciate your service. Prioritizing efforts here and there to enhance their experience, rather than solely pursuing new customers, can significantly boost your store’s revenue. Make customer retention management your top priority moving forward!

Frequently Asked Questions

What are the factors influencing customer satisfaction?

Here are twelve factors that can easily influence customer satisfaction:

1. Empathy.

2. Language.

3. Response Time.

4. Convenience.

5. Choices.

6. Simplicity.

7. Quality.

8. Appreciation

9. Reasonable Prices

10. Appreciation

11. Loyalty Programs

12. Community

What are the top 3 most important elements of high customer satisfaction?

Customer satisfaction hinges on three primary factors: perceived quality, value, and service. Harnessing these three factors enables consistent, positive customer experiences, and also support genuine customer loyalty. Let’s explore these contributors to customer satisfaction across various industries.

Perceived Quality

Imagine a customer who enjoys our training at Digital Marketing Skill Institute from and expects the same quality each time. If, one day, the training process falls short in terms of commitment, being updated with the current trends, or presentation, their perception of quality is disrupted, leading to decreased satisfaction. To mitigate this, we have always learned to stay vigilant to ensure no product or service inconsistencies and take proactive steps to address them by reaching out to affected customers. If you doubt us, see for yourself here

Perceived Value

A burger from a steakhouse and a burger from a fast-food chain offer different perceived values. While a $2 burger from the latter may be satisfying due to its affordability, the same burger from the former may not meet expectations. Understanding when a product or service falls short of a customer’s expectations is vital. For instance, if a customer expresses dissatisfaction through a poor review or feedback, such as feeling the product didn’t justify its price, consider offering a voucher for their next purchase to rectify their experience.

Perceived Service

The service a customer receives is a pivotal aspect of their satisfaction. Did they encounter a friendly and efficient service or face delays and indifference? Even a single unsatisfactory aspect, such as miscommunication can impact the overall perception of service quality. Ensuring consistently excellent service, from warm greetings to prompt order fulfillment, is crucial for elevating customer satisfaction levels.

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