Customer retention is what an organisation measures to understand and consequently reduce customer churn. The goal of customer retention is for the company to retain as many customers as possible as it is proven that the cost of acquiring new customers far exceeds the cost of retaining existing ones. Customer retention strategy can often be conducted through delivering exceptional service or product offerings to ensure there is a high degree of customer loyalty to the brand. Customer retention begins with the first contact a customer has with a company and the subsequent lifetime of that customer / brand relationship. Retaining customers has a value attached to it both financially and in terms of their likelihood to be strong advocates of the brand.
The customer retention measure is commonly referred to as the customer retention rate and can be calculated by using the below formula:
Customer Retention Rate = ((CE-CN)/CS)) X 100
CE = number of customers at end of a defined period
CN = number of new customers acquired during a defined period
CS = number of customers at start of a defined period