Customer Retention: What It Is & Why It’s Important

Every brand needs to acquire new customers to grow and scale, but it’s just as important to maintain high customer retention (and prevent customer churn) – if not even more so.

Unfortunately, many brands neglect customer retention in their marketing strategies, focusing almost exclusively on customer acquisition, but at the end of the day, to drive real growth, you want those hard-earned customers to repeat business. 

Here, we break down what customer retention is, why it’s important, and how to improve your customer retention strategies across different marketing channels.

What Is Customer Retention?

Customer retention is essentially how long customers stay with your business over a given timeframe. It’s also called churn rate, particularly in many B2B businesses – and you want that rate to be low, and your retention rate high. 

The lower your churn rate is, or the higher your customer retention is, the more often newly acquired customers return to make repeat purchases. While customer data is carefully tracked for any subscription-based businesses, it’s important for all B2B and B2C brands regardless of industry or business model.

The Importance of Customer Retention

Customer retention is important primarily because of its impact on your brand’s ongoing success. Added bonus: It is almost always less expensive to keep your existing customers than to acquire new ones, and the pay off is even greater. Consider this:  

Acquiring a new customer can cost five times more than retaining an existing customer, and increasing customer retention by as little as 5% can increase profits from 25-95%. 

The cost of acquisition usually far outweighs the costs required to maintain good customer relationships with valued customers or to operate customer support services. Therefore, most brands will find it more cost-effective to retain customers through a retention marketing strategy than to constantly pay high acquisition costs for one-time shoppers.

On top of that, high customer retention typically leads to higher recurring revenue. The longer your customers are loyal to your company, the more purchases they’ll make more often. And they may even spend more during future purchases – so Average Order Volume (or AOV) will increase). 

 Therefore, your customer lifetime value or CLV will also increase as the average customer spends more on your brand.

How To Calculate Your Customer Retention Rate

Before you start strategizing how to improve your customer retention rate, you need to know what that rate is. 

The Customer Retention Formula

The customer retention formula is:

CRR = ((E-N)/S) x 100

CRR is a form of customer retention metrics. “S” is the customers you have at the start, while “E” is the customers you have at the end of the measured timeframe. “N” is the number of new customers acquired during the measured period of time.

Here’s a breakdown of the customer retention formula in action:

Say you have 150 customers at the beginning of a business month. In that month, you lose 10 customers but gain 17 customers. Therefore, “S” or the number of customers at the beginning of the month was 150. “E” was 157 (since you started with one 50, lost 10, and gained 17). “N” was the customers you acquired during the timeframe

When you plug all of that information into the formula, you get:

This shows you have a high 93% customer retention rate.

How Can Lifecycle Marketing Improve Customer Retention?

All your marketing channels work in tandem to create a seamless shopping experience that keeps customers shopping, even when there are no promotional offers in sight. Focusing your efforts across the complete range of marketing channels for customers before, during, and after a purchase is known as lifecycle marketing. 

When it comes to customer retention, a lifecycle marketing approach is the best practice. 

Lifecycle marketing helps you develop an ongoing, nurturing relationship with customers as they engage more and more with your brand. Over time, targeting different channels, such as email, SMS, and social media, will help you reach a wider audience. Additionally, it will ensure your audience feels confident in your brand’s ability to support their needs and deliver the quality products or services they are expecting from your brand. 

6 Email Tips for Increasing Customer Retention

Email is a great platform to begin lifecycle marketing. In marketing, email is perhaps the most overused and underutilized channel around. According to data collected by, 89% of marketers use email as their primary source of lead generation, while the average click-to-open rate was only 14.1%. 

To boost its success, consider these six email tips:

  1. Segment Users Based on Engagement 
  2. Optimize Emails for Clicks
  3. Offer Loyalty Incentives 
  4. Incorporate UGC for Social Proof 
  5. Personalize Content, Offers, and Product Recommendations
  6. Extensively  A/B Test Copy and Creative 

Segment Users Based on Engagement 

The ability to segment users is handy for any marketing channel, but perhaps on no channel is it more important than email. All subscribers are not the same, as some are engaged and some are not, and thus should not be treated as such. 

You can target specific email campaigns to customers engaging with your brand at varying levels, which solves the common issue of overwhelming less-interested users with frequent emails. 

To boost engagement, you can split the channel between engaged users (receiving more frequent email content geared toward nurturing their continued engagement) and non-engaged users (receiving emails less often, with content optimized to re-engage users with your brand).

Optimize Emails for Interactivity

Once you segment out your engaged users, optimize your marketing emails to ensure they click on content. That means creating more engaging content –which can even be interactive with gaming elements such as polls. That way you are leveraging email as an opportunity not only to inform your customers but to interact and nurture strong relationships with them. 

Optimizing your emails for clicks with engaging content helps with retention. Additionally, infusing emails with personalized content will help foster positive bonds between your brand and your users, developing the long-term engagement and retention that you’re looking for. 

Offer Loyalty Incentives 

Another proven way to keep customers coming back is to reward them for their loyalty to your brand. Loyalty incentives like exclusive offers, access, rewards, and other incentives make shoppers feel more valued, and in turn, can ensure they return for repeat purchases, rather than jumping ship and buying from competitors. 

Incorporate UGC 

UGC (user-generated content) is a popular way to increase customer engagement and social proof simultaneously. The great thing about UGC for email is that it can both benefit customer retention and inspire future purchases as it shows real-life customers interacting with and reviewing your products.

Incentivizing existing shoppers to provide their own content will validate their continued engagement with your brand. An added bonus is that you can incorporate that content into your marketing campaigns.

Try Out One-Off Campaigns

Don’t hesitate to experiment when it comes to marketing emails. With email marketing, you can try one-off campaigns to see what sticks with your target audience and drives engagement and conversions. You can try campaigns such as a customer loyalty program, a referral program, and special savings like flash sales.

Utilize A/B Test Variables

After experimenting with various new offers, messaging, and content, use A/B testing to determine which versions of emails perform best with your target audience members. Once you learn this, you can continually iterate to improve engagement, conversion, and retention. 

5 SMS Tips for Increasing Customer Retention

  1. Add value to your messages
  2. Create engaging content and a brand story
  3. Display genuine care for loyal customers
  4. Integrate SMS with other marketing channels
  5. Personalize messaging

Add Value With Your Messages

Similarly, you can use SMS marketing to bolster customer experiences, customer acquisition, and customer retention at the same time. Firstly, you can add more business value to your messages by:

Create Engaging Content and a Brand Story

The last thing you want is a customer to opt-out after signing up for your SMS marketing. Engaging content, like exclusive offers, access, and incentives, as well as  important information and updates about sales and orders , helps keep customers engaged.

One great way to push engaging content that boosts retention is to celebrate your brand and customers. Communicating key milestones and emphasizing how your customers have played a crucial role every step of the way is engaging content. It also displays how much you value customers’ support and continued trust.

Display Genuine Care for Loyal Customers

Customers who have been with you for a long time and receive your SMS communications are excited about your brand — make sure they know you’re excited about them. Loyalty programs, personalized content, and informative messages will ensure your customers know they are seen and appreciated, helping to build the strong relationships you need for excellent customer retention. 

Still, don’t neglect less-engaged users. Like email, you can segment your SMS messages to target unengaged customers with content designed to win them back. High-value messages letting them know you still value their business can help these customers continue their journey with your brand.

Boosting Retention with Other Marketing Channels

While it’s less easy to speak to segmented audiences across Paid Social, there are other proven tactics to boost customer retention. For example, you can target your ads and personalize them more based on your highest-intent customers. For that cross-sells and upsells are wonderful, in addition to blasting promotions and new collection launches.

You can also leverage Paid Social to run lead generation campaigns that lure high-potential prospects into the funnel, then leverage SMS and Email marketing to nurture relationships with those prospects. 

Bottom Line: Invest in Customer Retention 

Ultimately, customer retention is an important part of any brand’s long-term success. You can’t depend on customer acquisition alone — you need to make sure your current customers are satisfied and remain loyal.

Fortunately, agencies like MuteSix can help you maintain high customer loyalty and retention with custom-tailored solutions that work best for your brand and your audiences  With our data-backed omnichannel digital advertising services, MuteSix can help you retain customers through smart strategies that ensure you’re scaling profitably and for the long-haul. 


What Are Customer Retention Rates? |

Does It Still Cost 5x More To Create A New Customer Than Retain An Old One? | Forbes

The Value of Keeping the Right Customers | Harvard Business Review