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How to Improve Your Customer Retention Rate

How Do I Calculate My Customer Retention Rate?

Customer retention rate formula:

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

For example, if a company had 100 customers at the start of the period (E), added 10 customers over the period (N), and ended the period with 100 customers (E), they would have a customer retention rate of 90%, or ((100 - 10) / 90) * 100 = 90%.


  •  S = The number of customers at the start of the time period you’re reviewing (you may want to take an annual approach; monthly or quarterly may not give you appreciable trends to review)
  •  E = The number of customers at the end of the same period

  •  N = The number of new customers acquired during the period

Different industries may see wide-ranging levels of attrition. For example, SaaS providers typically see annual churn in the 6% range; other industries with higher-priced products (which means a higher level of investment for the customer) may see lower annual churn rates.

It’s also important to ensure you pay attention to monthly versus annual churn rates. A 5% annual churn rate is not ideal but is very manageable; a 5% monthly churn rate can have a serious negative impact on your business success.

You've worked and invested a lot of time and money in connecting with prospects and nurturing leads. You’ve brought them through the sales process successfully, signed the contracts, and implemented your product or service.

That kind of relationship-building takes a lot of hard work and a dedicated focus on sales. However, if you don't keep these customers happy, your sales and other business efforts are in vain, because of the costs associated with customer attrition.

So how do you determine whether you’re keeping your customers happy, or whether you could do more to keep them engaged and maintain their business?

Customer retention rate is a good place to start.

Your customer retention rate is the percentage of customers you’re keeping versus the percentage that you’re losing.

In general, this number can give you insight into how many of your customers are happy, satisfied, and engaged, and where you might have room to make improvements in your sales and service processes.


Why Does Customer Retention Rate Matter?

Customer retention rate matters because keeping your customers on board and satisfied means higher efficiency and profitability. According to research by Bain & Company, a 5% increase in customer retention can lead to a 25% to 95% increase in profits.

Monitoring your customer retention rate can help you keep a finger on the pulse of your sales and service efforts. If you see a big change in your customer retention rate, you’ll be able to research, determine the issue, and then train or coach your staff to adjust their customer interactions where necessary.


What Changes Can I Make to Improve My Retention Rate?

Improving customer retention isn’t always a quick fix. It can take some research and diligence to find the issues affecting your retention efforts – and it then requires patience and perseverance to make the necessary changes. We’ve compiled some ideas to help you move the needle on your customer retention rate and improve your overall business success.


Change #1: Make Sure They're a Good Fit in the First Place

Many companies choose to blitz their market areas with cold calling in order to try to connect with as many potential clients as possible, regardless of fit.

Using an account based strategy – in which you research and understand the clients you’re selling to and make sure they align with your product – makes sense because you’re able to ensure they’re the right fit.



A good fit



Smart companies realize that it’s better to focus on clients who align with their ideal customer persona and who have the potential to become long-term partners. After all, the probability of selling to a new prospect is between 5% and 20%; the probability of making a sale to an existing customer is in the 60% to 70% range.


Change #2: Provide Clear Expectations

If your customer retention rate isn’t where you want it to be, it's important to take a look at the expectations being set for the relationship. If there’s a disconnect between what the customer thinks they should receive and what you think you should provide, it can be easy for the customer to feel unengaged and unenthusiastic about your product.

Ensure your customer support team is keeping in consistent contact with your clients and that they’re outlining the information they’ll be providing. In this way, you’ll be on the same page and able to clearly communicate the goals and action items necessary to achieve success.


Change #3: Prioritize Customer Success

You may have the best product imaginable, but if it's not helping your customers achieve their goals, then it’s not a good fit.

Talk candidly with your customers about the metrics they plan to achieve and the ways you can help. Using a focused customer success team to assist in this process can help you work through issues, as this team can use its expertise to grow relationships and increase customers’ lifetime value and relationship with your product.

When your customers are happy with the way their revenues are going, they'll be more likely to reflect positively on your company’s contributions to their success as well – and that will keep them in the paying customer fold.

If your interactions reveal that customers are not in fact happy, use that information to fix customer issues. You should also use that information to fine-tune your sales process and update your training methods so you can properly communicate with future customers and avoid similar issues.


Change #4: Focus on Experience

The best sales team in the world can’t bring in enough clients to keep your business growing if you’re not offering a high-quality product that’s easy to use.

Seventeen percent of customers are willing to walk away after one bad experience. That means your margin for error is slim, and you need to stay finely attuned to how customers are interacting with your product.

Be aware of pain points, look for ways to improve, and make sure that you’re selling something that works and that people want.

And, analyze the way people choose to interact with your company, whether things are going well or not. For example, if a customer has a problem, they may want the opportunity to do simple problem-solving on their own, then talk to an expert if the issue progresses.

According to research, 82% of Americans surveyed do want the chance for human interaction when product issues arise. If that’s the case with your client base, it’s important to make sure their experience fits their expectations, and to provide the resources they need to stay engaged with your product.


Change #5: Analyze, Survey, and Ask Questions Throughout

Sales is like courtship; when you’re in the sales process, clients are accustomed to you answering every question, testing to see how they’re responding, and generally hanging on their every word.


Always ask questions



If your approach changes significantly after the sales process, it may not be easy to keep them in the fold.

Regular surveys to determine effectiveness, as well as fact-gathering conversations, can help you ensure that expectations continue to be met. And, using these information-gathering tools can help you get in front of problems, rather than waiting until your customer is disengaged and ready to move on before trying to rectify issues.

If data is the head, communication is the heart – and you shouldn’t be reliant on either side alone for a full picture of your customer retention potential.

For example, you may get good reviews from your clients, but see a very different picture when you look at your customer retention rate. If you see discrepancies, research, then put your findings to work to increase your retention success.


Change #6: Keep Selling and Upselling

Again, like in a courtship, you need to keep the fire alive in your client relationships too. Make sure you’re putting processes in place to keep them connected with you and what you offer. For example:

  •  Follow up to sell an upgrade that enhances their experience or success with using your current product.

  •  Maintain email campaigns that are specifically focused on new features you’ve added, success stories from other clients, etc.

  •  Offer frequent, useful communications. Every time you communicate with a customer, whether it’s in an email, on your website, in a chat forum, or by phone, you have another chance to tell your product’s story, to drive home some unique value you provide, and to continue winning their loyalty.

  •  Create spaces for conversations between users, whether it’s a moderated group on social media, or your own self-hosted forum. In these settings, you can highlight the ways other clients are using your products successfully, and generate some positive feedback and connectivity between your clients.


How Does Sales Factor Into the Retention Process?

For the majority of clients, their sales rep is their first connection point with your company; and as such, they’re inextricably linked to your product in your consumer’s mind.

Keeping open lines of communication between sales and support/success teams is extremely important for that very reason. A customer who’s created a rapport with a sales team member may not hesitate to reach back out to them when they have an issue or when things don’t go to their liking.

However, there’s a more important reason you should keep your sales team feeling invested in your retention efforts: to create a continuous feedback loop. Sales and service/support teams can communicate regarding the information they receive from clients, then incorporate the appropriate changes into their processes.

For example, if the support team discovers that many clients are disenchanted with the data retention functionality of your service, it makes sense to check with the sales team, see how they’re communicating when selling it, and tweak efforts accordingly. And if the sales team sees that they’re getting good traction on a specific package they’re selling to new customers, they can share that with support/service as an opportunity to upgrade and retain business/loyalty.


How does your customer retention rate look? Have you discovered any strategies that have helped boost your success? Let us know in the comments below:


Looking to also improve your NPS? Check out our guide:


How to Use Customer Success to Improve Your Net Promoter Score