What is Customer Retention Management?
Written by
Zaid Hashmi
Zaid Hashmi
0
> Blog > What Is Customer Retention Management

What is Customer Retention Management?

Published : January 15, 2025

Could you ever fill water in a bucket with holes?

Similarly, if you have poor customer retention, you can barely acquire new customers with a hefty marketing budget.

According to a study, businesses in the US alone lose approximately $136 billion yearly due to high churn rates.

That said, to achieve a sustainable profit, it’s crucial to retain your loyal customers while continuing to attract new ones. That’s where customer retention management comes into the picture.

In this blog, we’ll explore proven customer retention management strategies to plug the holes in your bucket and keep your customers coming back for a sustainable profit. But first, let’s start with the basics.

What is Customer Retention Management?

Customer retention in your business denotes the number of customers you retain over a period of time for repeat business. The process you create to achieve this is called customer retention management. The more repeat customers you have, the more profitable your business becomes.

A study by the Harvard Business Review suggests that a 5% increase in customer retention can lead to a profit boost of 25% to 95%.

That’s interesting! But how can we measure the retention rate? Let’s find out!

Image source

How To Measure Customer Retention?

There are multiple ways to measure customer retention, depending on your business type. Let’s take a look at the most popular ones:

Customer Retention Rate (CRR)

CRR represents the core definition – how many customers your business was able to retain over a period of time. Here is how you calculate it: 

CRR = [(Customers at end of period – new customers acquired) / customers at start of period] * 100 

Let’s understand CRR with a small example. 

Let’s say a company offers curated snacks on a monthly subscription. At the beginning of Q1 (January 1), they had 1,000 customers. 

During the quarter, 300 new customers signed up, and 200 customers churned (canceled their subscriptions).

Let’s calculate their CRR.

1. Customers at the starting period (January 1) = 1,000

2. Customers at the ending period (March 31) = 1,000 (start) + 300 (new) – 200 (churn) = 1,100

3. New customers acquired = 300

CRR = [(1100-300)/1000]*100 = 80%This indicates that the company retained 80% of its existing customers over Q1. This means 20% of their original customer base churned during this period.

Repeat Purchase Rates (RPR)

RPR measures the number of customers who return to make additional purchases in a specified time period. 

Here is how you calculate it:

RPR = [Number of repeat purchases in a given time period / Total customers] * 100 

Imagine you’re a health supplement brand. You’ve found your product has a huge market demand, and your brilliant Facebook and Instagram campaigns brought in 100 customers in January. In February, you outdid yourself and gained 150 new customers. But only 20 of your 100 January customers returned for another purchase.

So, while you served 170 customers (150 new + 20 acquired from Jan), your repeat purchase rate would be: 

(20/100)*100 = 20%. 

Now, is it good or bad? That depends on the industry you’re in. Here is a table that shows the average RPR by industry.

Source

Net Revenue Retention (NRR)

This metric measures customer value over time by factoring in upsells, cross-sells, downgrades, and churn. Here is how you calculate it: 

NRR: [(Revenue from existing customers at end of period + expansion revenue – contraction revenue – churned revenue) /starting revenue] * 100

Let’s break it down with an example: 

Imagine an OTT streaming company. In January 2024, revenue from existing customers is $100,000, and we want to calculate the NRR for the quarter ending March 2024. 

Here’s the data we’ll use:

  • Expansion revenue (Upsells and Cross-sells): $20,000
  • Contraction revenue (Downgrades): $5000
  • Churned revenue (Lost revenue): $10,000

Now, using the formula: 

NRR = [(100,000 + 20,000 – 5000 – 10,000) / 100,000] * 100

NRR = 105% 

What does this mean? 

An NRR of 105% indicates that despite losing some revenue from downgrades and churn, the OTT business grew by 5% through upsells and cross-sells in the quarter (January – March 2024). 

We’ve seen why customer retention management is necessary and how you can measure the state of customer retention for your business. The next crucial step is to learn the powerful strategies you need to implement to scale customer retention. We’ll explore them in this section.

Five Strategies to Boost Customer Retention

Let’s take a look at the five best proven strategies to boost customer retention that works for almost every type of business in the industry.

#1 Create Seamless Post-purchase Journeys

The customer acquisition cost (CAC) is rising exponentially everyday. With stiff competition for market penetration among brands, aggregators like META and Google are thriving, forcing marketers to spend more to target the same audience. 

That’s why retaining customers is more necessary than ever. Once you acquire a customer, you need to provide them with the best experience for repeat business. 

How can you do this?

First and foremost, establish a great onboarding experience. First impressions really matter! A smooth and friendly welcome after they make a purchase can go a long way in keeping them around for the long haul.

According to a recent survey, 93% of consumers consider the post-purchase experience important for making a second purchase.

Let’s say you buy a jacket through a Google ad. You make the payment and immediately receive a confirmation via WhatsApp and email. What’s more? You earn a discount coupon to use on your next purchase.

The following day, you’re notified that your order will arrive within 24 hours. Once it’s delivered, the brand requests your honest feedback and offers personalized product recommendations based on your preferences.

Wouldn’t this make you feel valued as a customer?

#2 Loyalty Programs

One of the best ways to retain customers is to keep them coming back with loyalty programs. Even a study reveals that loyalty programs compel 83% of consumers to make repeat purchases. For example, consider the Starbucks Rewards program. It rewards customers for every dollar they spend at Starbucks. Once customers make a purchase, Starbucks give them stars, which they can redeem for free drinks, merchandise, and more.

As of now, Starbucks Rewards has nearly 31 million active members, who account for nearly 50% of sales in all franchise stores, with 16% year-on-year growth.

That’s the impact of a good loyalty program on customer retention and business growth.

#3 Leverage Customer Data

The best way to leverage customer data is through a Customer Data Platform (CDP)

With customer information organized in your CDP, you feel empowered to run personalized campaigns. A recent Statista study revealed that 56% of customers are more likely to make repeat purchases from brands that offer personalized experiences. 

Imagine buying your monthly medicines online and receiving a restock reminder at the exact moment when your medicines are about to run out, with a convenient button to complete the payment.

How does this work? The brand used your previous purchase data from its CDP to estimate when you need a refill, then designed a campaign to remind you at the perfect moment.

#4 Become Omni-present

Today, customers are omnipresent. They might discover your brand on Facebook, make their first purchase on Amazon, leave reviews on Google, and visit your website for subsequent purchases. To keep up with this behavior and maximize conversions, it’s essential to ensure your brand is present across multiple channels. In other words, brands must adopt omnichannel marketing to meet customer expectations. 

According to a study by Adobe, businesses using three or more channels in their sales campaigns see a 287% higher purchase rate compared to single-channel strategies.

Each additional channel strengthens your presence and increases the likelihood of engagement and conversion.

Let’s say a potential customer sees your Instagram ad for a new moisturizer, downloads the app, makes the first purchase and then goes dormant on the app. She then neither opens the app nor engages with your app campaigns. How do you make sure such customers buy from you again? 

This is where omnichannel campaigns pay off. 

You open up conversations on other channels like WhatsApp and email and try to hit their interest, which eventually gets them to make the second purchase.

#5 Gather Customer Feedback

According to a study, it takes 12 positive experiences to make up for one bad experience. 

But the real question is, how do you know what the bad experience was, and when did your customers experience it? 

A routine strategy is to implement an NPS survey

Let’s say you order a black jacket but receive a pink one instead. 

Right after the delivery, the brand sends you a notification asking for your feedback. You use it to report the issue, and the brand responds promptly, apologizing for the mistake and assuring you the correct jacket will be delivered within 24 hours. 

Once you receive your black jacket, the brand follows up with another notification— offering you a 10% discount as a gesture of appreciation for your patience. 

What could have been a customer service nightmare becomes an opportunity to rebuild trust and enhance loyalty. 

This is the power of a well-executed customer feedback loop. By addressing issues promptly and proactively, you not only improve the customer experience but also foster stronger, long-term loyalty.

Conclusion

In this blog, we’ve explored the importance of retaining customers and decoded some proven strategies to boost customer retention. We also learned the significance of having a powerful CDP to manage customer data for high retention. As the digital business world is continuously evolving, it’s more imperative than ever to invest in tools that align with your marketing objectives.

In this regard, Netcore Cloud stands out for its AI-driven personalization and omnichannel communication to help brands scale their marketing efforts with precision and speed. For more inspiration, check out how a leading Nigerian fashion brand, Habeebat, leveraged Netcore Cloud CE to increase its customer retention by 40%.

Subscribe for Exclusive Industry Insights
Unlock exclusive insights from industry experts! Get first access to powerful reports, expert guides, insider tips, videos & more.
Unlock unmatched customer experiences,
get started now
Let us show you what's possible with Netcore.
Avatar photo
Written By: Zaid Hashmi
Avatar photo Zaid Hashmi
Zaid, a skilled growth marketer with a flair for writing, is dedicated to producing results-driven content. He is passionate about MarTech topics and often researches & writes blogs around it. With a talent for both short-form and long-form content, he has a knack to hold his audience's attention through compelling storytelling and insightful narratives.