Customer Retention: Definition and Importance

Customer Retention: Definition and Importance

Allysia Edwards

May 11, 2023

What is Customer Retention?

There are several metrics that businesses can use to calculate their success. Customer Retention Rate (CRR) is a crucial KPI because loyal customers are the key to short-term and long-term success. Just like the name implies, this rate measures how well businesses can turn customers into repeat buyers. The formula is straight forward: CRR = ((E-N)/S) x 100. It accounts for the customers you have at the start (S), and end (E), and new (N) customers acquired during the period you’re measuring.

Customer Retention Benchmarks

It’s unrealistic to expect your business to have a 100 percent retention rate. Your target rate should be based on your company’s industry. For example, the CRR benchmark for small businesses is about 20 percent. Here’s a list of retention rate benchmarks by industry:


Industry (%)

 Media  84%
 Professional services  83%
 Automotive and transportation  83%
 Insurance  83%
 IT  81%
 Construction  80%
 Finance  78%
 Telecommunications  78%
 Healthcare  77%
 Software  77%
 Banking  75%

Benefits of High Customer Retention

  • It’s 6 to 7 times more expensive to acquire a new customer than it is to retain an existing customer.
  • A 5 percent increase in customer retention can increase company revenue by 25-95%.
  • In comparison to new customers, retained customers buy more frequently and are willing to pay higher prices.
  • If satisfied with their purchases, existing customers help generate new business by referring friends and family.

How to Get Started

To improve customer retention, businesses must understand and communicate with their customers. While there are several ways to get started, customer loyalty programs are one of the most popular strategies. Through a customer loyalty program, your business can reward loyal customers for repeat purchases. In exchange, those customers spend more money to earn exclusive items and offerings. Use Surf’s white-label browser extension and mobile app solutions to build your own program. Your users could earn points and giveaway prizes by sharing their data and completing tasks. Book a meeting with Melissa to learn more.

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