How to measure and increase customer retention.


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You’ve poured your heart and soul into building your business, product or app. Spent months refining and perfecting it, getting it ready for market but you’re forgetting one thing… Customers. Without customers and users, you don’t have a business at all.

Before you start throwing money into a fancy growth and marketing strategy cup, make sure you’ve inspected it for cracks first. There is no point in spending money acquiring new customers if you can’t manage to keep the existing ones.

Remember the old marketing cliche “It’s more affordable to keep a customer than acquire a new one”? Well, it’s a cliche for a reason. Spending money on sealing the cracks with save you time and money in the long run. But, how do you know if your customer retention game is weak or strong?

Fact: Retaining a user is 5x more cost effective than acquiring a new one. Which is why keeping track of your users and their journey is essential. To do this, and make better-informed decisions, you need accurate data.

Here is a helpful way to work out what your customer retention rate is. Once you have an idea, you can set goals for yourself to improve this.


Now that you have given your retention rate some thought it’s time to look at what a potential new customer retention curve could look like over time. This will help you identify if any alarm bells should be ringing.

Your business acquires 100 new customers each week. During week 1, only 30 people use your services/product again. This means your retention of week 1 is 30%. During week 2 only 20 people use your service/product, this means your retention rate is 20%.
Your retention curve will look something like this:

If your chart looks like this, then there are some things to consider. Firstly, such a drastic drop indicates that customers are interacting with your service/product once and not again. By week 2, 70% of your customers have fallen out of your bucket. By week 3, there is only 20% of your customers left in your bucket.

Secondly, depending on the nature of your business and the frequency of use, you should aim to have a continued steady stream of users interacting with your business. At this rate, all of the new customers you acquired will have dropped off within 6-7 weeks.

Once you’ve taken a deep dive into your retention rates and your retention curve, you can use this data to drive your decision making when determining the cause of the retention problems and how to solve them.

Here are four stepping stones to consider when your start patching up the cracks in your cup to increase retention rates:

Analysing the data you gather correctly, in conjunction with taking a deeper look at the customer journey is one of the cornerstones to improving customer retention, business growth and ultimately, revenue.



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