What is customer retention and why is it important?

Customer retention goes beyond just keeping customers around. It’s about building a long-lasting relationship that turns them into loyal advocates. It’s about making sure that the people who already believe in your brand choose you again and again, all while fostering a deeper connection with them.

In this article, we’ll look at the importance of customer retention, why it’s crucial for your business success, and how a thoughtful, human-centred approach can truly make the difference.

What is customer retention?

Customer retention is simply how well a business can keep its customers over time. A high customer retention rate means people choose to stay, even with plenty of other options out there. In the UK, nearly half of consumers say they value a great experience over the lowest price when deciding where to shop (PwC, 2022)

This loyalty strengthens when brands go the extra mile, with research showing that 75% of people are likely to stick with a brand that provides positive, personalised experiences (Salesforce, 2024)

What is customer retention management?

Customer retention management is the strategies you use to keep customers coming back. But these days, consumers expect more than just a transaction, they’re looking for real, meaningful connections. Customer retention strategies such as loyalty programs and personalised offers are great, but to really win customer loyalty, you need to go beyond basic interactions. More than half of UK consumers say they’re more loyal to brands that provide genuine human interaction, even online (PwC, 2022). Customers want to feel valued and understood, which is why building authentic connections is now a must, not a nice to have.

Why is customer retention important?

Customer retention isn’t just keeping sales steady. It’s a key driver of long-term growth. Loyal customers not only stick around but also become your biggest advocates. In fact, 70% of people say they’d recommend a business because of great service (Salesforce, 2024).

But, if things go wrong, loyalty can take a hit fast – 73% of consumers say they’d take their business to a competitor after just one bad experience (Zendesk). So, if customer service isn’t up to scratch and you’re overlooking things like complaint management, it could cost you in the long run. Focusing on consistent, caring service doesn’t just keep customers happy. It saves you money by reducing the need to constantly find new ones. It’s a smart investment in your brand’s future.

How do you calculate customer retention rate?

Customer retention rate, churn rate, and lifetime value (CLV) are key to understanding customer loyalty and profitability. Retention rate measures the percentage of returning customers, while churn rate shows the percentage who leave – a critical indicator for areas needing improvement. CLV estimates the total revenue from a customer throughout their relationship with the business. Together, these metrics help guide loyalty efforts and highlight high-value relationships.

You can read more about this in our blog ‘How to measure customer retention’.

So how do you increase customer retention?

We know that brands can no longer just throw loyalty points at the problem. Online shoppers have wised up to loyalty programs and other  traditional retention techniques. But what they’re asking for isn’t anything outrageous. Actually, their demands are very fair, and very simple. They just want their favourite companies to be more human.

Experience is absolutely everything

The loyalty shake-up has placed far greater importance on the way that customers experience brands. This goes far beyond early stage awareness and conversion. Instead of focusing on the moments before, during and immediately after the sales transaction, we have to look at the entire journey.

Firstly, the customer journey is no longer linear. Thanks to the rise of multi- and omni-channel, customers now connect with your brand in a much more chaotic way. Not only will a potential buyer dip in and out of the funnel before committing to a purchase, but they’ll interact with you on multiple channels, each time expecting the same level of experience.

Secondly, all of these micro-interactions count and shape the decision-making process. If a customer develops a meaningful or emotional connection with your brand and the content you’re sharing, they’re more likely to buy from you over a competitor. Make them feel valued and listened to, and they’ll buy from you again and again, and even become a brand advocate for your company on social media.

Customers are human, and so are you

There’s no denying the rise of tech in recent years, and customers now expect everything from chatbots and automated notifications to AI-powered personalisation. But digital transformation can only be successful when people and technology work together.

Forrester reports there’s going to be an imminent shift from “digital sameness to human-centred tech”, and in the midst of transformation, we can’t forget the power of people within the customer journey, whether for B2C or B2B.

The human element is still critical to the customer experience, and it all begins with empathy. Developing your brand empathy allows audiences to feel seen and heard, especially in a time where people have become more isolated through the global health crisis and are looking for brands they can trust.

In fact, trust is nearly as valuable as quality and value, with 53% of shoppers claiming to see through marketing ploys to spot when a company is being dishonest. This means you need more than a dazzling campaign strategy, but a great customer service function to ensure a deeper, more meaningful human connection.

So if empathy and trust are high on customers’ agendas, how can businesses adapt to improve customer retention? How can they up their game for the savvy, experience-driven customer and also make them stick around? Retention isn’t as easy as it used to be with increasing choice, so meeting customers where they want to be met is critical.

Adapting to customer needs is all about making their lives easier. But don’t forget, that starts with ensuring your teams have all the tools and support they need:

Customer retention strategies

Make customer service accessible

Customers want a connected omni-channel experience, but don’t discount traditional contact channels. Let them decide whether to call, email, tweet or send a WhatsApp. While chatbots can be handy for late night or simple queries, many people still prefer to speak to a human being on the phone.

Focus on complaint management

As mentioned, great customer experience is a winning formula, even when customers encounter problems with a product or service. How you deal with customers in this crucial moment matters; fast resolutions and a display of empathy are key. The right solutions allow you to listen and gather feedback effectively, and that will make customers feel valued.

Adopt agile solutions

Being able to scale up or down on demand is essential for making sure your team can handle fluctuating levels of calls/emails. Review the volume and complexity of incoming enquiries to assess your current capabilities, and invest in scalable solutions that give you flexibility when you need it.

Make use of digital, AI, and tech

AI and digital tools can help with customer retention by offering personalised experiences and around-the-clock support. With 60% of consumers wanting brands to tailor their interactions (Accenture, 2023), businesses can use AI to track behaviours, predict needs, and respond quickly.

Additionally, chatbots can be incredibly useful when deployed at the right time – whether it’s for answering common questions or providing instant solutions outside of regular hours. But while some customers appreciate the convenience of chatbots, they also want the option to connect with a real person when they choose. A balance helps create a more flexible and positive experience for everyone involved.

Show that you care about people

UK consumers are increasingly drawn to brands that share their values, especially around authenticity and sustainability. Over half of UK consumers say that a brand’s ethical stance and transparency guide their purchasing choices (Edelman, 2023). . Ultimately, it’s a people thing – and customers want to support businesses that show they care about others.

One thing that’s worth noting is that excellent customer experience starts with your own people. Speed, consistency, friendliness and that invaluable human touch are all things that only happy, empowered employees can help you deliver. If you want to improve customer experience, first work on employee experience.

This is why investment in people and training should be a priority with any customer-centric strategy. If you care about your employees and provide them with the right tools and training programmes, it shows. The human approach has to start from within, and the empowerment you create for your team will filter out in the work they do and be reflected in the overall customer experience.

Employee happiness and customer happiness go hand-in-hand, so your journey to retention should always start with having the right employee support in place. Look after your workers, and they’ll develop organic empathy for your customers, giving them a reason to choose you over other competitors in the market.

How Sigma Connected can help boost retention

Outsourcing customer experience solutions can streamline your approach to customer retention. Making it easier to meet the growing expectations of today’s consumers. Our teams can offer seamless, omnichannel support, handle complaints with empathy, experience and efficiency, and scale up quickly during busy periods. This flexibility and consistency help build customer loyalty and ensure customers can reach you on their terms. Whether by phone, email, social media, SMS or WhatsApp.

Plus, with the help of AI and digital tools, we can offer 24/7 support, anticipate customer needs, and personalise interactions to improve satisfaction and resolve issues quickly.

We can create customer experiences that focus on listening, empathy, and meaningful connections – ensuring customers feel valued and eager to return.