Here's Why Customer Retention Is An ROI Gamechanger

Customer retention ignites your ROI. End of story. Find out why this is so and how to shift the gears so that your customers remain never-ending fans.

Here's Why Customer Retention Is An ROI Gamechanger
Table of Contents

What's customer retention?

Customer retention is a company's ability to hang onto customers over a specific amount of time. It comes down to customer loyalty and how many customers return to buy your products and services. 

High customer retention means the people love your offers and aren’t swaying towards the competition. 

Retaining the same customers that return over and over again is a huge money saver that can skyrocket your ROI. Not to mention a confidence booster because customers like what they get from you, which often creates an emotional tie between them and your brand.

Think about the brand you keep buying from (we all have one we cannot live without). It could be a specific clothing shop that sells jeans that fit your waist flawlessly or a digital marketing consultant that transforms your business strategy. 

The crux of the matter is that customer retention is pinnacle on all fronts, and there are ways to improve it.

How to calculate your customer retention rate

How to calculate your customer retention rate

Ready for some maths?

Alright, so here's the formula to calculate your customer retention rate.

[(E-N)/S] x 100 = CRR

You might be thinking, what the 'hey' does this mean? 

Don't worry. We’re going to break it down into simpler terms. 

  1. First, identify the time frame you want to analyze. 

For example, in the first quarter of 2022 (January, February, and March) 

  1. Next, collect the number of customers you had at the start of this period (S for the start). 

For example, on January 1st, you already had 80 existing customers. This is S. 

  1. Then find the number of total customers at the end of the period (E for the end)

For example, on March 31st, you had 110 existing customers. This is E. 

  1. Finally, determine the number of new customers added within the period (N is for new)

For example, 30 new customers were recruited. 

110 - 30 = 80 

80 ➗ 90 = 0,88 

0.88 x 100 = 88% customer retention rate.  

There you have it.

An 88% customer retention rate is pretty impressive. 

Take note that in this calculation, a few customers were lost during that quarter (January to March), which is why this calculation is essential. If customers begin to drop off, you can return to the drawing board and fix the hole. 

Having a 100% customer retention rate is the ultimate flex. Keep it as close to this as possible, but it depends on the industry your business resides in.

Why is customer retention necessary for ROI?

Customer retention measures how successful your business is at acquiring new customers and how good your business is at satisfying existing and recurring customers. 

Only a 5% customer retention increase can elevate your company's revenue by 25% - 95%. 

Sounds crazy, but it's true,

and here’s why.

1. Reduce costs on customer acquisition

Finding new fresh-out-the-oven customers means more marketing for you. Marketing consists of money and time. 

If you run a business, it’s an obvious fact that a marketing strategy is needed. However, reaching out to acquire new customers can be costly. 

Regular fixed money from happy existing customers funds your marketing strategy, reducing the costs needed to acquire new customers, usually in panic mode. 

You need to use paid and organic marketing methods to attract new customers. Paid advertising methods are heavy on the wallet, and organic marketing is heavy on time and resources. 

The trick here is to keep existing customers happy by adding value to their lives after purchase. 

Often, the buyer's journey ends once a business has its money. 

Bad move. 

By keeping existing customers satisfied, you’re doing your business a massive solid. 

Current customers will fund the bank so that you don't have to spend heaps on marketing to acquire new customers. 

Bottom line- Keep your existing customers chipper and jolly.

2. More word-of-mouth referrals

The longer a customer stays with you, the more they get to understand your brand and your offerings. Keeping these people happy also triggers them to talk about your business and refer others. 

Word of mouth referrals is potent because nothing spreads faster than chit-chat. 

For instance...

Let’s say you own a sports massage service specializing in running recovery. Offering your patients the best quality service is a surefire way to get them talking about your biz. Runners are usually social and love to chat on their group runs. If you provide an excellent service, your biz will come up in conversation. 

Word of mouth is direct and purposeful. 


Because when someone recommends your brand, they usually chat to someone in need of it. A potential customer that sits in the middle of your business niche.

We often try hard to target these leads using paid advertising, but word of mouth is free and direct. 

Customer retention is an ideal solution that triggers word-of-mouth advertising. Customers that return also talk, and they become a free mobile advertising machine.

3. Increased feedback from your customers

Long-lasting loyal customers who stay by your side understand your brand better and can offer valuable positive or negative feedback. 

Don't worry if the feedback has a few negative remarks. You need the ugly truth to master and improve your offerings, and there’s no one better to learn from than your customers. 

Besides, you may just land a few gob-stopping testimonials you can show off on your website. 

Long-term customers can pick out areas in your biz that you can improve on. 

For instance, maybe communication and support need work in your business. You can then craft a strategy to improve this area.

Another great benefit of customer feedback is that you’ll naturally attract new customers.


Because you’re continually bettering your offerings that make your biz irresistible. And if you keep improving, you’ll retain these customers and increase your ROI. 

The magnetic snowball effect.

4. Boost customer lifetime value (CLV)

New customers are exciting. They bring in new energy and often purchase a lot from you on the get-go. 

However, which customer is more valuable in the long run?

  • Customer A gives you $1000 first purchase, and then they disappear.
  • Customer B gives you $50 a month for many years to come. 

This brings us to the importance of customer lifetime value (CLV). Often the customer that brings in small but repeated payments brings you in more revenue than the customer that makes a one-time purchase only to ghost you. 

CLV is the amount of revenue a customer can bring you over their entire relationship with your company. 

There’s a bit of mathematics to calculate CLV but what's important here is that a CLV is directly linked to customer retention. 

Essentially, the longer a customer returns for your products and services, the more money you acquire from them and the better your ROI. 


Final thoughts

There you have it. Customer retention is the ultimate game changer when boosting your company's ROI. The costs to run your business, especially within the marketing space reduce significantly as you hold onto loyal and happy customers instead of pouring money into finding new ones. 

Focus on looking after current customers who keep returning for your products and services. 

They’ll do the work for you to bring in stable and constant money, so your business runs smoothly.

Check out this 14-day free trial to keep loyal customers booking your products and services over and over again.


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