Customer Retention Rate is the percentage of the total number of customers who continue to do business with the company over a specific time period. The specific time period is determined by the company’s specific business and average frequency of purchase by the customers.

Retaining customers (reducing customer turnover) is critical for profitability and business success. Marketing and Sales Managers who develop Customer Retention approaches to improve the current retention rate are making very effective and profitable job for the business. The cost of customer retention is lower then the cost of acquiring a new customer and it also saves time and other resources for the company, so developing and implementing a customer retention strategy is always beneficial for the business. By using technology companies can have marketing tools, templates, and databases which are easy to use and affordable so decision makers can make the right decisions for improving the customer retention rate and profitability of the company. These tools can track customer purchase information such as how often they buy, when was the last time they buy, how much they spent so management can make informed decisions based on facts and focus on the most important and/or critical customers.

By using promotions, membership programs, customer relationships programs and other marketing techniques managers can motivate customers to continue doing business with the company or in other words extend the Customer Lifetime which results in improved customer Retention rate. Past customer behavior is a good indicator for the future so any changes in customer behavior (purchasing trends) can be identified by using appropriate technology (marketing tools) and consequently efficient and effective actions can be developed and implemented by the company (effective marketing resources allocation).