Existing customers generate 1.7 times more revenue than normal customers

Customer retention is the activity that a company undertakes in order to reduce customer losses. Customer retention is about exceeding customer expectations so that they become loyal advocates for your brand.

Customer retention directly impacts on profitability with research by John Fleming and Jim Asplund finding that engaged customers generate 1.7 times more revenue than normal customers. In addition having engaged employees and engaged customers, returns a revenue gain of 3.4 times the norm.

Customer retention is affected by:

  • Customer satisfaction – For every industry customer satisfaction is a direct driver of customer retention.
  • Customer delight – In today’s ultra-competitive world merely satisfying customers is not enough and companies need to delight customers by providing exceptionally strong service.
  • Customer switching costs – These are one-time costs that customers associate with the process of switching from one provider to another. These can be (1) financial switching costs (e.g., fees to break the contract, lost reward points); (2) procedural switching costs (time, effort, and uncertainty in locating, adopting, and using a new brand/provider); and (3) relational switching costs (personal relationships and identification with brand and employees).
  • Customer relationship management – The social and relational aspects of service businesses means customer retention can be increased by focusing on managing customer relationships.
  • Implementation of a customer service standard – This leads to improved customer service practices and customer retention.

With the costs involved in gaining new customers ensuring customer retention materially affects a company’s profitability.


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