Tracking customer retention and loyalty

in Growing by Kathleen Aoki
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customer retention and loyalty, customer retention

As a small business owner, you've probably heard the saying, "It's cheaper to keep a customer than make a new one." And it's true. Statistics show it can be six to seven times more costly to attract new customers than keep the ones you've got, and that by increasing customer retention rates by a mere 5 per cent, you can increase profits from 5 to 95 per cent.1

Most businesses rely on discounts and promotions to bring both new and existing customers through the door. How do you then measure the effectiveness of your campaigns and track which customers are coming back after the deals are over? How do you identify your most valuable customers over time?

These are important questions to ask, as small business owners are always looking to maximise their limited marketing budgets. As such, here's a look at a few different ways small business owners can get a grasp on their customer retention rates.

A simple calculation

The easiest and simplest way to calculate customer retention is with the formula:

Retention rate = ((CEnd - CNew)/CStart)) x 100


CStart = # customers at the start of period

CEnd = # customers at the end of period

CNew = # of new customers acquired during period

For example, say you have 150 customers at the start of a period. During the period, you lose 10 customers and gain 50 customers, for a total of 190 customers at the end. Your formula would look like this:

((190 - 50)/150)) x 100 = 93.3% Retention rate

Whether this is good or bad depends on your particular industry, goals and other factors. But this basic formula provides a good barometer of customer satisfaction as you measure your retention rate over time.

CRM systems

Instead of manual calculations, many businesses rely on CRM systems to help manage their customers. As the name suggests, customer relationship management systems are software tools designed to help businesses keep track of and manage their leads and sales. While once the domain of large corporations, affordable CRM systems are now available for businesses of all sizes.

CRM systems allow you to nurture leads and track your best customers as well as automate various marketing functions. Some of the more popular CRM tools include Salesforce, Microsoft Dynamics CRM and GoldMine, with some systems offering integration with your existing software.

Online customer relationship management tools

If the idea of implementing your own in-house CRM system is a bit daunting, there are many tools online designed to make the job of tracking your customers easy and straightforward.


is a one-stop loyalty management application designed to help you increase and keep track of customer loyalty and retention through the use of ongoing programs and rewards.

  • Foursquare

    is a location-based customer rewards program that allows you to engage with customers via news, events and discounts. Foursquare provides analytics that, according to their website, enable you to "see who's coming in for the first time and how often they're coming back."

  • Groupon Scheduler

    is a free tool for companies looking to improve customer retention rates. It features a scheduling system for campaigns, as well as customer history tracking to see which customers return after promotions end.

These tools are only a small sampling of the plethora of options now available to businesses that wish to manage their campaigns and track customer loyalty. Having these tools in place before, during and after promotions makes it easier to collect valuable customer data, gauge the success of campaigns and drive repeat sales.

Whichever method you choose, actively tracking your retention rate will provide valuable insight on how well your business is doing, in turn keeping your best customers around.



This article represents the views of the author only and not those of American Express.

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Kathleen Aoki

Kathleen has a degree in marketing with over 10 years experience in the IT field as a database developer and web designer. As a freelance writer, Kathleen has written for several publications across Australia as well as for various business and hi-tech blogs online.

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