Blog 5 min read

Definition and importance of customer retention in retail

Are you constantly on the hunt for new customers and spend serious cash doing it? Frustrated that customers don’t come back to buy again? First of all, you’re not alone. Second, shifting focus to retaining customers is the way to go. But do you know why is it so important? And where to begin? Get the answers in this blog.

What is retail customer retention?

Let’s break it down. The word retention means “the power to keep something”. This means that customer retention simply put is to keep your customers. And keeping your customers means that your customers come back to buy from you more than once. When marketing talks about this, it’s all about finding strategies on how to engage and inspire customers to come back and make more purchases.

Download the video to learn all about customer retention in retail!

How to calculate customer retention in the retail sector

You might be familiar with the term CRR – customer retention rate. It’s the percentage of your customers who bought from you more than once in any given period.

Let’s say you want to see the CRR of Q4. You need these three numbers:

  1. How many customers did you have at the beginning of Q4
  2. How many customers purchased at the end of Q4
  3. Count the number of new customers you got during Q4

Now let’s get down to math!

Customers who purchased during Q4 – New customers during Q4 / Number of customers at the beginning of Q4

X 100 = Your CRR


The retail brand KC uses Voyado and finds that on October 1st, they have 10.000 customers in their loyalty program. As Q4 passes, they have attracted 800 new members, and come December 31st, the number of buying members was a total of 8200. This is how KC calculates the customer retention rate for Q4:

8200 – 800 / 10000 x 100 = 74 %


We know what you want to know next – what’s the industry standard? This is highly depending on what kind of products you sell if you are in FMCG or a furniture store. And of course, how many months you calculate. But according to Profitwell, the retail industry has an average CRR of 63 %.

Importance and benefits of customer retention

You have probably heard it many times before – a new customer costs you up to seven times more than keeping an existing one. But how is that calculated? Pretty simple actually. For example, to find new customers, you spend a lot of money on:

  • Paid search
  • Social media advertising
  • Display ads
  • SEO
  • Web retargeting

To keep an existing customer you focus more on:

  • Email marketing
  • Social media
  • Content marketing
  • Referral marketing

See? The activities you create to find new customers are up to seven times more expensive than what you spend on existing customers. And even though you use some paid media to target existing customers, you won’t have to go nearly as broad as when you want to attract new ones. Meaning, the budget isn’t as large.

Read more: How customer satisfaction affects retention

When you focus on customer retention management, you will increase your revenue, build your brand, create brand love, get happy customers who spread the word, etcetera.

Here are some statistics that are highly relevant and illustrate the importance of customer retention*.

  • Loyal customers increase sales and spending

A customer who has bought from you once is about 25 % likely to buy again. A customer who bought from you twice is 45 % likely to make a third purchase.

  • Retention improves shopper engagement

You are about 40 % more likely to sell to an existing customer than to get a new customer to make a purchase and existing customers spend 31 % more than a first-time buyer! Selling to an existing customer has a probability between 60-70 %, but selling to a new customer has a probability of only 5-10 %.

  • You will learn important insights from core customers

When customers shop from you frequently, you will be able to collect feedback from them and their experience for example. See what kind of offers and promotions work best, and follow your customer’s churn scoring to learn more bout the customer journey for example. Voyado offers a range of different retail analytics.

Where to start

Same as the percentage, how you set up strategies for customer retention will be different depending on the industry. A high-end lingerie company will talk to its customers very differently from the coffee supplier. What we can say though, is to start as soon as you can! When a new customer makes their first purchase, that’s when you need to start working to get them hooked. Because you only get one chance to make a first impression!

For starters, make sure the customer gets a flawless experience online and in-store. This includes everything from finding your store to getting the help they require with easy payment options – to leaving with great products, and staying courted by you!

Tip! Small things like adding a little thank you note in the online package you send or giving the customer a big smile in-store make a huge difference!

Long-term strategies to retain customers in retail

In the long run, the absolute best strategy for increasing customer retention is a loyalty program. Create it based on your specific target audience and customers. What are they interested in and what will make them want to stay loyal to you?

Set up a program that focuses on the customer experience and makes them feel special and unique. In a world where so many retailers are competing for the same customers – you have to stand out!

Read more: Customer retention strategies – 8 expert pieces of advice


*Numbers are taken from Crazy Egg, HubSpot, and Markinblog


More reading

Browse through all of our blog posts to find more inspiration!

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