GUIDE 2024

What is Customer Retention?

Interested in learning what customer retention is? You’ve come to the right place!

Today, customer retention has become a hot topic among product managers who strive to build successful product experiences. 

The stats are revealing. According to conclusions shared via Finances Online, most industries record customer retention rates that fall below 20%. On the other hand, Think Impact reports that retaining customers has a tendency to increase company profits from as little as 25% to as much as 95%. 

In this article, we discuss what customer retention is, common tools that teams use to measure it, and its role in building amazing product experiences. 

Let’s get right into it. 


What is the Purpose of Customer Retention?

Customer retention is a term that refers to the activities and actions that a team undertakes to lower the number of customers who discontinue using a product or service. In doing so, it constitutes a metric that measures the impact of those activities on reducing churn rate and, by extension, keeping a company’s customers for a longer period of time. 

Customer retention programs, therefore, use a combination of brand loyalty and customer loyalty tactics to help minimize churn rates and incentivize customers to continue leveraging their services. 

From a product management point of view, customer retention also entails finding ways to improve the value proposition of the product, build optimal user experiences, and communicate the value of your product to your users over your competitors. 

Essential Features of Customer Retention Metrics

While many consider customer retention itself to be a metric, it’s important to recognize that there are separate metrics that help you measure the effectiveness of your customer retention programs. 

Here’s a breakdown of some of the most common customer retention metrics and an explanation of what they help you track: 

  • Customer Retention Rate: The customer retention rate is a metric that gauges the rate at which a company keeps its clientele during a given period. The formula to measure customer retention is as follows: Total Number of Customers at the end of a period – New Customers Acquired/Customers at the Start of the Period = Customer Retention Rate. 


  • Net Promoter Score: Net Promoter Score is a quantitative tool that measures how satisfied or pleased a client is with a given service. When it comes to software products, this metric is useful in helping to validate the interest a user has for anything from their overall product experience to a specific feature. Here is the formula to calculate the net promoter score: Net Promote Score = % of Promoters – % of Detractors. 


  • Product Usage: Product usage metrics form part of a broader subset of metrics that provide clarity on adoption rates. Product usage metrics are critical to the success of successful product adoption since they provide insight into customer engagement. One of the common metrics among product usage metrics is time spent in-product. This metric tells you how long your customer stays on your platform. The best way to measure this metric is to calculate it as an average. Here is the formula for the time spent in-product metric: Total time spent in-product x All customers over a week or month/total number of unique log-ins.


  • Repeat Purchase Ratio: Repeat purchase ratio (RPR) is a metric that represents the percentage of customers that have completed a purchase from you and have returned to make another purchase. This metric is critical in determining customer loyalty. The formula to calculate the repeat purchase ratio is as follows: Number of returning customers/Total number of customers = Repeat Purchase Ratio. Credits: Product Plan

What are Examples of Customer Retention Programs?

Below, we provide a breakdown of some of the most common strategies and tools that teams use to practice effective customer retention. 

Let’s dive right in: 

Customer Surveys

Customer surveys are tools that teams use to learn more about how a given product or service is performing. Survey responses allow you to collect input from end users and pinpoint the areas that you must improve in order to satisfy your customers.

Credits: QuestionPro

 In doing so, customer surveys give you a chance to view things from the vantage point of the customer and get a sense of how your product, support team, delivery drivers, and more have contributed to your customer’s experience. Most teams incorporate them after product launches, deliveries, and releases to gauge impact and customer engagement. 


Nowadays, more and more development teams build product experiences that allow for personalized messaging options. Personalizing product experiences as far as possible has become such a standard that customers expect it. 

This feature allows you to craft messaging experiences that make customers recognize how much you value them. In turn, this has a direct impact on your customers’ interactions with your brand, thus contributing to customer engagement and retention.

Loyalty Programs

Loyalty programs are some of the best ways to increase customer retention. Where possible, build product experiences that allow your customers to subscribe to. With that in mind, base your subscription on exclusive benefits, be it early notice of the latest product offerings, special events, or discounts that only your customers have access to. 

Credits: Kinsta


Building these programs into your product experience goes a long way in building customer loyalty. That said, you do not have to force customers to pay for a subscription in order to build loyalty. Free newsletters where you provide valuable information that your customers later capitalize on for their benefit are platforms that allow you to build customer loyalty. Consider incorporating it within your overall marketing strategy to help retain more customers.


Customer retention plays a crucial role in maximizing product success and increasing a company’s profit margins. 

In recent times, teams continue to experiment with a plethora of metrics that help to measure customer retention. These metrics collect data that provide key insights on concepts that shed light on customer engagement and interest. 

While product management continues to evolve at a rapid pace, companies must continue to emphasize the importance of retaining existing clientele as much as possible and, in turn, reducing churn rate percentages.

Experiment until you find a customer retention strategy that works for you and your company. Then and only then are you setting yourself up for long-term product success. 

Josh Fechter
Josh Fechter
Josh Fechter is the co-founder of Product HQ, founder of Technical Writer HQ, and founder and head of product of Squibler. You can connect with him on LinkedIn here.