Understanding Customer Retention

Customer retention is what happens—or what you hope happens—after you convert a prospect to a paying customer (see Figure 6.1). A retained customer is one that places a second order from you—and a third, and a fourth, and a fifth. It’s a customer that’s a loyal customer, one who doesn’t drop off the radar screen, one that keeps giving and giving.

Figure 6.1. Customer retention is what happens after the conversion process.

By definition, a retained customer is one who has not defected to competitors. That doesn’t always mean that the customer has reordered; some products and services have a very long life cycle, and thus a customer might be in the middle of the process without having yet reordered, and still be retained. It’s probably more important to look at intent to reorder, especially on large-ticket products and services, and say a customer is retained when he has that intent.