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Unveiling the Profitable Magic of Retention

Updated: Jul 19, 2023

Imagine, for a moment, the joy you feel when walking into your favorite coffee shop, where the barista knows your order by heart. This comfort and familiarity exemplify the essence of customer retention.

Customer retention refers to the proportion of customers who keep coming back to a business within a certain timeframe. It's a sought-after achievement for businesses, given that existing customers often spend up to 67% more than newcomers. Businesses today are recognizing the profitability of focusing on retention—take the financial services sector, for instance, where a 5% rise in customer retention can bring about an over 25% increase in profit, as suggested by a Bain & Company report.

A customer's frequency of return can significantly vary, influenced by factors such as the type of purchase, from groceries to luxury goods. Consequently, retention rates are industry-specific. For instance, in banking, where customers often keep their accounts with one bank, the retention rate is quite high at around 75%. In stark contrast, the hospitality industry sees a lower rate of 55%, despite people dining out regularly, largely due to a plethora of options available.

To understand this better, let's glance at global customer retention rates in various sectors from 2018:

  • Media companies: 84%

  • Professional services: 84%

  • Automotive and transportation: 83%

  • Insurance: 83%

  • IT services: 81%

  • Construction and engineering: 80%

  • Financial services: 78%

  • Telecom industry: 78%

  • Healthcare: 77%

  • IT and software industry: 77%

  • Banking: 75%

  • Consumer services: 67%

  • Manufacturing: 67% Retail: 63%

  • Hospitality, travel, and restaurant: 55%

This varying panorama of retention rates underlines the individuality of industries and their distinct challenges and strategies.

Customer retention. Not only does it increase profitability but also forges a bond that turns customers into brand ambassadors. Retention is not just about repeated business; it's about creating meaningful connections that foster customer loyalty, offering a glimpse into the magic that happens when businesses go the extra mile to ensure customers don't just come back—they feel they belong. Read more here



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