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Retention in a business, specifically retail, is the ability to keep customers coming back over time. As we didcussed in the Customer Acquisition Cost topic, acquiring new customers is expensive while retaining and increasing partonage from new customers is much less costly and valuable for retailer.  Therefore it's critical for local retailers to implement trategies and tools for increasing retention, and reducing churn (losing a customer).

This is a critical aspect of business success because retaining existing customers often costs less than acquiring new ones. For a local retail store, effective retention strategies might include:

Customer Service: Providing excellent customer service to create a positive shopping experience that encourages customers to return.

Loyalty Programs: Implementing loyalty programs that reward repeat customers with discounts, special offers, or points that can be redeemed for products.

Quality Products: Ensuring that the products offered are of high quality and meet the needs and expectations of customers.

Community Engagement: Engaging with the local community through events, sponsorships, or partnerships can build a loyal customer base.

Personalization: Tailoring the shopping experience to individual customer preferences and behaviors can increase satisfaction and loyalty.

Feedback and Adaptation: Actively seeking customer feedback and adapting business practices in response to this feedback can help to improve the customer experience and retention.



Customers might stop buying from local retail stores for several reasons, often related to changes in customer expectations, competition, and internal store management. Here are some common factors:

Poor Customer Service: Negative experiences with staff or management can deter customers from returning. Friendly, helpful service is crucial for customer retention.

Lack of Product Variety or Stock Issues: If customers consistently find that products are out of stock or that the store lacks new and diverse products, they may turn to other retailers.

Pricing Issues: If prices are perceived as too high or not competitive with other local or online retailers, customers might choose to shop elsewhere.

Inconvenience: Factors such as store location, difficulty in accessing the store, limited parking, or inconvenient store hours could drive customers away.

Changes in Consumer Preferences: If a store does not keep up with changing trends or customer demands, it can lose relevance and appeal.

Better Alternatives: The emergence of new stores with better offerings or the increased convenience of online shopping can pull customers away from local retail stores.

Economic Factors: Economic downturns or changes in individual financial circumstances can lead customers to reduce their spending or switch to less expensive stores.

Poor Marketing: Ineffective communication about what the store offers, special promotions, or new stock arrivals can lead to reduced customer visits.



The  first step in a retention program is the measurement.  We need to have metrics we can track as well as monitor how they change over time.

There are formulas such as below however several other metrics also provide the data to tell us about our retention and churn.

One formula for calculating retention rate is (E−N)/S(E−N)/S x 100, where E is the number of customers at the end of a period, N is the number of new customers acquired during that period, and S is the number of customers at the start of the period.  Basically this metric tells us of the total number of new customers, what percentage purchase again from a store within a specificed time period.

Selecting the correct time duration is key to having a realistic and useful retention rate.  The time duration is typically linked to frequency of purchase as well as past customer behavior.  For example if the average purchase frequency of running shoes is 1 per year and the store sells a running shoe the duration we want to measure is more than the average otherwise we can have false positives of negatives.

As you can see retention can be different for different product categories and if a store selle multiple categories it's important to have different retention rates for each category as well as overall, cross-category rates.

Average overall (cross-category) customer purchase rates are a key metric, specially after the start of a measurement scheme.  Over time the store will be able to set a purchase frequency fron individual customers across different categories and use this metric as part of the overal analysis.

As you can see the measurement tools used are crucial in helpgin store automate tracking and reporting retention and churn.


Other options to measure retention of customers:

Loyalty Programs: Implement a loyalty program that allows you to track customer purchases and visits. This can provide data on how often customers return.

Customer Feedback: Collect customer feedback through surveys, comment cards, or online reviews to measure satisfaction levels, which are indicative of retention potential.

Customer Relationship Management (CRM) Software: Use CRM software to track customer interactions, purchases, and behavior patterns.


Investing in understanding why and how much your customers churn is key to improving retention, and as you know high retention is the foundation of a high LTV (Lifetime Value).


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