Do you know the formula for customer loyalty?
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Be prepared to do a little math. While this isn't my typical lesson, it's very important. After all, customer retention can lead to customer loyalty. Loyal customers are important to all businesses, regardless of industry or size—big, small, B2B or B2C. Most businesses know their numbers, but do they know the right numbers? It's easy to measure customer satisfaction at a variety of levels. We find out how they liked our experience. We know that if they liked the experience, that's the first step to getting them to come back. The "getting them to come back" number is different than the "were you happy with us?" number. I'd love for customers to rate our company five out of five every time, but the number that's almost as important—maybe even more important—is the one that proves to us that the customer came back. That's your customer retention number. If that interests you—and it should—then grab a notepad and a pencil. A calculator probably wouldn't hurt, either. Let's get started. According to Zendesk, customer retention rate measures the number of customers a company does business with over a period of time. It is the percentage of existing customers who remain loyal to the company during that period. The formula for calculating customer retention is pretty simple. First, you need three pieces of information. You need “S,” the number of existing customers at the beginning of the period. You need “N,” the number of new customers added over the period. And you need “E,” the total number of customers at the end of the period. To calculate the rate, first subtract the number of new customers added over the period (represented by the letter N) from the total number of customers at the end of the same period (represented by the letter E). That's E minus N. Then divide that number by the number of customers at the beginning of the period (represented by the letter S). Finally, multiply that number by 100 and you get the percentage of customers who stay. In other words, E minus N divided by S gives you the customer retention rate. Of course, the closer you are to 100%, the better. Very few companies can say, "We're retaining 100% of our customers!" But if you're close, you're on target. If you continue to attract new customers and keep existing customers coming back, that's a recipe for success and growth!

This video answers the following questions and more…

What variables do you need to know to determine your customer retention rate?

How can you increase your customer retention rate to 100%?

Shep Hyken is a customer service and experience expert, award-winning keynote speaker, and New York Times bestselling business author. For more information, visit https://www.hyken.com.

For information about The Customer Focus™ customer service training programs, visit https://www.thecustomerfocus.com.

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