What Is Customer Retention Rate? - Klaviyo UK
2026-03-10 23:07 Diff
https://www.klaviyo.com/uk/glossary/what-is-customer-retention-rate

Customer retention rate is a metric that tells you what percentage of your customers have remained customers over a given period of time. It’s critical to track customer retention rate and customer acquisition cost (CAC) together, so you’re sure that your acquisition costs are properly offset by long-term customer retention.

If running a business were like running an open mic night, customer retention rate can tell you whether your customers are asking for an encore or throwing tomatoes at the stage.

How to calculate customer retention rate

To calculate your customer retention rate, divide the number of customers who have purchased more than once by the number of customers who have purchased only once, then multiply the result by 100.

[customers who have purchased more than once] / [customers who have purchased only once] x 100 = customer retention rate

For example, let’s say 36,000 of your customers have made more than one purchase and 56,000 customers have only made one purchase within the last year. You would divide 36,000 by 56,000, then multiply by 100 to discover you have a 64% retention rate.

The average customer retention rate varies by industry. For example, it’s normal to see retention rates of about 63% for retail, whereas travel and restaurant brands can feel good about a retention rate of 55%.

You may want to use different time windows to calculate customer retention rate. Learn more about how to manipulate this data in this quick guide.

Why is customer retention rate an essential metric to track?

B2C brands are rightfully obsessed with how much it costs to acquire a customer—and how to get those new customers to purchase again. These two metrics––CAC and customer retention rate––are leading indicators of customer lifetime value (CLV) and the overall health of your business.

Let’s look at why customer retention rate matters so much:

1. Customer retention rate is a strong sign of business health

A high customer retention rate is often a strong indicator of overall business health. It’s a metric that cuts across many areas of the business—from marketing to customer service—and shows you if your customers are happy enough to buy again. A focus on maintaining a high customer retention rate can also lead to higher CLV.

But customer retention rate may be less important to some brands, particularly if the business model relies on expensive one-time purchases. Take a mattress brand, for example: while they might still aim to increase customer retention rate by selling pillows, a lower retention rate is less concerning because most consumers don’t need to buy a mattress at the same frequency as buying a new shirt or face cream.

Your customer retention rate can help you understand your pricing strategy and margin multiples. The higher retention you have, the less margin multiple you need. The lower retention you have, the higher margin multiple required to make your business profitable.

2. Customer retention leads to more revenue and a higher CLV

It’s expensive to land new customers. A 2023 First Page Sage report found the average paid CAC for the ecommerce industry is $68. That figure jumps to $247 for hotels and resorts.

If you can retain these customers and drive more repeat purchases, you’ll earn back more revenue for each dollar you’ve spent (and keep your CAC to CLV ratio strong). What’s more, if you’re able to prove that your CAC is worth it with strong customer retention rates, you may be able to secure a higher marketing budget which can in turn acquire more customers to retain.

To keep your customer retention rate strong, focus on designing a customer journey strategy that meets customers where they’re at. Find out what channels they’re most engaged on—whether that’s email, SMS, or mobile push notifications—and send personalised messages that educate customers on new products and promote cross-sell opportunities.

It’s also wise to regularly collect feedback and make customers feel heard, which will bolster long-term relationships with customers already on your list. These tactics can increase your customer retention rate, and speed up time to next purchase.

3. Customer retention means higher customer satisfaction

If your customers are coming back for more, you can pat yourself on the back. A strong customer retention rate usually means your product quality is high and your overall customer experience is positive. You can keep these customers happy by continuing to engage them with more relevant offers.

On the flip side, a low customer retention rate can signal that it’s time to source feedback to improve the quality of your products—or that it’s time to run a re-engagement campaign.

It’s worth noting that you don’t have to rely solely on customer retention rate to tell you if customers are happy. Klaviyo’s review sentiment AI, for example, can help you identify positive and negative feedback more quickly, so you can build true feedback loops that create a better customer experience.

10 tips for improving your customer retention rate

1. Send personalised offers to encourage repeat customers

Who doesn’t love when an exclusive promo code lands in their inbox? According to Klaviyo’s 2025 future of consumer marketing report, 39% of retail consumers said the number one thing brands can do to make them feel valued and understood is to offer personalised discounts or offers that match their preferences.

When you offer discounts that are tailored to customers’ past purchases, you’re not just discounting for the sake of it. You’re being intentional about letting customers know you know them, you value them, and you want them to have a good experience with your brand.

2. Launch a loyalty program to give customers a good reason to re-engage

Loyalty programs can take many different forms. You can reward customers for purchases with points that can be redeemed for discounts, like lingerie brand LIVELY does. Or you can take a page from Biossance’s playbook and offer free shipping and other perks to customers who pass a certain spending threshold.

Both of these brands have found a clever way to re-engage customers. And engaged customers are more likely to make more repeat purchases, leading to a higher customer retention rate over time.

3. Send helpful content to keep your brand top of mind

Newsletters are a great way to keep your brand top of mind and educate customers about your products (especially if your products require a lot of education to use).

For example, cookware brand Made In knows their audience is made up of home cooks who want to improve their culinary chops. So, they regularly send customers mouth-watering recipes and cooking tips—and show them which tools can really make them feel like pros in the kitchen.

4. Maintain excellent customer service and support

Say the pint of artisanal ice cream you ordered arrived melted. Or the cosy blanket you ordered for your sister’s baby shower didn’t arrive on time. Where’s the first place you turn? Customer support.

You can easily turn a bad experience into a good one with a customer support experience that exceeds expectations. Half of consumers would give brands another chance after a bad experience if they’re offered a refund, replacement, or discount on a future purchase, according to Klaviyo’s future of consumer marketing report.

But if you don’t? 1 in 5 consumers will stop purchasing from a brand after they have a negative experience with them, the same report found. The case for investing in customer support to bolster retention rate is clear.

5. Source customer feedback to consistently improve

It’s simple. Satisfied customers are more likely to make another purchase. That’s why sourcing customer feedback can be invaluable for keeping retention high.

Customer feedback can take many forms. Whether it’s a survey, focus group, or product review, the important thing is to actually take your customers’ advice when you’re designing your products.

For example, you may learn that customers want your cosmetics in travel sizes. If you’re seeing this feedback over and over again, it’s an indicator that you’re losing out on higher retention rates and revenue without this version of your product.

6. Use reviews for retention—not just acquisition

Social proof from satisfied customers is one of your best marketing tools. Klaviyo’s future of consumer marketing report also found that customer reviews and/or feedback were among the top considerations for making a repeat purchase.

Try featuring a relevant review in your cross-sell emails to entice customers to make another purchase. Make sure you’re sending relevant reviews, the same way you would personalised offers—use past purchase history to determine which reviews are most likely to encourage a repeat purchase.

7. Encourage subscriptions for easy repeat purchases

If your product is one consumers use regularly, offering a subscription is a great way to prompt customers to make repeat purchases with little friction.

Personal care brand Zero Co has this strategy down to a fine art. The brand built out a 6-month post-purchase flow to boost subscription uptake, retargeting customers across email, SMS, and Facebook Ads to turn one-time purchasers into loyal subscribers. As a result they’ve been able to maintain an 80% customer retention rate.

8. Speed up time to value with post-purchase emails

Post-purchase emails help customers understand how to get value out of your products. And they can speed up time to value (TTV), too—spurring customers to make more repeat purchases faster.

Cosmetics brand ILIA has made this a core part of their customer retention strategy. After a customer buys a product, they get a post-purchase email with a personalised tutorial that can help them make the most of their purchase.

This extra love helps customers learn skills that ultimately make them more satisfied with their purchases. And since those purchases don’t end up sitting in a drawer, customers are compelled to make more purchases in the future.

9. Use RFM analysis to speed up repeat purchases

RFM analysis is a framework that relies on 3 key metrics—recency, frequency, and monetary value—to bucket customers into segments. By creating these segments, you can then create personalised offers and messaging specific to each—leading to higher conversion rates.

For example, you can offer big spenders exclusive rewards, early access to products, and personalised messages that really speak to them. For less engaged folks, focus your offers and messaging on win-back campaigns that promise discounts as an incentive to re-engage.

10. Consolidate your marketing, service, and analytics data in a single platform

A lot of B2C brands rely on a fragmented tech stack with separate products for email and SMS marketing, customer service, and behavioural analytics. But when these systems don’t talk to each other, you’re missing out on valuable opportunities to create the omnichannel experiences that make customers want to buy from you again and again.

As the CRM built for B2C, Klaviyo can help you drive immediate sales and lasting loyalty with a winning combination of advanced email automation, AI, and real-time customer data.

If you’re looking to boost your customer retention rate, sign up today.