The ability of a business to keep its existing customers over time by ensuring they continue to purchase products or services. High customer retention indicates satisfaction, loyalty, and strong relationships, which contribute to sustained revenue and lower acquisition costs.
Example:
A gym offers a loyalty program that rewards members with free personal training sessions after completing six months of consistent attendance. By providing this incentive and maintaining excellent service, the gym retains 90% of its members year-over-year, ensuring steady income and reducing the need to spend heavily on acquiring new customers.