A high customer retention rate is an integral component of success. Business owners all over the world are improving retention strategies in the race to stay ahead of the competition. However, a high rate for one industry may be considered low for another and vice versa.
That's why figuring out the average customer retention rate by industry can help you understand where your business stands.
In this article, you'll learn top industries' retention benchmarks that give you valuable insight into building your retention strategy.
What affects customer retention?
Reasons why clients stay with brands vary tremendously. They can also depend on the industry. Knowing what affects customer retention in your sector is vital to honing your retention and marketing efforts.
The pillar of customer satisfaction is the comparison between expectations and experiences. If the experience matches the expectation, the customer is satisfied. In cases where expectations are higher than the quality experience, the customer is unhappy, and the retention rates drop.
However, the correlation between satisfaction and retention isn't always straightforward. Other factors may affect the retention rate as much, or for some industries, even more than satisfaction.
By measuring customer satisfaction frequently, you can adjust your retention strategy to keep the rates up.
In 2020, companies are shifting from being "customer-focused" to "customer-committed".
Since your service addresses the key pain points of your customers, their success is vital to yours. If your clients realize their goals by using your products and services, they are likely to stay with your brand for many years. Or as long as they keep succeeding.
You generate revenue during the entire customer lifecycle. Accordingly, your earnings directly depend on how long they stay with you.
In many industries, aiming for the customer's success is much more important than struggling to keep them happy.
How much do your customers rely on your services? Their dependency on your product dictates the retention rate. The more the customer relies on you, the harder it is for them to leave or switch to another service provider without financial losses and downtime.
The longer you provide excellent services to clients, the more dependent they become on your company. That's why thriving toward dependency can be highly important for increasing the revenue.
Difficulty to leave
You can keep the customer bound to your brand by a contract with an expensive "out" clause. The more difficult it is to leave your company, the less likely clients are to switch to other providers throughout the contract's duration.
A well-thought-out customer incentive to prolong the contract can also make it difficult for clients to leave once it's up.
Is there such a thing as a good or bad retention rate?
A 100% retention rate is always good. Meanwhile, a 15% retention rate is usually bad. Whatever is in between varies by the industry. What may work for your niche can be unacceptable for another, and vice versa.
That's why it's imperative to compare your retention rate to similar companies and niches rather than strive for a certain number. By looking at average customer retention rates by industry, you can draw conclusions about retention benchmarks to work with.
Average customer retention rate by industry: 7 top examples
There are two ways to analyze benchmark retention: against yourself and against other companies within your industry. Knowing what the average customer retention rates by industry are and what affects them is essential to tweaking your retention strategy.
Let's look at the top seven examples across different industries.
1. Retail: 63%
Compared to other top examples, the retention rate in the retail industry is fairly low. The reasons are high competition and lack of difficulty to leave.
Consumers in the retail industry are virtually bombarded by a variety of choices. Companies work hard to make the switch from one brand to another. Meanwhile, the number of leads in this industry is extremely high. For some companies, the difference in costs of acquisition and retention can be minimal.
2. Banking: 75%
An average American uses the same primary checking account for 16 years. The key reasons why consumers switch banks are usually tied to relocation or other life circumstances. Clients tend to stay with banks for decades. For example, in 2018, only 4% of consumers switched banks.
The reason is high customer satisfaction. Banks excel at customer satisfaction tactics. They make collaboration effortless and contribute to their clients' success.
3. Telecom: 78%
The high retention rate in the American telecom industry is attributed to the "difficulty to leave" factor. These companies focus on customer loyalty programs and expand reward possibilities. Meanwhile, they create long-term contracts, making it harder for consumers to look the other way.
In some sectors of the telecom industry, such as wireless carriers, the competition isn't too diverse. Each top company offers similar sets of services and benefits, making switching meaningless.
4. IT Services: 81%
The reason for high retention rates in the IT sector is that top companies focus on the client's success. IT services generally show results rather quickly. Failing to achieve the desired outcome for the client quickly leads to a high churn rate and a ruined reputation.
5. Insurance: 83%
The retention rate of insurance companies depends on many factors. A high rate isn't always an indicator of the company's health. It's important to look at the time people spend as clients with the company and the retention rate by the acquisition period.
Losing 17 out of 100 clients can be highly detrimental to an insurance company. Much more than, for let's say, a retailer.
Insurance companies work on increasing wallet share and upping the "difficulty to leave" factor to keep their clients.
6. Professional services: 84%
Companies that offer professional services focus on building close relationships with their clients. This keeps the retention rate at a high level. They emphasize the individuality of each customer, making offered services an integral part of their success.
With the right approach to personalization, these companies make their services an integral part of the consumer's routine.
7. Media: 84%
Similar to retail, media companies focus on large volumes of clients. Even though they may have a hard time personalizing their products, these companies have large marketing and retargeting budgets, keeping the retention rate at a high level.
How to stay above the average
The key to success in any industry is keeping your customer retention rates above the average. Tactics may vary from sector to sector, but the majority stays the same and includes channeling efforts into the affecting factors.
Take on retention strategies
It's hardly a secret that increasing customer retention rates by 5% can increase profits by up to 95%. By constantly working on your customer retention strategies, you can improve your bottom line and cut marketing costs substantially.
Retained customers don't just bring extra profits, they become brand ambassadors and provide valuable feedback. Increasing their number is essential to the success of any business.
With the customer choices reaching all-time highs and attention span dipping dangerously low, holding on to people you already converted is virtually priceless.
Employ retention software
Regardless of the size of your customer base, retention strategies require a structured approach. That's where retention software comes in. From tracking metrics to offering advice and providing valuable insight, such software can become an integral part of your retention and marketing efforts.
Retention software can help you automate many retention processes, cut your retention costs, and stay ahead of the competition.
Focus on customer success
For SaaS companies, customer success is the top customer retention factor. Customer success reduces churn and drives revenue. When customers achieve the desired outcome while using your services, they boost their value, become loyal, and turn into brand ambassadors.
You need to have a clear understanding of what success looks like for your clients. Doing that can help you constantly search for ways to achieve it by improving your offering. In addition to day-to-day problem solving, focus on a bigger perspective.
Companies that turn customer success into an operational philosophy deliver value in every interaction with their clients, thus increasing the retention rate.
Keep an eye on your metrics
Checking and analyzing your customer retention metrics are important to your success. Simply knowing your customer retention rate doesn't give you an insight into what needs to be changed.
Key retention metrics coupled with your business-specific indicators, can contribute to the decision-making process and retention strategy building.
Increasing your retention rate based on industry-specific data
To maintain an above-average customer retention rate, you need to know average customer retention rates by industry. Comparing your results to what other companies have achieved in your sector can give your retention strategy a push in the right direction.
What may be a high retention rate for one industry could be a failure for another. Take advantage of the insights into your competitor's metrics to improve your own.
By learning what your industry's retention benchmarks are, you can make the most out of your competitors' experience and propel your company to the top spots in your niche.