Business Development Bank of Canada Defines Customer Retention Rate

The Business Development Bank of Canada (BDC) has published insights into the customer retention rate, a key metric for evaluating business loyalty. This rate helps companies understand their ability to keep existing clients over time.

According to Ajay Sirsi, Professor and Director of the Centre for Customer Centricity at York University’s Schulich School of Business, customer retention is about actively keeping the customers a company has acquired. He states that loyal customers are less price-sensitive and generally cost less to market to than new customers, making them a valuable asset.

Sirsi further explains that retained customers can become brand ambassadors, actively promoting the company's products or services. He notes that a strong, loyal customer base also strengthens a company's negotiating power within its distribution channels. This leverage can be crucial when dealing with retailers or other intermediaries.

To calculate the rate, BDC provides the formula: (E-N)/S * 100, where E is the number of customers at the end of the period, N is the number of new customers acquired during the period, and S is the number of customers at the start of the period. Understanding this metric allows businesses to assess and improve their customer relationship strategies.