I need to write about Customer Retention Rate. What does it means?

Answer 1

It means whether you are holding on to your customers or are they buying the stuff from somebody else. It has to do with customer loyalty and what you can do to keep your customers happy and coming back for more.

In the current business environment where acquiring each new customer takes significant investments, customer retention has never been so important to an organization’s health. Recent research has shown that lost customers will simply stop using your product or service without telling you why, and that lost customers are many times more likely than happy customers to share their bad experiences with friends and colleagues. Do you know your customer retention rate and why you have lost customers recently?

Top reasons for low customer retention rates tend to include:

Service issues (bad or confusing)
Pricing issues (too expensive or confusing)
Better offer from competition
Location changes, or
Product or service no longer needed.

Is the customer staying with you out of his own choice? Or is he exhibiting passive loyalty?

Passive loyalty or inertia loyalty can occur due to a variety of reasons and under a number of different scenarios where the customer is exhibiting repeat buying behaviour- not out of choice, but because he is forced to do. In such a scenario, retention rate could be really misleading as an indicator of future potential for business. What are the cases of passive loyalty?

Situations of quasi-monopoly
Habitual buying
Risk minimization
Switching hassles
Lack of a decent alternative

You can read more of the above in the links provided.