Aswath Krishnan: Customer retention = Frequency of Need X Fulfillment X Mind share
High customer retention is the holy grail of most businesses. If customers keep coming back to your business, it increases lifetime revenue per customer (LTV) and you earn more per cost and effort of acquisition.
Customer retention may be hard to execute, but really simple to understand. There are three main factors that impact retention:
Users use products to satisfy a need. Some needs recur on a daily basis, like the need to eat, sleep, talk to people, hear the news, commute, or shopping. Some needs recur on a monthly or yearly basis, like doctor visits, car maintenance, or vacations. Some needs are episodic and happen a few times per lifetime, like dating, wedding planning, home or car purchase, teeth alignment, or funeral services.
If you are serving a need that's recurring frequently, you have more potential for retaining customers. If it's less frequent, it's likely that customers will only come back infrequently or just try a different solution next time the need arises. If the need is episodic, then it's likely that the customers never come back.
