How to Solve the 2025 Customer Retention Problem

It’s 2025, and businesses across sectors have a customer retention problem.

U.S. companies alone lose an estimated $168 billion annually due to customer attrition, as revealed in a CallMiner whitepaper. Well after the pandemic’s immediate impacts on consumer behavior, customer retention remains a critical challenge for businesses. In every sector and among diverse markets. The financial implication of customer churn is staggering, with little end in sight, if unaddressed. Let’s examine some of what customer retention in 2025 looks like from an operational perspective. And how experience-informed strategies can drive solutions to the multi-billion dollar attrition problem that threatens the second half of this never-a-dull-moment decade.

The 2025 Customer Retention Problem

Brands across sectors struggle to keep repeat, loyal customers. This creates operational challenges and financial losses that threaten long-term brand viability. Hospitality is chief among industries battling low retention rates. But they are not alone in seeing double-digit declines year over year.

Today, the hospitality, travel, and restaurant sector has the lowest customer retention rate of all industries worldwide, coming in at just 55%. And they continue to struggle to stem the tide. In 2024 alone, hospitality saw a 20% decrease in already troubling customer retention rates.

There are many reasons for this. The travel and hospitality industry faces pressure related to demand fluctuations, the need for comprehensive and often expensive whole-staff training, and fierce competition. Not to mention constantly evolving customer expectations for exceptional service in a world in which every experience is compared to the last best experience. No matter who delivered that experience.

However, chalking up downward trends in retention to the hospitality sector alone, with its unique mitigating factors, is inaccurate. And as a whole, it moves us away from important conversations about why so many customers are leaving brands and the impact of their loss of loyalty.

Lowest Customer Retention Rates and Decline by Industry

Globally, the retail sector continues its decline in customer retention, posting a 63% rate, twelve percent below the average retention rate across sectors. Like hospitality, retail faces significant challenges to keeping their customers. Many of these challenges present as beyond the control of individual executives and the customer experience teams they put in place. Retail, too is driven by high competition, price sensitivity, and shifting consumer behaviors. But larger trends like these do not account for all customer attrition. And executives can’t afford to stop the retention conversation there.

Consumer services and manufacturing also post below average customer retention and noteworthy rates of decline, each at 67% and with an 8% decline. All sectors with low customer retention encounter larger factors like supply chain and quality control challenges. At the end of the day, though, we are all facing the same challenge to one degree or another: customer needs and expectations are changing. If we don’t figure out what those needs are and what our customers want from us, we cannot expect them to come back to us. Despite how hard we work to get them in the door.

Source: Statista

Customer Attrition: A Symptom of the Past, Not the Future

One reason for the steep rates of decline is CEOs often find out about lagging customer retention numbers too late in the game. As CEO, once you see significant losses, the customer experience problems have already taken root. This happens because customer attrition is a symptom of the past.

This is important to note. The impact of attrition is in the future: loss of revenue, increased cost to acquire new customers, and a longer road to ROI on those customers. However, attrition is a metric of past performance. You are losing customers because there are breakages in the customer experience. Your brand is not delivering on its promises. The customer is not receiving essential pieces of information. There are disruptions in your processes and procedures. Your customers don’t feel like they matter, or that you would notice (or care) if they were gone. Attrition is the metric that confirms one or all of these scenarios occurred. And no one intervened to stop the loss.

All too often, we see drops in customer retention rates that are the result of a misplaced focus on growth via acquisition at the expense of nurturing and cultivating the existing customers who already bought in to your brand.  This growth-centric approach means it takes CEOs and other stakeholders longer to recognize retention issues. By the time they find out about the scope of the problem, it is too late. Simply put, when the CEO becomes aware of a retention problem, customer satisfaction has been a problem for a long enough time to impact revenue in a significant way.

What Causes Customer Churn?

So, what past missteps does customer attrition confirm? Everything from poorly designed experiences to  customer service delivery. And often, a fundamentally flawed, insufficient, or misaligned customer experience strategy.

Top reasons for customer churn include poor customer service and support, shipping issues, and low quality or performance. All of these are resolvable issues, especially if you make customer retention a strategic priority, fund it accordingly, and stand up programs to support it. Think about the impact of benchmarking performance, processes, procedures, and even product and experience design and development to customer retention.

Now, you are getting closer to solving the multi-billion dollar customer retention problem. And building a more efficient, results-driven operation. By shifting priority from growth to nurture, ultimately you are finding that clearer path to the growth your brand needs to thrive.

Why Customer Retention Matters

Customer retention is paramount for many reasons. Not the least of which, businesses have a 60% – 70% chance of selling to an existing customer, compared to 5% – 20% to sell to a new prospect (Marketing Metrics).

Moreover, existing customers spend more than new customers, to the tune of  31%. And they are 50% more likely to try your new products (Forbes).

Financial Impact of Retention

Retaining customers drives profit increases. In fact, Bain & Company reports a 5% increase in retention can boost profits by 25% to 95%. And long-term clients tend to spend 10-15% more yearly.  In this context, think of customer retention as an effective strategy for increasing profitability. Why? Because it reduces acquisition costs and amortizes the initial acquisition cost of the retained customer by yielding higher customer lifetime value. Even when you invest in robust customer retention programs it is markedly less expensive to retain a customer than to acquire a new one. Think about all the marketing, advertising, and sales expenses associated with outreach to new vs. existing customers.

Importantly, long-term customers typically have a higher lifetime value. Remember, these are your customers who are more likely to make repeat purchases, renew long-term engagements, try new products and services, and require fewer incentives to remain loyal. This is a path to sustained revenue growth.

Customer retention provides a more predictable revenue stream. This makes for better financial planning and resource allocation. And lower churn rates mean you can maintain a steady customer base, reducing the pressure to continuously replace lost customers. This kind of stability allows companies to invest in innovation and improve offerings. Ultimately, that drives profitability even more.

Furthermore, the deeper your relationship with your customers, the higher value customer insights you get from them. Robust insights into your ideal customer’s preferences and behaviors enable you to tailor strategies to meet and exceed customer expectations. Even as those expectations evolve in competitive markets like manufacturing, retail, consumer services, and hospitality.

Solve Your Customer Retention Problem

To address customer retention challenges in 2025, businesses need to prioritize high-quality, relevant delivery of products and services. You need to actively listen to current customers. And empower teams to integrate customer feedback into strategy, design, and workflows.

Invest in Quality

As a business competing in 2025, no matter your sector, you must ensure high quality products and services. But what defines quality? Most importantly, it is your product’s utility to your customer. Is it useful? Is it relevant? Are you solving problems for your customer? These are key questions to ask, whether you are a B2B or a B2C organization. Make sure you are adding value for your customer through the products and services you give them. And the experience you wrap around those products and services.

Committing to quality involves continuous innovation and improvement. That starts by listening to your customers to determine from their point of view – not yours – what they require to meet and exceed expectations. This approach also enables personalization, opening the way for you to design experiences to individual needs and preferences. Lastly, when you focus on quality, integrate the customer journey into your overall design to support the seamless, positive experiences that drive customer loyalty.

Listen to Current Customers to Bolster Customer Retention in 2025

We have already established the value of prioritizing retention over solely focusing on acquisition. Remember, part of the value proposition of customer retention includes leveraging the insights you gather from returning, loyal customers. Create robust Voice of the Customer (VOC) programs to grab even more value from your customers.

Collect feedback regularly through surveys and direct customer interactions that underscore how much you appreciate your customers. And how you trust them to co-create products and experiences with you. Never miss the opportunity to operationalize customer feedback not only for its data collection value, but for its brand communication opportunity.

Conduct social listening by monitoring social media channels to better understand customer sentiments and respond promptly to concerns. Analyze feedback to identify patterns and implement actionable changes to enhance customer satisfaction, and reinforce to your customers that you hear them and respect their experiences.

Go the next step by standing up a Customer Advisory Board. Assemble a board of loyal customers and give them the autonomy to present suggestions for improvement. Then allow that to inform your decisions to help  you deliver  more of what your customers need and want, the way they need and want it.

Empower Delivery Teams with Customer Data and a Customer-Centric Mindset

Similarly, encourage your delivery teams to question sales and marketing strategies to ensure they reflect customer feedback. This involves fostering open communication between delivery, sales, and marketing teams. Aim for alignment around customer needs and expectations. Keep in mind, as we have mentioned before, an approach like this is most effective when your business strategy and your CX strategy are aligned.

By incorporating customer feedback into marketing campaigns and communication to current customers, you can create more compelling, relevant, actionable messages. To help support these efforts, provide ongoing training to your delivery team. This makes it easier for them to address customer concerns and deliver consistent, personalized, exceptional experiences.

Rethink Customer Retention in 2025

The challenge of customer retention in 2025 underscores the critical need to re-evaluate business and CX strategies and focus on nurturing existing customer relationships. The financial benefits of retaining customers are significant. Remember those increased profits, higher customer lifetime value, and more predictable revenue streams.

By investing in quality, actively listening to customers, and empowering teams to integrate customer feedback, customer retention initiatives become pathways to sustained success.

With our clients, we provide expert insights, implement Voice of the Customer programs, and foster a culture of continuous improvement All to help guide companies through the process of designing seamless, personalized, meaningful customer experiences that drive value into the future. To talk more about what your customer retention landscape looks like for 2025 and beyond, schedule time with us.