Episode 70 - The Compounding Impact of Retention
Tom Burrell
October 10, 2025
Did someone forward this to you? If so, click to subscribe
Welcome to episode 70 of the Retention Blueprint!
Retention impacts compound.
When you keep more customers:
You keep the revenue you would have lost
You reduce costs because retained customers cost less to serve
You improve upsell because retained customers are easier to upsell
Your acquisition costs decrease to hit the same customer/revenue target*
Your acquisition activity becomes more efficient because when the number of customers you must acquire to hit your target reduces, you reach lower-hanging fruit first*
*Of course, you can also maintain your acquisition budget, while also improving retention enabling you to smash your growth targets.
Most brands seek quick, obvious fixes to improve retention - such as churn models and incentives to stay.
While there are quick fixes, real growth comes from a systematic alignment around the most significant opportunities.
In this episode, the first of a two-part series, I break down how and why retention impacts compound growth. In episode two of this series, I break down how to build a short-term roadmap that allows you to scale retention-led growth in 2026 and beyond.
Behavioural Science in CRM Marketing
This week, I presented the behavioural science module of my CRM Marketing Strategy 2.0 course to over 80 marketers at one of the world's biggest brands.
They loved it.
For some of the audience, the techniques were new; for others, they simply hadn’t considered how to apply them effectively
You can access this content and 10 other modules on CRM Marketing Strategy in my 2.0 video-on-demand course. 1500 others have.
📰 Top Story: Small Improvements, Big Multipliers
One of the most misunderstood truths in growth is that small retention gains deliver outsized profit increases. Research from Bain & Company shows that improving retention by just 5-10% can increase profits by 25–95%.
Why? Because the economics compound across every aspect of your business model: acquisition, cost to serve, and customer lifetime value (CLV).
The Math Behind Compounding Retention
Let’s make this real with a simplified example.
A subscription brand with 100,000 customers paying $24 per year, a 35% annual churn rate, and a 3-year average customer lifespan delivers around $1.6M in margin per annum.
If the brand reduces churn by just five percentage points (35% → 30%):
They retain $360k in recurring revenue that would’ve been lost
Save $120k+ in acquisition costs
Cut $50k from customer service costs
Generate $30k in upsell opportunities
That’s $560k in additional lifetime margin.
When retention compounds, it doesn’t just protect profit; it creates a flywheel effect that boosts efficiency across the business.
How Retention Makes Acquisition More Efficient
Every marketer knows acquisition costs are rising.
But few realise retention can reduce them, without touching a single ad platform.
Here’s how:
Referral effects: Retained customers refer more frequently, reducing the need for paid acquisition.
Cheaper cohorts: When you retain more customers, you can afford to target lower-hanging fruit, customers who convert faster and cost less to acquire.
Stable growth: Meeting revenue goals with fewer new sign-ups frees you from the hamster wheel of unsustainable acquisition spend.
Retention improves your CAC: CLV ratio on both sides of the equation, by extending CLV and reducing CAC.
Retention as a System, Not a Tactic
Most businesses treat retention as a reactive exercise: plug churn leaks, offer discounts, or run winback campaigns. However, the compounding impact only emerges when retention becomes systemic and deeply ingrained in how teams think, act, and measure success.
That means moving beyond surface-level fixes and aligning around the most critical moments of truth:
Onboarding
Early-life engagement
Service recovery
Cancellation journeys
Each moment represents a high-leverage opportunity to influence future behaviour.
Improve retention 1–2% at each key moment, and you’ll easily achieve that 5–10% overall gain that can drive 25%-95% improvement in profits.
Moments of Truth: The Levers of Compounding Growth
To improve retention systematically, start by mapping the customer journey to identify where behaviour changes most before churn events.
Data science can reveal what interactions or issues precede cancellations.
Qualitative research can uncover the emotional “why” behind those moments.
Behavioural science can guide how you shape the experience, using commitment, habit, and friction wisely.
From onboarding systems that foster early habits to cancellation flows that prompt customers to pause before leaving, these interventions build long-term customer value.
The Data Behind Retention-Led Growth
Compounding retention depends on data, but it does not require predictive models.
Descriptive analytics: understanding what happened and why often delivers a higher ROI than predictive models early on.
Start with:
Cohort analysis to see how different customer groups retain over time
Revenue deciles to identify which customers drive the most value
Moment-based analysis to understand where retention shifts
Final Thoughts
A 5–10% improvement in retention may seem small, but it compounds through every layer of your business model: increasing profitability, lowering costs, and improving acquisition efficiency.
The brands that master this (Amazon, Netflix, Spotify) understand that compounding retention drives compounding growth.
Coming Next: Build Your 2026 Retention Roadmap
In part two of this series, I’ll turn today’s principles into a practical, short-term plan you can start executing immediately and then scale through 2026.
Expect:
A 90-day sprint plan that targets the highest-leverage moments of truth
A simple prioritisation matrix to pick winning tests (and kill distractions)
A measurement framework linking actions → churn reduction → margin lift
If you want next weeks episode as soon as it drops, add this newsletter to your primary tab and forward today’s issue to one colleague who owns a retention lever: onboarding, service recovery, CRM, or product. The more leaders are aligned on compounding retention, the faster your growth flywheel spins.
Until next week,
Tom
P.S. What did you think of this episode? |
Reply