What does customer retention measure?

• A. The number of new customers acquired
• B. How loyal customers are to an enterprise
• C. The average amount spent by customers
• D. The speed of customer service responses

Answer: (B)

Customer retention measures how loyal customers are to an enterprise. It reflects the ability of a business to keep its customers over time and demonstrates the effectiveness of strategies aimed at fostering customer loyalty. High customer retention typically indicates that customers are satisfied with the products or services offered and are likely to continue purchasing from the business, rather than switching to competitors.

Understanding customer retention is crucial because it often costs less to retain existing customers than to acquire new ones. Loyalty can lead to repeat purchases, positive word-of-mouth recommendations, and long-term business success. Therefore, evaluating customer retention helps businesses gauge customer satisfaction, which is a critical aspect of managing customer relationships and overall enterprise performance.

The other options measure different aspects of business performance. For example, acquiring new customers is important for growth, spending indicates customer purchasing behavior, and response times relate to service efficiency, but none of these directly measure customer loyalty and retention like the correct answer does.