This study is about the importance of customer retention in small and medium enterprises in New Zealand, investigating the value of customer retention and customer loyalty. The aim of this research is to find a usable strategy in order to attain customer retention in a SME. It studies the various reasons customers prefer certain businesses for their products and services. This research will assist SMEs in profit planning and customer retention strategies. The method used is a mixed methodology using primary and secondary data, where the primary data was collected by conducting short interviews of both customers and SMEs and the secondary research is based on references sourced from various authors and credible articles. The research found that both customers and SMEs believe that location and customer service are the two important factors that help in generating a successful business. Customer retention helps in securing long term stability and profitability amongst the customers and the SME.