You might believe that to grow your business, constantly investing money into customer acquisition is the only way to see your profits going up.

But the truth is that there’s a more cost-effective strategy to compliment your lead generation efforts. You guessed it right, that’s Customer Retention.

As data is the bread and butter of Customer Retention, today we’re sharing with you six essential Customer Retention Metrics to track and work actively on improving.

Let’s get down to brass tacks!

1. Customer Retention

Rather self-explanatory, Customer Retention Rate demonstrates the percentage of buyers who continue to make purchases from your store.

High customer retention rate signifies that your buyers are happy with your products and services, and are very likely to come back or refer your store to friends and family.

Calculate Customer Retention Rate:

(#Customers at the end of the period - #New customers acquired) / #Customers at the start of the period.

2. Churn Rate

Churn rate is the reverse of the Customer Retention Rate. It indicates the percentage of buyers you lost during the examined period.

Even though losing some customers along the way is unavoidable, having a Churn Rate over 5-7% needs to ring the alarm and get you to review your products and processes.

Calculate Churn Rate:

(#Customers at start of the period - #Customers at end of period) / #Customers at the start of the period.

3. Repeat Purchase

Plain and simple, Repeat Purchase ratio demonstrates the number of customers that returned to make a purchase from your store.

It’s a crucial metric to figure out the loyalty of your customers, and the patterns underlying the seasonality of their return to your eCommerce store.

Calculate Repeat Purchase:

#Returning customers / #Total customers

4. Product Return

As an online retail merchant, a high rate of returns designates a possible issue happening along the post-purchase journey.

If a significant percentage of your customers return their purchased products, then there’s some problem with the products’ description, quality, or with shipment’s duration.

Calculate Repeat Product Return:

#Total Returned Products / #Total Products Sold

5. Time Between Purchases

This metric gives you a better understanding of the average time it takes for a customer to return and make a purchase.

It’s an important metric to track because it illustrates the degree of customer loyalty and
whether or not they substitute your products with your competitors’.

Calculate Repeat Product Return:

#Sum of individual purchase rates / #Repeat Customers

6. Customer Lifetime Value

Customer Lifetime Value is the trickiest metric to track, and one to monitor constantly. It measures how much revenue is generated by a single customer, in total.

You should be aiming to increase the CLV for each buyer. A shrink in CLV suggests you're either acquiring low-value customers or losing customers at a greater rate than before.

Calculate Repeat Product Return:

(Average Purchase Value * Average Number of Purchases) / Average Customer Lifespan

Stop bleeding buyers. Invest in Customer Retention.

Capturing new customers is vital to seeing your business and profits grow, but building a pool of loyal customers is what’s going to keep you around for the long run.

If you want to stop agonizing over continually capturing new customers, and start investing in retaining the ones you already got, we’d be more than happy to help. Let’s book a call.

Share