Customer Retention Metrics

5 Customer Retention Metrics Your Business Must Have

Customer Retention Metrics is a system that is formulated to tabulate the number of customers visiting a store in order to keep them coming back.

In order to maximize the retention of customers, you must understand their purchasing habits. The blog is one such site that has made use of the ever-growing digital advertising in order to market and advertise their products.

There are key retention metrics that have been set up to enable organizations to calculate the percentage of customers who are willing to purchase their products. Once you grasp this concept, your organization will be sure to rake in profits.

Every successful businessman knows that the best way to ensure growth in your business is to keep customers hooked on your products and services.

An important aspect of this is to also identify hidden opportunities in the market. This article will seek to answer all your queries as far as customer retention metrics is concerned.

Below Are The Pivotal Keys To Understanding Customer Retention Metrics


The 4 main categories of retention metrics are;-

• Bringing Customers Back

• Maximizing Revenue

• Tracking Retention Efforts

• Measuring Loyalty

This section will dissect the basics of retention metrics in terms of what each metric measures, why they are important to you, how to calculate and improve them respectively.

1. Customer Retention Metrics: Bringing Customers Back


The motive behind this strategy is the hope that each and every customer who makes a purchase comes back for more products/services.

This is true whether they have bought 1 or 20 products. These three specific retention metrics are useful in ensuring that the customers repeatedly make purchases from you.

Customer Churn Rate (CCR) refers to the percentage of customers who have stopped making purchases over a certain period of time.

Being aware of the CCR will help you make the right moves to keep it as minimal as possible. This is because the lower it is, the higher the success of your business.

It is calculated by dividing the number of customers you’ve lost by the number of customers you initially had. It is advisable to do this arithmetic on a monthly basis.

In the event that this figure goes up, the solution is to ensure that your customers receive the best customer experience they have ever had in their lives.

Repeat Purchase Probability (RPP) is essentially the assumption that a customer will buy more products. It is vital to know this figure because of its close relation to the churn rate. The more likely a customer is to make a second purchase, the lower the churn rate.

Most customers will lose interest or find better deals from your competition. Gamification is the best way to spark up renewed interest in your products in order to increase sales.

Repeat Purchase Rate (RPR) is the percentage of customers who repeatedly buy products from our store.

 It is calculated by dividing the number of repeat customers by the total number of customers you receive.

To ensure that this figure goes up, reward your loyal customers in order to strengthen their faith in your products.

2. Customer Retention Metrics: Maximizing Revenue


This section will focus on how you can measure and improve the profitability of your customers.

Average Order Value (AOV) quantifies the cash spent by consumers on each and every purchase made.

It is a simple way to value the impact of individual customers based on the transactions they make.

The more money a customer spends per purchase the cheaper it is to advertise. AOV is calculated by comparing the total revenue earned with the number of orders made. To improve revenue, in the long run, consider marketing your products in bundles.

Profitability per Order (PPO) is the measure of profit made on an individual purchase. It is directly proportional to the total profits made.

It is calculated by multiplying your profit margin by the number of orders. A neat way to improve it is by displaying positive customer reviews of your products.

Purchase Frequency (PF) refers to how many repeat purchases are done by the average shopper. Unlike the repeat purchase rate, PF focuses on the average shopper instead of a specific one.

High purchase frequencies generate more sales and subsequently more profits.  It is calculated by dividing total annual orders by the number of unique customers in a year.

A good way to improve the frequency is to send out personalized retention emails to your customers on a regular basis.

Time between Purchases (TBP) is the measure of sales made to a consumer in a year. It is useful to prep the customer and increases their interest in your products for the next big sale.

It is calculated by dividing 365 days by your purchase frequency. A great tool to lessen the TBP is to make use of social media platforms.

3. Customer Retention Metrics: Tracking Retention Efforts


Customer Retention Metrics


This section will delve into the gears and facets of a successful customer retention strategy. More so, it will be focusing on the loyalty program of your company.

Customer Lifetime Value (CLV) is an estimation of how much money an average consumer will generate for your company over a certain period of time.

Ideally, it is a projection of the benefits based on the relationship between the company and the customer.

It is important to gauge this value in order to know much money should be spent on advertising and acquisition.

It is estimated that a company is likely to spend 7 times more money to get a new customer as opposed to retaining a loyal one.

This is because loyal customers require less convincing to make a purchase. It is calculated by combining the average order value and the purchasing frequency.

Ways of increasing your CLV is to make your brand convenient and highly accessible to your customers.

Redemption Rate (RR) is the percentage of redeemed loyalty rewards. Customers only redeem points that they have collected over time when they deem the rewards valuable.

It is calculated by dividing the total reward points by the number of issued points. To improve RR employ different and creative ways for customers to earn rewards.

4. Customer Retention Metrics: Measuring Loyalty


This section will assess how well the above retention tools are working so far for your company. Only after a bit of time has passed is when you can truly understand the results of the strategies employed. Then, you are able to view the scope of your customer loyalty.

Customer Retention Rate (CRR) is a percentage showing the number of customers who have stuck with you through a certain period of time.

A good measure that you should be aiming for is between 85-90% the higher the rate the more successful your business.

Loyal Customer Rate (LCR) helps you to identify the most loyal customers who have the most faith in your brand.

It allows you to differentiate between your loyal customers and repeat customers. This is the primary reason for setting up customer retention metric for your business because the loyal customers are the ones to convert new shoppers into ‘members of the clan’ so to speak.

You can improve it by setting up an unparalleled loyalty program. If your store is on Shopify, you can use the application to set up the program.

5. Customer Retention Metrics: Additional Tips


Customer Retention Metrics

Here are some more out of the box strategies ideas to accompany your Customer Retention Metrics.

Send a handwritten thank you note whenever a customer makes an expensive purchase. This can do wonders for their attitude towards your organization.

By doing so, you are making human contact in a world that is becoming computerized. A sweet note that acknowledges the individual customer will make them feel special and more likely to make a second and third purchase.

Offer a second-time buyer’s discount when you have managed to secure a purchase from a unique customer.

This will ensure that you spark the customer’s interest in all the other items you have on sale. Discounts are a surefire way to get people interested in what your company is selling.

Just make use of the right social media platforms to get your message across. Send follow up emails to find out what your customers think about your products and customer service.

By opening up this channel of communication you are able to engage the consumer and address any issues that they may be having.

Make use of Beard King which will allow you to send personalized messages to customers every few weeks.

Include positive customer reviews on your website to showcase your company’s performance over the years.

This will give potential buyers a feel of what your brand is about. Positive responses influence first-time buyers to take a leap of faith and invest in your company.

Make product recommendations to customers that prove to be valuable to you. These are the ones who make several purchases at once and oftentimes come back with friends.

So, there you have it. Hopefully, you have gained some insight into the world of customer retention metrics.