Customer Retention Metrics
How will you be able to tell whether your retention marketing strategy is working? There are a number of metrics and KPIs that you can monitor.
Customer Retention Rate
Customer retention rate – a measure of how loyal customers are to your brand – can be calculated in various ways, but one measure is to take a group of customers who first shopped with you in a certain period and look at whether, at certain points in the future, they could still be considered active customers.
If you consider ‘active’ customers to be those that have shopped in the last 6 months, you could take a slice of customers who first shopped, say, in January 2013, and see what percentage were active customers on 1st January 2014 (i.e. had made a purchase between July 1st and December 31st 2013), and what % were still active on 1st January 2015 (i.e. had made a purchase between July 1st and December 31st 2014).
You can make this figure more actionable by segmenting by:
- Marketing channel – which channels are driving long-term value?
- Product/category first bought – which products or categories attract more loyal customers?
- Marketing campaigns – which marketing campaigns bring in valuable, repeat purchasers?
Read more: 4 Useful Data Reports To Shed (New) Light On Your Ecommerce Marketing Performance
Read more: The Great Repeat Rate Myth: Adventures in Retention Rate Analysis
Customer Churn (lapsed customer rate)
Sometimes referred to as ‘customer attrition’, customer churn is a measure of how many customers you’ve lost in a particular period of time. It can be calculated using the following equation:
Churn Rate = (# of customers lost in period/# of total customers at beginning of period)*100
But when should you consider a customer ‘lost’? This will vary from business to business depending on sales cycle, and you will need to carry out your own analysis or get in touch with us at Ometria.
For example, if I’m an online grocery business, I might start to get worried about a customer lapsing after 3 or 4 weeks, and consider them ‘lost’ or lapsed after 8.
At the other end of the spectrum, if I were an online sofa shop, it may be years before I start worrying that a customer has lapsed.