Businesses often put a lot of resources into expanding their audience and seeking out new customers, but this can cause us to overlook a critical aspect of business growth: customer retention. While attracting new customers is essential, retaining existing ones is more cost-effective and can significantly boost revenue. In fact, repeat customers can generate up to four times more revenue than new ones. With the rise of online shopping and the digital marketplace, it's more important than ever for online stores to measure and improve their customer retention strategies.
Here are the top five metrics to help you gauge your efforts:
1. How Many Stick Around? (Customer Retention Rate CRR)
Think of this as a friendship metre. If you have 100 friends this year and 90 are still your friends next year, you've kept 90% of them.
In business, this is your customer retention rate. The more customers you keep, the better you're doing. This is a primary metric that measures the percentage of customers who continue to do business with a company over a specific period. A higher CRR indicates better customer loyalty and satisfaction.
2. What's a Customer Worth? (Customer Lifetime Value CLV)
Some friends maintain their closeness over time, creating a deeper relationship. In the same way, some customers buy from you again and again.
By figuring out how much a customer spends on average, you can get an idea of their value over time. CLV estimates the total revenue a customer can generate throughout their association with a company. CLV not only gauges the value of your customers but also helps assess how effectively you're selling new products to them.
3. Do They Come Back for More? (Repeat Purchase Rate RPR)
Let's say you throw a party. If most of your guests enjoyed it so much that they come to your next one, you're doing something right! In business, if customers return to buy from you again, it's a good sign they like what you're offering.
RPR measures the frequency at which customers return to make subsequent purchases. For instance, if you had 200 unique customers over three months and 75 made multiple purchases, your RPR would be 37.5%. The average return rate in eCommerce typically ranges between 20% and 40%.
4. Who's Leaving? (Customer Churn Rate CCR)
On the flip side, sometimes friends drift apart. In business, this is when customers stop buying from you. By keeping an eye on how many customers you're losing, you can work on ways to keep them around.
CCR indicates the percentage of customers who stop doing business with a company over a specific period. It's especially relevant for subscription-based businesses where revenue is generated through recurring payments. However, it's also vital for other ecommerce ventures, especially those aiming to foster long-term relationships through social media and email marketing. A lower CCR suggests better customer satisfaction and loyalty.
5. Would They Recommend You? (Net Promoter Score NPS)
Imagine asking your friends, "On a scale of 1 to 10, how likely are you to recommend me as a friend?" The ones who give high scores are your biggest fans. In business, this is a simple way to see how many of your customers love what you do and would tell others about it.
NPS is a straightforward metric to gauge customer satisfaction and their likelihood to recommend your business. A higher NPS indicates better customer satisfaction and loyalty.
Wrapping Up and Next Steps
Customer retention is like tending to a garden. You need to nurture it, pay attention, and make adjustments when needed. By keeping an eye on these simple measures, you can ensure your business grows and thrives.
Want to make your business even better? Get in touch, and we'll help you keep your customers happy and coming back for more!