7 Customer Retention Metrics You Should Be Tracking

As an ecommerce business owner, you work hard to build a loyal customer base. After all, the more you can keep your customers coming back time after time, the more successful your business stands to be in the long run.

Considering this, it’s naturally important to keep track of key performance indicators (KPIs) that give you a better idea of how effective your company is at retaining customers. But what are the most essential customer retention metrics to track, and how do you track them? Read on to find out.

Top 7 Ecommerce Customer Retention Metrics You Should Track

Measuring retention among your audience is one of the most important things you can do to understand and improve your company’s growth trajectory. After all, if you can keep the majority of your existing customers coming back month after month and year after year while maintaining a relatively steady flow of new customers coming through the door, you’ve tapped into the recipe for success.

But how can you tell how effective your company is at retaining its customers? Use the customer retention KPIs below to track and optimize your results.

1. Customer Churn Rate and Retention Rate

Your customer retention rate is the most important way to measure customer retention.

Customer Retention Rate Formula

The customer retention rate formula is as follows:

                                                                CRR = (CETP / CBTP) X 100

Where:

• CRR is customer retention rate
• CETP is customers at the end of the period
• CBTP is customers at the beginning of the period

Customer Retention Rate Calculation Example

So, if you have 100 customers at the beginning of a predetermined period, and 98 of those customers remain at the end of that period, your customer retention rate formula would look like this:

                                                                     CRR = (98/100) X 100

                                                                                CRR = 98%

The customer retention rate is vital because it tells you the percentage of customers that stick around after a predetermined period of time. It also gives you your churn rate, the percentage of customers you lose in a period of time. In the above example, the customer churn rate for the period is 2%.

2. Customer Lifetime Value

Customer lifetime value is one of the most critical KPIs for customer retention because a higher average customer lifespan typically equates to a higher customer lifetime value. So, if you keep track of the average amount of money your customers typically spend over the time period they’re active with your company, you’ll likely be able to spot any peaks or valleys, outlining optimization opportunities.

3. Net Promoter Score

Your net promoter score is the result of a single survey question. As part of that question, your customer rates their likelihood of referring friends from one to 100. The most satisfied customers will give you 100, but you’ll likely have some current customers who aren’t so happy. As a result, asking every customer this question and keeping a running average of the result, known as the net promoter score, could give you a better understanding of the percentage of your customers who are happy and likely to stick around.

4. Average Order Value

Happy customers typically purchase more goods and services. So, keeping a moving average of order values processed by your business may be a wise idea. For example, focus on the average order value over the past month and the average order value over the past year.

Once you have these averages, keep running totals and plot them on the same chart. You're in good shape if you notice that the monthly average order value is above the annual average order value. However, if your annual average climbs above your monthly average, it may be a sign that order values are dropping, and you have an opportunity to optimize your business.

5. Purchase Frequency

Purchase frequency is an essential part of retention tracking. After all, a customer who sticks around for one year and makes one weekly purchase may be more valuable than a customer who sticks around for 10 years but only purchases every six months or so.

Keep a moving average of how often your customers purchase from you. If you notice that the time between purchases shrinks after implementing a change, the data suggests you’re on the right track. However, if purchase frequency falls after a change, it may be a sign that it’s best to make another adjustment.

6. Repeat Purchase

You know your customer retention efforts are working when you see an uptick in repeat purchases. This metric provides valuable insights into whether or not your customers are enjoying the product or service you provide. After all, if they’re satisfied with their purchase, they’re more likely to purchase it again.

When you keep track of this, pay close attention to the following factors:

• When customers come back: If you see an uptick in repeat customers, think about promotions or other events that could be leading to the increase. These are the types of things you’ll want to duplicate.
• What customers purchase: What customers buy the first time they visit your ecommerce business and what they purchase during subsequent visits may differ. Focus on repeat purchases to learn more about your most valuable products.  

7. Product Return

Finally, product returns are painful for ecommerce businesses as they lead to a loss of revenue, but they’re a key metric worth tracking. Ultimately, customers aren’t likely to ask for a refund on a product or service they enjoy using, so tracking your product return rates will tell you more about your customer satisfaction.

For example, if you notice that your product return rates are increasing, you may need to perform a quality assurance check to make sure the latest batch of products meets your company’s standards.

Concentrate on Retaining Your Customers and Scale With Revolv3

Revolv3 can help you bring your customer retention to the next level. The platform automates the tracking of crucial customer retention metrics, allowing you to focus your efforts on executing effective customer retention strategies and improving customer satisfaction. Moreover, Revolv3 helps you reduce customer churn with dynamic routing and high approval rates while reducing costs by avoiding nickel-and-dime expenses like charges for declined transactions. Find out how Revolv3 can help you take your business to the next level.