5 key customer retention metrics and how to calculate them
An essential component of any business is customer retention metrics. Each company is customer-focused, notwithstanding the type of business it is. However, when you begin to lose customers unusually, it means something is not right. Customer retention is critical to the success of your business. Regrettably, it is a significant problem for most businesses despite applying various retention strategies. It is much more than that. Therefore, what customer retention metrics can you use to justify the success of your brand? How can you calculate these metrics to know if you are meeting your goals or not? In this article, you will learn important customer retention metrics for your online business. Customer lifetime value It measures the revenue you generate from a particular customer. It doesn’t matter if you sell individual products or render services; you need to trace this metric consistently. Usually, customer lifetime value should either rise or remain constant. However, anything that makes it shrink only means losing customers faster or capturing low-value customers. To evaluate customer lifetime value, you need to determine the average revenue of a particular customer for a year. To get the average revenue, you divide the gross annual sales you generate by the number of unique customers you acquire for that year. Repeat Purchase Ratio The repeat purchase ratio represents the percentage of customers returning to purchase an item from your store or company. This metric helps you know your loyal customers, which you can use to assess your performance and the impact on the customer retention strategy you implement. Here, the repeat purchase ratio applies to products. However, you can also use it for contract renewals or repeat subscription services. To calculate the repeat purchase ratio, you divide the number of returning customers by the total customers. Product Return Rate The product return rate is essential for businesses that deal with intangible products. It represents your product return rate when an item is purchased. It is a proportion of the total units of an item returned compared to what was sold. The product return rate is equivalent to the number of units sold that customers later returned divided by the total number of units sold. Net Promoter Score This metric measures the general satisfaction and loyalty to your brand. Your overall score will determine if your customers are willing to advertise your product to others in their community. You can compute the net promoter score by getting the percentage of promoters subtracted by the percentage of detractors. Loyal Customer Rate Loyal customers represent those who have previously made a purchase on your store at a given time. Since your existing customers buy from you, this metric identifies the percentage of your customer base that is loyal to your business or brand. Importantly, you need to know your existing customers because these customers are your valuable assets. They don’t only buy items to drive your sales; they act as ambassadors to your brand since they can share positive words about your business. To calculate your current customer growth rate, you have to determine the number of existing customers divided by the total customers that visit your store. If you are looking for a tool to increase customer retention rate, check out our apps for BigCommerce automation and Shopify automation.
Customer Retention Strategies For Business Growth
As a business owner, your biggest asset is your customers. The obsession with lead generation and sales will lead nowhere if you don’t create a system of customer retention. It’s great to get a new lead, but retaining existing customers should also be a priority. Several studies have shown that more than 70% of sales come from your existing customers. In other words, the loss of one loyal customer can cause significant harm to your business. You shouldn’t measure your success based on customers who only visit your website or place an order without thinking of coming back. Here are 8 proven customer retention strategies you can implement in growing your business to help improve your customer retention. Remember, you don’t have to apply these strategies at once. Predict customer expectations What do you expect customers to do when they visit your website? Customer service is beyond complaints and inquiries. The question is how to meet the needs of someone you don’t know. Well, the first step is to get acquitted with them to get to know their hopes and desires. These will help you understand their expectations. Over-deliver on your promise It’s dangerous to make a promise you can’t keep as an online business. It will do nothing other than tarnish your brand reputation. One disgruntled customer will likely tell other customers about their negative experience with your brand. On the other hand, being able to exceed your customer’s expectations will result in positive word of mouth, thereby fostering your brand image. Offer surprises To implement this customer retention strategy, you need to have detailed information about your customers. People love surprises, and you can create something unique for your customers. Perhaps, it is something in their wishlist that you know from their shopping cart. Send it to their address as a birthday gift will make them feel like being cared about. Build Trust Most successful businesses are founded on trust. A business with no trust from the customers would soon die away. Therefore, you need to make attempts at promoting trust, which will strengthen your relationship with your customers. You can do this by providing evidence that you’re protecting your customer’s rights, or simply by getting the package delivered on time. Leverage feedback survey Reviews and surveys are essential tools for customer engagement. Boring as they might seem, they provide relevant feedback about the concerns of your customers. This gives the customer a chance to speak up about their expectation and evaluation. It also generates a feeling that you are willing to listen to them, which positively affects customer satisfaction and retention. Furthermore, you will get to know what needs to be improved for better performance. Use customer complaints to your advantage. You can leverage surveys and reviews to address customers’ issues. You never want your customers to run away from you. Instead, you should be the one to start the conversation. Once you get negative feedback from a customer, you should address it immediately to instill confidence in your product. Train and educate your customers It is not enough to get sales from your customers. You need to give back to them. Here, you can create exciting and educational content to improve your customers. If you can add value to their experience, they will never forget your store when they want to make a purchase. Use automation Finally, retaining customer retention is about engaging with them at the right time. The problem is that you can’t pay attention to the customer service all the time. That’s when the automation platform comes to the rescue. You can tell the system to send a message to your customer whenever an action is triggered. You can also integrate the app with email marketing tools for better performance. This way, you only need to focus on the content quality rather than the distribution process. In this example, as soon as a new order is placed, a thank you letter will be automatically delivered to the customer. The email might include words of appreciation as well as essential information regarding the order, all depending on what you want. Keeps your customer for further growth Once again, the customer is the biggest asset of your business. As long as they appreciate your brand, they will continue purchasing and might become your advocate. Focusing your time and effort on nurturing existing customers can be a powerful way to accelerate your revenue growth.
