Skip to content
(314) 849-6969 (314) 849-6969

Estimated reading time: 9 minutes

No one wants to lose customers, and it’s a no-brainer! Customer retention is one of the key metrics for business growth. It’s important to have a list of happy customers for business growth, after all, happy customers are the backbone of your business. Today we are going to talk about 10 key metrics to measure customer retention.

Great, if you have incorporated key metrics to measure customer retention lately, and if you have not yet, check out this list of 10 key metrics that will help you measure customer retention.

Make sure you incorporate these metrics into your brand strategy as you execute, plan and implement it.

What Is Customer Retention?

In marketing, customer retention is defined as the act of persuading existing customers to purchase more goods or services from your company.

Customer retention is the core component of business growth. Buyers that are faithful to you don’t simply buy once; they return for more.

In this article, we will dig a little deeper into how to track and measure customer retention indicators.

Customer Retention Metrics

1. Churn Rate

Customer churn. A happy customer.

Client churn rate is the most easily observable metric we have for customer retention. The percentage of customers who stop buying products or services during a certain time period is known as the customer churn rate.

They are, in other words, customers who have ceased making new orders or renewing their subscriptions.

You may better understand your company’s results and develop the initiatives to strengthen your retention strategy by evaluating your churn rate.

How To Calculate Churn Rate?

Based on what you need to evaluate, you may calculate churn in a few alternative techniques.

The formula is as follows:

The frequency with which you compute your corporation’s churn rate is determined by the size of your business.

If you have thousands of clients, you may wish to look at monthly growth by identifying your monthly rates. If your company is growing, you may measure your yearly churn rate to observe how your revenue is changing every year.

2. Revenue Churn

Revenue scrabble tiles with a green background.

The percentage of income you have lost from current clients in a specific interval of time is your revenue churn rate. An order cancellation, a contract downgrading, or the loss of a business partnership, for instance, can all contribute to revenue churn.

While the total revenue churn rate offers a broad picture of customer health, it must be monitored on a per-client basis.

The major goal of your customer support team is to guarantee that consumers aren’t having issues utilizing your product or service, much alone reaching the point of downgrading their membership.

How To Calculate Revenue Churn?

The churn rate for revenue should be determined on a monthly basis. If you get a negative percentage from this calculation, it means that your revenue increases from current clients exceed any financial losses.

Revenue from new clients should not be included in this computation.

3. Rate Of Increase In Existing Customer Revenue

The percentage of existing client revenue growth is vital whether you have a small business or you are already making millions.

A rising rate indicates that your marketing, sales, and account teams are successfully encouraging consumers to spend more. It also implies that your buyers are appreciating the benefits of your collaboration.

On the other hand, a stumbling or declining growth rate should warn your success team.

How to Calculate Existing Customer Revenue Growth Rate?

The calculation above, once again, should only include income produced by existing clients. This assessment excludes any fresh purchases.

Current customers’ profit growth rate can be computed to reflect the “overall view” or applied to a particular account over time.

4. Repeat Purchase Ratio

Repeat Purchase Ratio.
Image Source

As its name suggests, the repeat purchase ratio (RPR) refers to the number of consumers who come back to your business to make another order.

This measure is an excellent predictor of customer retention, and it is frequently used by marketing and sales teams to evaluate the effectiveness of their customer retention approach.

Although this measure is most commonly associated with items, the same method may be used to calculate recurring membership or agreement renewals.

How To Calculate RPR?

This simple method may be used to compute the value of a week, month, year, or any other period of time.

5. Rate Of Product Returns

Products being returned.

Your product return rate is also another measure that relates especially to firms that sell tangible items (as opposite to services or memberships). This is the percentage of all unit sales that were returned to you.

Despite the fact that items may be returned for a variety of reasons, product returns are never positive, and the ultimate objective is to reduce this number as low as possible.

How To Calculate Product Return Rate?

The length of time it takes for your product to be returned will be determined by your sales volume. What works for one firm might not work for yours.

But here is the basic formula, and it is necessary that you use it constantly no matter what time frame you choose to interpret the computation.

6. Day Sales Outstanding

The mean amount of days receivables (client dues, bills, and transactions) remain unpaid before even being retrieved is known as days sales outstanding (DSO).

DSO demonstrates not just how successful your firm’s receivables are maintained, but also how dedicated a client is to establish a positive working relationship with your organization.

How To Calculate DSO?

DSO is generally applied to the whole list of outstanding bills for a firm at any particular moment, instead of a single invoice. You may calculate your DSO on a monthly, quarterly, or yearly basis.

It can be done by dividing the number of accounts receivable over the total value of credit sales over the same time period, then multiplying the result by the number of days in that period.

7. Net Promoter Score

Mood faces for net promoter score. 10 Key Metrics To Measure Customer Retention.

The Net Promoter Score (NPS) is a customer satisfaction indicator that determines how likely consumers are to suggest your business to others. This number reflects a customer’s overall satisfaction and brand loyalty.

Although a high NPS does not ensure customer retention or growth, it can assist in identifying brand evangelists who are most likely to promote recommendations.

A low NPS indicates low customer satisfaction and may suggest the need for some type of intervention to improve matters.

How To Calculate NPS?

To get this score, ask your consumers on a scale of 0 to 10 how willing they are to suggest your goods or services to a friend or colleague.

Those who provide a score of 9 or 10 are called promoters, while those who give a score of 6 or less are called critics.

8. Purchase Interval

The time it would take for an average client to buy from you again is measured by the duration between purchases or also known as purchase interval.

This is an essential retention statistic since it indicates how satisfied consumers are with your product or service and if they are likely to test rivals in your market.

If you see a long period of time between purchases, it is possible that your product or service is not distinguishing itself from the competition.

It might also indicate that your product is well-made, and buyers will not need to purchase it again.

How To Calculate Purchase Interval?

You will need to maintain track of all customers’ purchase dates in order to compute the average duration between transactions.

A CRM may assist you in this by allowing you to create contact attributes that track when consumers make repeat purchases.

9. Loyal Customer Rate

Customer rating with yellow star blocks.

The amount of consumers who have made repetitive purchases with your firm during a certain time period is referred to as the loyal customer rate.

You should strive for a high percentage of loyal clients, as these are the most important consumers of your company. They are not only more inclined to make repeat purchases, but they are also more likely to suggest others.

How To Calculate Loyal Customer Rate?

The total number of clients your firm has during a particular month, quarter, or year is used to determine the loyal customer rate. This is true for both current and new customers.

10. Customer Lifetime Value

Sales price quality ratio control marketing concept. 10 Key Metrics To Measure Customer Retention.

Customer lifetime value (CLV) refers to the amount of income earned by a single customer over the course of their relationship with you.

This is a statistic to track regularly whether you sell individual items or services or software that is invoiced annually.

CLV should ideally increase or remain constant since a decreasing CLV indicates that you’re either gaining low-value consumers or losing customers at a quicker rate than in the past.

How To Calculate CLV?

The average amount you may anticipate from a client over the course of a year is calculated by dividing your company’s gross yearly revenue by the total number of unique customers for the year.

Multiply this figure by the average customer lifetime, which is based on statistics on how long customers generally remain with your company in years.

It’s 2021, and prioritizing customer retention is critical than ever before. With businesses adopting new strategies every single day, you have to adapt to the advancing technologies to stay ahead of the competition.

Make sure you improve your brand strategies to gain potential customers and retain your existing ones. Engage your target audience via the website and social media channels by creating content including infographics, animations, videos, blog posts, and charts. The more variety you will have in your content types, the better you will be able to engage and retain customers.

Contact Matchbox Design Group Today!

If your website could use a refresh or you’re looking to drive more traffic to your site, fill out the form below and we’ll contact you to learn more about your digital needs.

Categories:  Digital Marketing / Marketing Tips

About the Author

James McMinn

Senior Digital Strategist

James is a savvy digital marketing specialist with a Masters of Science in Internet Marketing. For the past fourteen years, he has been specializing in SEO, PPC & Marketing Strategy. He has a super sharp analytical mind and a finely tuned creative eye for marketing initiatives that optimize brands.

View more posts by James or check out profile.