What is the Customer Retention Rate?
Loyal customers are the backbone of any successful business. They are those who stick with you over a period of time, the ones who are likely to take to social media to promote your business, and who tend to have the highest levels of customer satisfaction.
Customer retention is all about nurturing your existing customer base. Ecommerce business owners who are constantly working towards getting a higher CRR are setting their online empire for success.
Customer retention rate marks out your loyal customer base, in other words, repeat customers. Repeat customers are any day easier to sell to and going by the reports, repeat customers have a 60 to 70 % chance of converting.
It is the percentage of your existing customers who are loyal to you and who continue to engage with your business over a while. It tells you how efficient your processes are and how they keep your customers happy and coming back for more of your products or services. This is a metric that you don’t want to miss tracking.
How to calculate the customer retention rate for your online business?
Your goal in calculating the customer retention rate is to find out the number of customers who have stayed till the end of a given period barring the new customers who were acquired during that time. The formula works for any kind of ecommerce business irrespective of its size. Let’s get straight down to the calculation.
Key pieces of information you’ll need:
a) The number of customers at the start of a given period, let’s denote it with the letter ‘S’.
b) The number of customers at the end of that time period, denoted by ‘E’.
c) New customers acquired during that time, represented by the letter ‘N’.
Once you have these data points in place, this is the formula you need to arrive at your customer retention rate:
Customer Retention Rate = (E-N/S) x 100
An example will help you understand this metric a little better.
Let’s assume you had 100 customers at the beginning of the one-month period you have chosen for tracking (S). During this time, you lost 5 customers but gained 15 new customers (N). So at the end of the one-month period, you have 110 customers (E). Add these numbers to the formula:
CRR= [(110- 15) ÷ 100] x 100 = 95 %
This shows that your customer retention rate for the one-month period is 95 %.
The most ideal and sought-after rate would be 100 % which means you haven’t lost a single customer, but this seems far-fetched and shouldn’t be something to worry about instead aim for at least 85 % which will ensure your business stays healthy and scalable.
Why should customer retention rate matter to ecommerce businesses?
The CRR lets your online business know-how successful it has been in keeping its customers happy and shopping at your website, which boils down to be the core for the success of an ecommerce business.
Customer retention techniques aim at building lasting relationships with customers who will turn loyal to your brand. Many online stores invest a lot of time and money in trying to get new customers, but studies show that it’s cheaper to retain an existing customer than it is in attracting a new one.
All the more reason why your business should focus on a high retention rate and include it as an important part of its strategy.
Here are some facts to take note of:
- According to Yotpo, 59.3 % of loyal customers are sure to talk about their favorite brands and products with their friends and family.
- A 5 % increase in the retention rate can increase your profits by 25-95 %.
- Existing customers tend to spend 31 % more than new customers.
- When a new product is released, repeat customers are 50 % more likely to give it a try.
How to improve your customer retention rate?
Here are a few popular tips that will set you on the right track to improving customer retention rates-
- Make it easy for customers to reach you: Bad customer experience is one of the main reasons why a customer leaves a brand and opts for another.
- Evaluate your online presence: Are your website and social channels informative and up to date? Because that’s the first place customers go to, to look for information or help.
- Connect with your customers on social media: This way you can interact with your customers on a personal level. Your customers will also get to know what’s happening with your business and are more likely to remain loyal. You can manage your social media posting schedule to automate things and cut down your efforts.
Good customer support is at the heart of retaining customers over time. DelighChat’s all-in-one customer support tool for ecommerce stores is everything you need to keep your customer happy and coming back for more.