7 Important Retention Metrics To Check Out - blog image

7 Important Retention Metrics To Check Out

Govind Panicker on May 29, 2024 in Campaign Management

Key Highlights

  • A 5% rise in customer retention rate can boost brand revenue by 25%-95%.
  • Some important retention metrics are customer lifetime value, retention rate, and churn rate.
  • Onstro CRM helps build centralized customer data to make tracking retention metrics easy.

Customer retention metrics play a key role in driving the business toward success. Unfortunately, many turn a deaf ear to those figures and focus just on sales, leads, etc.

As per stats, just a 5% rise in customer retention rate can boost brand revenue by 25%-95%. That’s why more companies are starting to focus on customer retention strategies. Read on to learn what customer retention is and its metrics.

What is customer retention?

Customer retention is a measurement that shows how well your business retains customers. Most companies check it out to verify your customers’ satisfaction with their service.

7 Important Metrics on Customer Retention

The best way to boost customer retention rate is to measure them and take corrective measures whenever they become low. However, there are many retention metrics. So, what is the KPI for customer retention? Here are some important metrics that you must focus on:

  1. Customer retention rate

    Customer retention rate is the percentage of customers that your business has retained over a period of time. This is the most simple and effective metric for measuring customer retention.

    You might be thinking of how to measure customer retention. Well, the customer retention rate formula is quite easy. First of all, you must determine the total number of customers over a period of time. Then, subtract that figure from the number of customers at the end of that period. Divide the result by the customers at the beginning of the specified time and multiply it by 100. Quite simple.

  2. Customer Lifetime Value

    Customer lifetime value measures the potential revenue that could be generated by a single customer. It varies largely based on industries. Many businesses keep a close eye on this customer retention measurement to ensure the business is on the right track.

    It is better to keep Customer Lifetime Value (CLV) three times higher than Customer Acquisition Cost (CAC). If CLV drops below that figure, there are two possibilities. Either your current customers are leaving faster or you are getting low-value customers.

  3. Customer churn rate

    Customer churn rate is one of the most straightforward customer retention metrics. It is the rate at which customers leave your business or stop using your services. It could be due to any reason.

    You must aim to keep the churn rate within 8%. A higher rate shows that you must focus on implementing better customer retention strategies.

  4. Repeat Purchase Rate

    The repeat purchase ratio is the percentage of customers who make another additional purchase from your business within a specified time. It is one of the best ways to measure customer loyalty to your brand. Many companies use this metric to measure the effectiveness of customer retention strategies.

    As per stats, a 28.2% repeat purchase rate is considered as a rough average figure. If you sell daily consumer goods, then the average figure is higher.

  5. Net Promoter Score

    “How would you rate our services, on a scale of 0-10,” have you ever come across such a question? Well, that’s for measuring Net Promoter Score (NPS). Net promoter score is a direct figure that shows customer satisfaction with your service.

    NPS is mainly calculated through surveys and questionnaires. Even though it’s not a powerful metric for measuring customer retention, it could be used to forecast business growth through referrals.

  6. Time Between Purchases

    Time between purchases simply refers to the average time between two purchases of a customer. The shorter the time frame, the more satisfied they are. It directly shows how many customers are happy with your service.

    Measuring the time between purchases is challenging yet effective in measuring customer retention. You need to have a proper record of all bookings and sales. And that’s exactly where software like Onstro can help you.

  7. Product Return Rate

    The product return rate is the rate of products returned by the customers. Even though it’s not a direct metric, it is useful for customer retention measurement, especially for companies selling tangible products.

    An average product return rate lies between 20%- 30%. A high product return rate signifies something wrong with the product or service that needs to be immediately sorted out.

Final Words

With these metrics, measuring customer retention may seem like a cakewalk. However, an efficient tracking system is required to maintain a stable customer retention rate. That’s where we can help you.

Onstro CRM is a business software that helps centralize customer data in an all-in-one platform. You can manage the information about all your prospects and track the conversion process from anywhere. Contact us now to know more.

Govind Panicker

Govind Panicker is a blogger and content strategist. He specializes in helping busy business professionals stay updated with technology and improve productivity through exclusive tips and tricks.