English
French
What is Customer Retention and Which Metrics Should you Track to Improve it
SHARE THE ARTICLE ON
Table of Contents
What is Customer Retention?
Customer retention refers to the different measures taken by organizations to retain existing customers. High customer retention is very advantageous to companies, boosting customer lifetime value (CLV), increasing customer loyalty, and increasing sales.
Customer Retention Rate and How to Calculate it
Customer retention rate helps organizations quantify customer retention by measuring the percentage of customers the company has retained over a given period of time. The following formula can be used to calculate customer retention:
Where,
E is the total number of customers when the period ends,
N is the total number of new customers that you acquired during the period,
and S is the total number of customers at the beginning of a period.
Metrics to Track Customer Retention
The most important metric to track for customer retention is the customer retention rate itself, as it is a direct measure of how many customers stay with your business over a time period. However, there are many different metrics that you should track while trying to understand your customer attrition. Let’s go over a few of them:
Customer Churn Rate
What is it: Customer churn rate is a metric that measures the percentage of customers that stop doing business with a company within a specific period of time. It is usually measured monthly, quarterly, or yearly. Although most firms measure it quarterly, there are certain industries or organizations that experience a faster churn rate and will instead choose to look at it monthly.
How to Measure it: Customer churn rate can be calculated by subtracting the number of customers at the beginning of a specific time period from the number of customers at the end of the time period, and then dividing this value by the number of customers at the beginning of the specified time period. To get this answer as a percentage, simply multiply it by 100.
Customer Lifetime Value (CLV)
What is it: Customer lifetime value is a measure of the total amount of money a customer will spend while doing business with a company, from the time of acquisition to the end of their relationship.
How to Measure it: CLV formulas can get pretty complicated as it is not an easy metric to define. The most basic formula for calculating CLV is the average order total multiplied by the average number of purchases in a year multiplied by average retention time (in years).
Repeat Purchase Ratio (RPR)
What is it: Repeat purchase ratio is a measure of the percentage of customers that return to make purchases over a specific period of time. RPR is a strong indicator of customer loyalty and customer satisfaction.
How to Measure it: Repeat purchase ratio can be calculated by dividing the total number of returning customers in a specified time period, by the total number of customers in that time period.
FAQs on Customer Retention
Customer churn rate can be thought of as the inverse of customer retention rate as it measures the percentage of customers who are lost over time, while the latter measures the customers who stayed over time.
Customer acquisition is the process of acquiring new customers, while customer retention is the process of retaining the acquired, or existing, customers.
A customer retention strategy can be described as a plan that businesses create to reduce customer attrition by turning customers into repeat buyers and preventing them from switching to competitors.
How can Voxco help you Boost Customer Retention?
These are a few ways in which Voxco can help you achieve increased customer retention:
Omnichannel Survey Solution
Use Voxco to collect feedback from your customers through any channel! Connect with customers on their preferred channels and create an effective feedback loop using our versatile and powerful survey software.
Voxco IVR
With Voxco, you have access to tools such as Voxco Dialer and Voxco IVR. Our Interactive Voice Response system will help you achieve a higher FCR (first contact resolution), boosting call centre efficiency and improving customer satisfaction.
Track Different Customer Retention Metrics
You can’t improve your customer retention rate without first tracking and understanding it. Use our powerful survey software to conduct surveys that help you understand the different reasons for customer grievances and customer attrition. Use this data to improve customer interactions and boost customer retention.
