The Top 12 Customer Retention Metrics to Track

Although most brands think that the best way to build a sustainable business is to acquire new customers, business leaders believe that customer retention is the key to a successful business. Creating ads, generating leads, and nurturing them takes a lot of money. Isn’t it wiser to further nurture these new customers into loyal customers?

But to do that you need to know how to track customer retention. Here are 12 customer retention metrics that you should take into consideration while devising your customer retention strategy:

1. Customer Retention Rate

Customer retention rate is a metric that measures the percentage of customers who continue to do business with a company over a given period of time. It can be calculated by dividing the number of customers at the end of a period by the number of customers at the beginning of that period and then multiplying by 100. 

Customer Retention Rate = (Customers at the End of the Period) - (New Customers Acquired) / Customers at the Start of the Period

To measure customer retention, businesses typically track customer purchases and engagement over time and monitor changes in customer behavior and demographics. Some tools that can be used to measure customer retention include customer surveys, analytics software, and customer relationship management (CRM) systems.

2. Customer Churn Rate

Customer churn rate is a metric that measures the percentage of customers who discontinue business with a company over a given period of time. It is the opposite of customer retention rate. It can be calculated by dividing the number of customers who have left a company by the total number of customers at the beginning of a period and then multiplying by 100. 

Customer churn =  (number of customers churned in a given time period / total customers at the start of that period) x 100

Businesses can use predictive modeling techniques such as machine learning to identify customers at risk of leaving, so they can take action to retain them.

3. Existing Customer Growth Rate

Existing customer growth rate is a metric that measures the increase in the number of customers over a given period of time. It is a measure of how well a company is retaining and expanding its customer base. This metric can be calculated by taking the difference in the number of customers at the end of a period compared to the number at the beginning of the period, and then dividing that number by the number of customers at the beginning of the period. The result is then multiplied by 100 to express it as a percentage. 

Monthly Revenue Growth Rate = (MRR at the End of Month - MRR at the Start of the Month) / MRR at the Start of the Month

This metric is usually used to track the performance of a company over time and to compare it with competitors. It is also an indicator of the company's ability to generate revenue from its existing customer base, and it's important to measure it along with the customer retention rate and customer churn rate to get a full picture of a company's customer base.

4. Loyal Customer Rate

Loyal customer rate is a metric that measures the percentage of customers who have made repeat purchases from a company over a given period of time. It can be calculated by dividing the number of customers who have made repeat purchases by the total number of customers and then multiplying by 100. 

Loyal Customer Rate = Number of Repeat Customers / Total Customers

This metric is often used to assess the strength of a company's customer base and its ability to generate repeat business. A high loyal customer rate indicates that a company has a strong and satisfied customer base, which is typically more profitable than constantly acquiring new customers. Additionally, loyal customers tend to be less price sensitive, and they are more likely to recommend the company to others. Measuring loyal customer rates can be done using customer purchase data, surveys, and customer feedback.

5. Time between Purchases

Time between purchases is a metric that measures the amount of time that elapses between two consecutive purchases made by a customer. It is a measure of how frequently customers make purchases from a company. This metric can be calculated by taking the difference in the dates of two consecutive purchases made by a customer and then expressing that difference in days, weeks, or months. 

Time between purchases = Reference time period/ purchase frequency


Time between purchases is a key metric for understanding the purchase behavior of customers, and it is often used to identify patterns and trends in customer behavior. A shorter time between purchases generally indicates that a customer is more engaged with a company and more likely to make repeat purchases. This metric can be used to predict customer behavior and to develop strategies for retaining and growing the customer base. It can also be used as an indicator of customer loyalty.

6. Product Return Rate

Product return rate is a metric that measures the percentage of products that customers return after purchase. It is a measure of customer satisfaction and the quality of a company's products. This metric can be calculated by dividing the number of returned products by the total number of products sold and then multiplying by 100. 

Product Return Rate = Number of Units Sold That Were Later Returned / Total Number of Units Sold

A high product return rate can indicate that customers are not satisfied with the quality or performance of a company's products, or that the products are not meeting customer expectations. It can also indicate that the company's return policy is too lenient or that the products are mislabeled or misrepresented. A high product return rate can result in increased costs for the company, including restocking and repackaging costs, as well as lost revenue. Measuring product return rate is important for identifying and addressing any issues related to product quality, and for developing strategies to improve customer satisfaction and reduce the number of returned products.

7. Customer Satisfaction Rate

Customer satisfaction rate is a metric that measures how satisfied customers are with a company's products or services. It is a measure of customer loyalty and the effectiveness of a company's customer service. This metric can be calculated by surveying customers, and asking them to rate their satisfaction on a scale, such as from 0 to 10 or from "Very Dissatisfied" to "Very Satisfied". The survey responses can be then grouped and averaged to find a score, or percentage of satisfied customers. 

A high customer satisfaction rate indicates that customers are generally happy with a company's products or services, and are more likely to remain loyal to the company and make repeat purchases. A low customer satisfaction rate, on the other hand, can indicate that a company's products or services are not meeting customer expectations and that customers may be more likely to switch to a competitor. In fact, a report found that 78% of customers have backed out of a purchase due to poor customer experience. Measuring customer satisfaction is an important way for companies to identify areas for improvement and to develop strategies to retain and attract customers.

8. Customer Acquisition Rate

Customer acquisition rate is a metric that measures the number of new customers that a company gains over a given period of time. It is a measure of a company's ability to attract and convert potential customers into paying customers. This metric can be calculated by dividing the number of new customers acquired during a certain period by the number of opportunities for customer acquisition during that same period and then multiplying by 100. 

Customer Acquisition Rate = A+B+C+D/total number of new customers acquired x 100

Wherein A = total marketing costs for acquiring new customers
B= salaries/wages for sales and marketing
C= Cost of associated marketing and sales software (CRM, E-Commerce Platforms, Automation Software etc)
D= other related marketing and sales expenses

A high customer acquisition rate indicates that a company is effectively reaching and converting potential customers and that its marketing and sales efforts are successful. A low customer acquisition rate, on the other hand, can indicate that a company is struggling to attract new customers and that its marketing and sales efforts may need to be improved. Measuring customer acquisition rate is an important way for companies to track the effectiveness of their marketing and sales efforts, identify areas for improvement and develop strategies to acquire new customers.

9. Net Promoter Score

Net Promoter Score (NPS) is a metric that measures customer loyalty and satisfaction. It is based on the idea that customers who are highly satisfied with a company's products or services are more likely to recommend it to others. The NPS is calculated by asking customers to rate their likelihood of recommending a company's products or services on a scale of 0 to 10, and then grouping the responses into three categories: detractors (scores of 0-6), passives (scores of 7-8), and promoters (scores of 9-10). The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

An NPS score can range from -100 to 100, with a positive score indicating more promoters than detractors, and a negative score indicating more detractors than promoters. A high NPS score is generally considered to be a good indicator of customer loyalty and satisfaction, and a low score can indicate that a company has issues with customer satisfaction or loyalty. NPS is widely used in various industries as a metric to measure customer satisfaction, and loyalty and can also be used as an indicator of business growth potential.

10. Average Order Value

Average Order Value (AOV) is a metric that measures the average amount of money spent per purchase or per order. It is a measure of the revenue generated by each customer transaction. AOV can be calculated by dividing the total revenue by the number of orders or transactions.

AOV = total revenue earned in a given period/total number of orders placed

This metric is important for businesses because it allows them to understand the value of each customer transaction, and it can be used to identify trends and patterns in customer spending behavior. A higher AOV generally indicates that customers are purchasing more expensive products or more items in each transaction, which can lead to increased revenue for the company. A lower AOV, on the other hand, can indicate that customers are purchasing fewer items or less expensive products, which can lead to decreased revenue. Measuring AOV is important for businesses to track their financial performance and to identify opportunities to increase revenue by encouraging customers to purchase more items or more expensive products.

11. Profitability Per Order

Profitability per order (also known as profit per order or return on investment per order) is a metric that measures the amount of profit generated by each customer transaction. It is a measure of how much money a company makes on each order after accounting for all costs associated with that order. It can be calculated by subtracting the total cost of goods sold (COGS) and all other related expenses such as shipping, handling, and other operational costs from the revenue generated by that order, and then dividing by the number of orders.

Profitability per order = Revenue generated - COGS - related expenses/number of orders

Profitability per order is an important customer retention metric for businesses to track as it helps them to understand the financial performance of each order, and it can be used to identify trends and patterns in customer behavior and spending. A higher profitability per order indicates that a company is generating more profit from each order and is more efficient in managing its costs. A lower profitability per order can indicate that a company has issues with managing its costs or that the prices of the products are not competitive. Measuring profitability per order is important for businesses to track their financial performance and identify opportunities to increase revenue and improve profitability.

12. Customer Effort Score

The Customer Effort Score (CES) is a metric used to measure the ease of the customer experience when interacting with a company. It is typically measured on a scale of 1-5, with 1 being very easy and 5 being very difficult. Companies use this metric to assess how easy it is for customers to complete tasks or resolve issues, and to identify areas where improvements can be made to the customer experience more seamless.