Customer Retention

Customer Retention Metrics for your Business

Without the right data, it is impossible to understand how well you are retaining your customers. Learn about how understanding customer retention metrics and trends can help you improve revenue.

Have you ever wondered why your dollar spends aren’t giving you the kind of returns you had hoped? It's time to get a closer look at your customer retention metrics, stats, and trends to devise an effective strategy.

Did you know that 80% of your future profits will come from 20% of your existing customers?

Without the right data, it is not possible to understand how well you are doing at retaining your customers or if your high-value customers are satisfied with your brand. In fact, a 2020 report said “businesses need to shift their mindsets from “customer focused” to “customer committed”. In this article, we will learn about how understanding retention metrics and trends can help you improve revenue.

What are Customer Retention Metrics?

Customer Retention KPIs are the key factors that are used to measure the possibility of retaining and attracting customers for your business. Here are some key metrics you should consider measuring: 

#1. Customer Retention Rate 

Customer retention can be defined as the activities that brands take to turn first-time customers into repeat buyers. It is a key indicator of whether your product or service is satisfying customers. To calculate the customer retention rate, you have to subtract the number of acquired customers from the total number of customers at the end of the given period divided by the number of customers at the beginning of the period

Customer Retention Rate = Total number of customers at the end of the period - total number of newly acquired customers/ customers at the beginning of the period

#2. Customer Churn Rate 

Customer churn rate can be defined as the rate at which customers discontinue doing business with you. Although customer churn is a natural occurrence for all businesses, it is wise to re-evaluate if the rate exceeds 5% to 7% annually.

Customer churn rate = Number of customers at the beginning of the year - number of customers at the end of the year/ number of customers at the beginning of the year.

#3. Revenue Churn Rate

This metric measures the rate of revenue lost from existing customers. For instance, revenue churn can occur due to canceled orders, subscription plan downgrade, etc. The revenue churn rate is usually calculated in monthly intervals. To calculate the revenue  churn rate, start by subtracting monthly recurring revenue (MRR) at the end of the month & MRR in Upgrades from MRR at the beginning of the month divided by MRR at the beginning of the month

Revenue churn rate = (MRR at Start of Month - MRR at End of Month) - MRR in Upgrades during Month] / MRR at Start of Month

#4. Repeat Customer Rate

Repeat customers are an essential ingredient to ensure retention. In fact, a customer has a 27% chance of returning to your store, after their first purchase. In addition, if that same customer comes back and makes a second or third purchase, the chances of this customer purchasing from your store go up to 54%. To calculate the repeat customer rate, you have to divide the number of unique customers by the number of more than one purchase.

Repeat customer rate = number of customers with more than one purchase/number of unique customers

#5. Purchase frequency

Purchase frequency can be defined as the total number of times a buyer makes a purchase in a specified period of time. Usually, this time period is considered to be one year. It is an important metric to understand how your customers are interacting with your product and brand. To calculate purchase frequency, divide the total number of unique customers by the total number of orders.

Purchase frequency = Total number of orders (365 days)/ total number of unique customers (365 days)

#6. Customer lifetime value (CLV)

Customer lifetime value can be defined as the total amount of money a customer is expected to spend on your brand during the entire customer lifetime of an average business relationship. Once you measure your customer lifetime value, you can adopt specific strategies to improve retention and reduce acquisition costs. To calculate your customer lifetime, you have to multiply customer value by the average customer lifespan.

CLV = customer value x average customer lifespan

 (customer value = average order value x purchase frequency)
 (Average customer lifespan= sum of customer lifespans/number of customers)

What is the Average e-Commerce Customer Retention Rate?

Reports reveal that e-commerce retailers have an average repeat rate of 28.2%.  However, this rate differs based on industry. They are as follows:

✅Cosmetics: 25.9% 
✅Pet products: 31.5%
✅Coffee: 29.6%

What is the Average Customer Retention Rate based on Industry?

The average retention rate based on industry in 2022 is as follows:

✅Retail 63%
✅Insurance 82%
✅Banking 75%
✅SaaS 35%
✅Media 25%
✅Hospitality 55%
✅Fintech 37%

Customer Retention Trends

Customers like brands that are reliable, authentic, and aware of their individual needs. Hence, brands have started to leverage technology to deliver exceptional experiences that inspires customers to take continuous action. Here are some  retention trends that modern brands are focusing on:

#1. Customer Experience

A noteworthy customer retention trend is how technology and data-driven strategies have revolutionized customer experience. With customer journey’s becoming more dynamic, brands have developed strategies to cater to these unpredictable journeys using CX technology. To create a one-of-a-kind customer experience include:

✅Designing seamless customer journeys that apply to real people
✅Meeting your customers where they are
✅Personalizing experiences based on customer needs

#2. Personalization

Personalization is not just about addressing your customers with the right name. It's about engaging them in personalized experiences that you know they will enjoy. Brands are now leveraging technology to collect data and create unique customer profiles to deliver tailor-made experiences. These unique profiles are made based on customer tastes, preferences, browsing history, purchase history, and more. The unique profiles help the brand to segment customers and deliver targeted messages based on them. For instance, a high-value customer may receive loyalty program alerts asking them to sign up and avail the benefits. For a customer segment that has spent more than 30 seconds on a product details page, brands can send alerts highlighting the benefits or usefulness of the product in their daily life.

#3. Conversational Commerce

Conversational commerce has been the talk of the decade. Brands are increasingly realizing the importance of driving meaningful conversations in their customer’s preferred channels of communication. For instance, a customer lands on your Facebook ad that clicks to WhatsApp. The customer clicks on the “send message” button to enquire about the availability of the dress. The bot can promptly respond and incentivize the customer conversationally to complete the purchase. Once the purchase is completed, the bot can also further communicate with the customer enquiring about their purchasing experience and feedback. It can also offer a coupon to use for their next purchase thus incentivizing the customer to keep purchasing from your store. Conversational commerce has become a key factor in driving conversations that help in repeat purchases.

Customer Retention Statistics

Loyal customers buy more frequently and spend more during their lifetime than new customers. In addition, happy customers tend to refer their favorite brands to their friends, family, and social media. Hence, it's always wise to keep your customers happy, be it new or existing. Let's review some statistics that can help in devising the perfect strategy to retain customers for your brand:

1. Repeat customers have been found to spend an average of 67% more than acquired customers
2. The average U.S. consumer was part of 16.7 loyalty programs, though only actively utilized 7.4 of them in March 2021
3. The 15% of brands that successfully implement personalization are projected to benefit by $800 billion within 5 years
4. Existing customers are 50% more likely to try your business’s new product (Hubspot)
5. 55% of millennials claim to be more loyal to brands today than 39% of consumers aged 35 and up.
6. Content marketing has an effectiveness of 32% for customer retention
7. 58% of customers belonging to a brand’s loyalty program buy from that brand at least once per month
8. 50% of customers change their habits just to get to a higher tier of a loyalty program they participate in.
9. 83% of people say joining a loyalty program will keep them making purchases at that business
10. Restaurant loyalty programs increase visits by 35%
11. 61% of retail companies cite customer retention as their biggest challenge
12. 59% of customers with a bad experience with a retail company decreased or completely stopped purchasing from them
13. 94% of consumers would recommend a company with whom they had a great experience
14. Customer experience technology spends was $641 billion in 2022 (BusinessWire)
15. More than 90% of businesses in the US have loyalty programs (Forbes)
16. 72% of adults have signed up for at least one loyalty scheme (Forbes)
17. 75% of consumers say they prefer brands that offer rewards (KPMG)
18. 72% of American buyers are more likely to recommend a brand that has a loyalty program (Acquia)
19. Organic search is ranked second as a tactic for retaining customers
20. Email is the preferred method for 89% of marketers for the retention of customers. (Content Marketing Institute)
21. Converting an existing customer has up to a 70% success rate. (Forbes)
22. US companies lose $83 billion because of bad retention strategies
23. 80% of customers are willing to pay more to get a good experience
24. 73% of customers say their experience with a company impacts their purchasing decisions (PwC)
25. E-commerce customers are 50% more likely to share their experience on social media if they receive bad service


In conclusion, measuring customer retention metrics is crucial for businesses to understand the effectiveness of their customer retention strategies and the level of customer loyalty they have been able to establish. These metrics help businesses to identify areas where they can improve their customer experience, engagement, and satisfaction. By tracking customer retention metrics, businesses can also identify customers who are at risk of churning and take proactive measures to retain them.


Similar posts

Get notified on new marketing insights

Be the first to know about new B2B SaaS Marketing insights to build or refine your marketing function with the tools and knowledge of today’s industry.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter and stay updated.