7 Customer Retention Metrics You Should Be Tracking.

Customer acquisition metrics is essential for business growth. However, focusing solely on gaining new customers while neglecting existing ones is a mistake. 

The story of your successful online business doesn’t begin with one customer buying your products. It begins with multiple return customers browsing your store, increasing their cart value over time and sharing their new favorite store to their friends and family. 

This is proven by statistics that show customer retention is often 25% – 95% more profitable, as retained customers tend to spend more, try new products, and naturally refer others to your brand. Moreover, to truly gauge the health of your customer relationships, you need to track the right metrics. 

What is customer retention? 

Customer retention is the process of previous customers returning to your online store and buying from you repeatedly. When you have a higher percentage of returning customers who are loyal, spend more and are word-of mouth marketers, you have a high customer lifetime value (CLV) and increase your Shopify store sales. By measuring your customer retention rates, it helps you identify what marketing efforts are working. 

7 Customer Retention Metrics

Here are seven of the most crucial customer retention metric indicators:

1. Customer Churn Rate (CCR)

Your CCR is the percentage of customers you lose over a specific period. It’s one of the most fundamental retention metrics. 

A high churn rate signifies that you’re losing customers at a rapid pace, leading to lost revenue, increased customer acquisition costs, and potential damage to your brand’s reputation. However, a low churn rate indicates strong customer loyalty, greater profitability, and healthier long-term business growth.

How to calculate:

• Divide customers lost in the specific period by the total number of customers at the period’s start, then multiply by 100.
  

2. Customer Retention Rate (CRR)

The metric CRR measures the percentage of customers your business successfully retains over a given period. 

A high CRR signifies that you’re providing an ongoing value-added store, and you’ve built a strong customer retention. It’s a sign of a healthy business with a satisfied customer base.

A low CRR, on the other hand, leads to revenue loss, increased customer acquisition expenses, and potential damage to brand reputation. It often indicates underlying problems with the product, service, or overall customer experience.

How to calculate:

• Choose a time period (month, quarter, year).
• Subtract the number of churned customers from the total number at the start of the period.
• Divide this by the initial number of customers and multiply by 100 to get a percentage.
  

3. Repeat Purchase Rate (RPR)

RPR reveals the percentage of customers who return to make additional purchases. This loyalty indicator highlights the effectiveness of your product or service, and customer experience.

A high RPR metric indicates customer retention, loyalty and satisfaction, boosting revenue and suggesting a strong product-market fit. 

Conversely, a low RPR may signal issues with product quality, customer experience, or value perception. This can lead to declining revenue, create a need for higher customer acquisition costs, and negatively impact the overall health of the business.

How to calculate:

• Divide the number of customers who have purchased more than once by the total number of customers, then multiply by 100.

4. Customer Lifetime Value (CLV)

CLV is a powerful metric, predicting the total revenue a customer might generate for your business throughout their relationship with you. It helps you determine investment in customer acquisition and retention metric strategies.

A high CLV means customers are generating significant revenue over their lifetime, allowing for greater investment in acquisition and justifying customer-centric strategies.  However, a low CLV makes customer acquisition expensive and may indicate a disconnect between your offerings and target customers, damaging your. This can damage growth potential and suggest the need to re-evaluate pricing, product offerings, or your marketing approach. 

How to calculate (simplified model):

• CLV = Average purchase value x Average purchase frequency x Customer lifespan

A great way to calculate the metric CLV for your store is an app – Lifetimely by AMP. This app integrates completely into your Shopify store, equipping you with insights, reports, billions of data, and critical business suggestions to help scale your business. Lifetimely by AMP also has an automated profit and loss dashboard, granular customer behavior reports, AI generated LTV projections, month-to-month sale forecasts by cohort and more. 

5. Average Order Value (AOV)

AOV measures the average amount spent per customer transaction. Increasing AOV can significantly impact your bottom line. Consider strategies like upselling, cross-selling, or bundling products to encourage larger orders.

A high AOV means customers are spending more per transaction, directly increasing revenue and allowing for greater flexibility in marketing costs. However, a low AOV can indicate a need to re-evaluate pricing, explore upselling and cross-selling strategies, or focus on increasing the perceived value of your offerings.

How to calculate:

• Divide total revenue by total number of orders over a specified period.

With Upsell by AMP app, you can see your AOV grow in minutes. Upsell by AMP allows you to customize offers and surveys for a seamless shopping experience, covering all your upselling needs and allowing your customers to increase their order in just 1 click! Supercharge your checkout page with upsells, reviews, and enjoy unmatched Checkout Extensibility support, all with Upsell by AMP

6. Customer Acquisition Cost (CAC)

CAC tells you how much you spend, on average, to acquire a single customer. This also includes costs related to marketing, sales, and onboarding. Comparing CAC to CLV helps you determine the profitability of your customer acquisition efforts.

A high CAC means you’re spending a lot to acquire each customer, which eats into your profit margins and makes it harder to scale your business. A low CAC allows greater profitability and flexibility to invest in growth initiatives. Additionally, a high CAC might suggest a need to refine your target audience, improve your marketing channels, or streamline your sales process.

How to calculate:

• Divide total acquisition costs by the number of new customers acquired in a given period.
  

7. Time Between Purchase (TBP)

This metric indicates how frequently customers return to buy from you. Furthermore, understanding purchase frequency can enable targeted marketing campaigns and promotions to incentivize repeat business at the right time. Depending on the nature of your business model, a high TBP could signal infrequent usage, and a low TBP indicates frequent buying behavior.

TBP can also be calculated on Upsell by AMP through the analytics. It can help you develop the right marketing campaigns and promotions to reach your customers.

How to calculate:

• For individual customers, track the duration between their purchases.
• Overall, look at the time between orders across your customer base and calculate an average.

Let Data Drive Your Success

The success of a business heavily depends on its ability to retain customers. By monitoring these essential metrics, you’ll unlock valuable knowledge that will help you nurture loyal customers, increase revenue, and drive a customer-centric strategy for continued growth.