10 Important Customer Retention Metrics Your Marketing Strategy Needs

As a business owner, you need to ensure that customers remain loyal if you want your brand growth to continue into the future. In fact, you increase your chances of customers upgrading or adding services and becoming less likely to cancel if you’re able to show them that you can provide value.

The good news is that you have access to your business analytics, and by combining your analytics with proven growth marketing strategies, you can better retain customers and ultimately have a more profitable business. But what data should you look at? Let’s take a look.

What metrics should you be looking at?

1. Customer churn

What is this metric?

At its simplest, customer churn refers to the phenomenon by which customers become former customers. This happens to every business, no matter how successful they are. In fact, if your company has a churn rate of 0% then it’s probably because you only have a couple of customers, which can be a problem in its own right.

If you work with a growth marketing agency, the chances are that customer churn will be the first metric that they’ll benchmark. It’s arguably the ultimate measure of success for your customer retention strategy. 

How do you calculate it?

Take the number of customers that you’ve lost in a given month, then divide that by the number of customers that you had at the start of the month.

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2. Revenue churn

What is this metric?

Your revenue churn rate goes hand in hand with your customer churn rate and approaches the same problem from a different angle. While customer churn rate focuses specifically on the number of customers that you’ve lost, revenue churn focuses instead on the monetary value of those customers.

How do you calculate it?

To calculate your revenue churn rate, you first need to identify your monthly recurring revenue (MRR). This is essentially the amount of money that you make each month from existing customers making repeat purchases. 

Now take the amount of MMR that you’ve lost this month and subtract any upgrades or extra revenue from your current customers. Now divide your MMR by this second figure to determine the percentage of your revenue that’s churned in any given month.

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3. Repeat purchase rate

What is this metric?

This metric is a useful one for identifying how many of your customers are so impressed by your company that they come back to shop again. There are a variety of different names for this metric (including repeat customer rate and customer retention rate), but whatever we call it, the general idea is still the same. 

When it comes to your repeat purchase rate, the higher the number is, the better. The only exception to this is if for whatever reason, your company sells a product or service that you only want people to purchase once. 

How do you calculate it?

To calculate your repeat purchase rate, you simply need to take the number of customers who’ve purchased from you two or more times and then divide that by your total number of customers. If you have 1,000 customers and 371 of them have made a purchase, your repeat rate is 37.1%.

Black framed glasses on white paper

4. Repeat purchase probability

What is this metric?

Repeat purchase probability (RPP) is essentially the forward-looking version of repeat purchase rate. Instead of looking back at the past and analyzing what’s already happened, it looks ahead to the future and tries to forecast the odds of any given customer making another purchase. 

The idea is essentially to use data to predict how likely a customer is to churn. By making these predictions in advance instead of simply waiting for them to leave, you can take steps to stop them and redirect them back into your marketing funnel.

How do you calculate it?

To calculate your repeat purchase probability, you follow the same formula as you do to identify your repeat purchase rate. If you can, apply predictive analytics to the problem to predict likely metrics in the near future. This will allow you to base your repeat purchase probability on the figures you’re likely to experience instead of basing your predictions for the future entirely on past performance.

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5. Profit per order

What is this metric?

When creating and monitoring your lead generation strategies, profit per order is another one of those super important metrics that you’ll want to keep an eye on. Essentially, we’re talking about how much net profit your company makes on average for every order that a customer places. 

Why is this important? Well, if your profit per order is higher than the amount it costs you to bring a new customer in through advertising, you’re all set up to run profitable growth marketing campaigns that always generate a positive ROI. 

How do you calculate it?

This one’s relatively easy to figure out and you’ll just need two different measurements. First off, you’ll need to calculate the total overall income for all of your orders. Then you need to calculate all of your expenses, including stocking and shipping costs. Subtract that second number from the first one and you’ll be left with your overall profit. You can then divide this figure by the number of orders to calculate the average amount of profit per order.

Calendar on a grey iPad

6. Days sales outstanding

What is this metric?

Often shortened to DSO, daily sales outstanding metrics are used to identify the average number of days that it takes a company to receive payment after an order has been placed. If you’re an e-commerce company, it’s likely that you take payment at the point of sale. 

If you’re a service-based company, though, then it may take several weeks for you to receive payment, and this can lead to cash flow problems. That’s where monitoring your DSO metrics can help out. 

How do you calculate it?

To calculate your daily sales outstanding ratio, you’ll need to take the total amount of revenue that you’ve received on any given day and divide that by the amount that you’ve invoiced via sales. You can do this to calculate your DSO ratio for any given day, but you can also average out these figures to calculate your DSO metrics for a specified period, from a week to a month to one or more years.

Two women in a shop

7. Net promoter score

What is this metric?

This metric is quite a common once across a variety of different company departments because it can help to give you a feel for whether customers are actually happy with their purchases and whether they’re promoting your company to other people. 

Strictly speaking, it’s not a customer retention metric, although the chances are that if a customer is willing to recommend your company, they’ll also be willing to stick around. Either way, knowing what people actually think about your company will make all of the difference.

How do you calculate it?

This all comes down to a form of sentiment analysis. To obtain a net promoter score, you need data on the percentage of your customers which are promoters and the percentage that are detractors. You then subtract the detractor percentage from the promoter percentage to get your overall score. 

Woman wearing yellow turtleneck sweater

8. Customer retention rate

What is this metric?

Customer retention rate is essentially the polar opposite of churn. Instead of measuring how many people are leaving after their first purchase, we can instead focus on how many people stick around. Theoretically at least, your customer retention rate and your customer churn rate should add up to a total of 100%. In practice, there may be a very small difference due to rounding etc.

How do you calculate it?

The simplest way to calculate customer retention rate is to start at 100% and to subtract your churn rate. However, if you want to calculate the two separately, perhaps to check your mathematics, you can do that too. Simply take the number of customers that you’ve retained in a given month, then divide that by the number of customers that you had at the start of the month.

Person holding brown leather coin purse

9. Loyal customer rate

What is this metric?

If customers are more loyal, you’re more likely to be able to retain them. Definitions and metrics for customer loyalty can vary from company to company, but as a general rule it refers to the number of customers who’ve made a repeat purchase within a specified time period.

Similar to customer retention rate, there are a few subtle differences, mostly coming down to the way in which they’re used. Measuring your retention rate makes sense if the majority of your customers are on monthly retainers, such as if you’re an agency or providing software as a service. Measuring your loyal customer rate is better suited to ecommerce stores where buying cycles are less regular and predictable.

How do you calculate it?

Determine the period of time that you want to cover (e.g. three months, a year) and identify how many customers in that period made repeat purchases. Now divide this number by the overall number of unique customers in that period to determine the percentage.

Clear hourglass with red sand

10. Customer lifetime value

What is this metric?

This could well be the most important metric to you and your business, and it’s a much greater indicator of the actual value of each lead than the value of their first purchase. When we talk about lifetime value, we’re talking about how much a customer is worth to you across the entirety of their relationship with you.

Because of this, as long as your average lead generation cost is lower than the average customer lifetime value, any marketing campaigns are bound to deliver a positive ROI eventually.

How do you calculate it?

You can calculate a customer’s lifetime value by first calculating how many purchases an average customer makes throughout their relationship with your company and then multiplying this by the average order value. The good thing here is that you can do this at an individual level calculating the value customer by customer, but you can also do it at an overall level, calculating an overall company-wide customer lifetime value figure.

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Good growth marketing takes skill

Creating an excellent growth marketing strategy doesn’t come easy. Fortunately, with the right tips and tricks, you can get exponential growth for your business from end-to-end. Our guide, What is Growth Marketing? Your Complete Guide to Business Growth, will help you take your marketing to the next level.

Ultimately, if you want your business to retain clients then you need to make continuous, ongoing improvements. Keeping an eye on the metrics will help you to do this, but only if you implement growth marketing strategies, take action and act upon what you’ve learned. 

The good news is that if you’ve been struggling to monitor and improve upon your customer retention metrics, you’ve come to the right place. Growth Marketing Genie has a team of growth marketing experts, data scientists, content creators and retention specialists will be happy to help.

Reach out to us today to find out more!

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