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Customer Retention Metrics (Growth marketing)

Repeat Customer Rate

Repeat Customer Rate is the proportion of your customers who have made at least two purchases during a certain time period. It is usually expressed as a percentage and is a KPI commonly tracked by ecommerce businesses.

What is a normal repeat purchase rate?

A repeat purchase rate from 20-40% is a good range to be in. Shopify has found that a 27% repeat purchase rate is considered a good baseline.

retention rate

What is the difference between repeat customer rate and retention rate?

As mentioned, the repeat purchase rate measures the ratio of customers who made more than one purchase over a set period compared to your overall customer base, giving you an idea of how many repeat customers you have. The retention rate looks at how many existing customers purchased during a set period.

How to calculate and improve customer retention rate (+ formula)

Customer retention rate measures the number of customers a company retains over a given period of time. Calculate retention rate with this formula: [(E-N)/S] x 100 = CRR.

Identify the time frame you want to study

Collect the number of existing customers at the start of the time period (S)

Find the number of total customers at the end of the time period (E)

Determine the number of new customers added within the time period (N)

churn rate

Your customer churn rate is simply the inverse of your customer retention rate. For instance, if your retention rate is 90 percent, then your churn rate is 10 percent. The simplest way to determine your churn rate is to take the number of churned customers during a given time frame, divide it by the total number of customers at the beginning of that same time period, and then multiply the result by 100.

Customer churn rate formula: (Churned customers / Original number of customers) x 100

Revenue churn

Revenue churn tells you how much monthly recurring revenue (MRR) you lost over a given period of time.

Revenue churn formula: (MRR lost within the time period / MRR at the beginning of the time period) x 100

Unlike customer churn rate, revenue churn doesn’t measure the total number of customers—it measures their impact on your bottom line. This information is useful if you have a tiered pricing model, no set average order values, or many customers who downgrade rather than churn.

Repeat purchase rate

Repeat purchase rate is the percentage of customers who do business with a company again after their first purchase.

Repeat customer rate formula: Number of return customers / Total number of customers

Some companies go a step further and calculate loyal customer rate, which measures customers who made more than two purchases. The number of transactions it takes for a customer to qualify as “loyal” is at your discretion. The loyal customer rate formula is the same as the one above; it merely isolates a smaller number of customers.

Customer lifetime value

Customer lifetime value (abbreviated as CLV or sometimes LTV) is a measure of how much profit the average customer contributes to a business over their entire lifecycle. There are several CLV formulas, ranging from simple to complex, but most of them attempt to account for the costs of acquiring and retaining customers.

One CLV formula is: (Average order value x Repeat purchase rate) – Customer acquisition cost

Another way to calculate CLV is: (Average number of transactions in a time period x Average order value x Average gross margin x Average customer lifespan) / Total number of customers

CLV is an important metric because it points to whether your company needs to invest more in marketing campaigns to acquire new customers or in a retention strategy to keep the customers you’ve got.

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