What is customer retention rate and how to calculate it

When looking to improve your eCommerce business, the focus is often on finding new customers. However, the customer retention rate (CRR) metric recognizes the importance of existing customers and the potential that lies within that group. This article will outline what it is, how it works, and how to improve your customer retention rate.

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Templates using this KPI
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What is a customer retention rate?

The customer retention rate measures the number of customers that remain continuous customers in a given period of time. This is one of the benchmarks representing the churn rate of your eCommerce business and tells a story of customer experience and satisfaction. The benchmark can be measured across various periods, depending on the industry, and can provide insights about customer loyalty so that you can work to reduce customer churn and make the most of your existing customer base.

You can gain valuable customer feedback to understand how they can have a better customer experience with your shop. Getting repeat business from an existing customer is typically easier than seeking a new customer, so maximizing one’s customer retention strategy can boost the bottom line.

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How to calculate customer retention rate

Calculating customer retention rate involves checking your eCommerce store analytics to reflect on repeat customers and repeat purchases. This KPI measures how many customers were acquired and stayed during a period versus the total number of customers when that period began.

Customer retention rate formula

Customer retention rate = [(number of new customers at the end of a given period - number of new customers acquired during that given period)/number of customers when the period began] x 100

Customer retention rate KPI examples & templates

You can add your customer data in some of our templates!

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See this KPI in action here!

Ecommerce report template

A report with all the most critical metrics for your eCommerce site, like shopping cart abandonment, click-through rate, and revenue. Gather data from Shopify, Google Analytics, and different advertising platforms.

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Executive report template

This dashboard template is filled with metrics your C-suite will want to see. Please show them your revenue, new customers, churn rate, and more. You can also add some customer satisfaction KPIs, gross margin, or customer data for a better overview.

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Google Analytics report template

Get essential analytics metrics in real time. Check the number of customers, traffic, customer journey through your website, and more with this easy-to-use GA template.

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Customer Retention Rate Best practices

Falling below the industry average represents a bad customer retention rate, and hitting a number as low as 15% would be bad in any industry.

Develop a customer loyalty program

Creating an incentive for customers to shop again will help you achieve a good retention rate. Offering referral rewards and pricing discounts will build repeat customer relationships that boost your loyalty and improve the customer's lifetime value.

Learn about your customers

Distribute surveys, ask for feedback, and get a sense of customer expectations. Use social media to communicate directly with current customers and expand your marketing strategy to involve direct communication that provides insight. The more you know about your customers, the better you can serve them and boost customer acquisition for a group that will shop again and again. Use the net promoter score (NPS) to gain essential feedback, and work to dive more deeply from there.

Dive deep into your analytics

Reflect on all of your important metrics, the KPIs in your onboarding process, the lifecycle of typical customers, and their behavior within a timeframe. Your web analytics tell a detailed story so use that to your advantage.