In today’s fast-paced business world, it’s essential to retain your customers to maintain your business’s growth and success. Retention marketing is a marketing strategy that focuses on keeping your current customers engaged and happy. By understanding your customers’ behavior and preferences, you can create personalized marketing campaigns that appeal to them, thus encouraging repeat purchases and customer loyalty.
Bonus: At the bottom of the article you can find a prepared Google sheet with automatic calculations of basic retention metrics.
However, to measure the success of your retention marketing efforts, you need to track certain metrics. In this article, we’ll discuss the most important metrics for retention marketing and how to measure them using formulas and examples.
Customer Retention Rate (CRR)
The customer retention rate measures the percentage of customers who continue to do business with your company over a specified period. It’s one of the most crucial metrics for retention marketing because it tells you how well you’re retaining your customers.
To calculate the customer retention rate, use the following formula:
CRR = ((E-N)/S) x 100
Where:
E = the number of customers at the end of a period
N = the number of new customers acquired during that period
S = the number of customers at the start of that period
For example, suppose you have 100 customers at the beginning of the month, and you acquire 20 new customers during that month. At the end of the month, you have 110 customers. To calculate the CRR for that month, you would use the following formula:
CRR = ((110-20)/100) x 100
CRR = 90%
This means that 90% of your customers stayed with your company during that month, while 10% did not.
Repeat Purchase Rate (RPR)
The repeat purchase rate measures the percentage of customers who make a repeat purchase after their initial purchase. It’s a critical metric for retention marketing because it tells you how many of your customers are coming back to purchase from you again.
To calculate the repeat purchase rate, use the following formula:
RPR = (Number of customers who made more than one purchase / Total number of customers) x 100
For example, suppose you had 500 customers during a period, and 100 of them made more than one purchase. To calculate the RPR for that period, you would use the following formula:
RPR = (100/500) x 100
RPR = 20%
This means that 20% of your customers made more than one purchase during that period, while 80% did not.
Customer Lifetime Value (CLV)
The customer lifetime value measures the total value of a customer over their lifetime with your company. It’s a critical metric for retention marketing because it tells you how much revenue you can expect from each customer.
To calculate the customer lifetime value, use the following formula:
CLV = (Average Purchase Value x Number of Repeat Purchases x Average Customer Lifespan)
For example, suppose your average purchase value is $50, and your customers make three repeat purchases on average, with an average customer lifespan of three years. To calculate the CLV for each customer, you would use the following formula:
CLV = ($50 x 3 x 3)
CLV = $450
This means that the customer lifetime value for each customer is $450, and you can expect to make that amount from each customer over their lifetime with your company.
Net Promoter Score (NPS)
The Net Promoter Score measures customer loyalty and satisfaction by asking customers how likely they are to recommend your company to others. It’s a critical metric for retention marketing because it tells you how satisfied your customers are and how likely they are to promote your brand to others.
To calculate the Net Promoter Score, you need to ask customers to rate, on a scale of 0-10, how likely they are to recommend your company to others. Customers who rate 9-10 are considered promoters, those who rate 7-8 are considered passive, and those who rate 0-6 are considered detractors.
The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
For example, suppose you survey 100 customers, and 60 of them are promoters, 20 of them are passive, and 20 of them are detractors. To calculate the NPS, you would use the following formula:
NPS = (% Promoters – % Detractors)
NPS = (60% – 20%)
NPS = 40
This means that your NPS is 40, indicating that you have a good level of customer satisfaction and loyalty.
Conclusion
In conclusion, retention marketing is essential for any business that wants to maintain its growth and success. By focusing on retaining your current customers, you can create a loyal customer base that will promote your brand and generate revenue over the long term. However, to measure the success of your retention marketing efforts, you need to track certain metrics, such as the customer retention rate, repeat purchase rate, customer lifetime value, and net promoter score.
These metrics will help you understand how well you’re retaining your customers, how many of them are coming back to purchase from you again, how much revenue you can expect from each customer, and how satisfied and loyal your customers are. By using these metrics to measure your retention marketing efforts, you can identify areas for improvement and make data-driven decisions to optimize your marketing campaigns.
Remember, retention marketing is a continuous process, and you should regularly track and analyze these metrics to ensure that you’re meeting your business goals and objectives. By using these metrics effectively, you can create a strong foundation for your business’s long-term success.
Read more about Top Goals of Retention Marketing, and you can find more information about in Retention Marketing category.
As we said above, here’s a bonus Google sheet with automatic calculation of basic metrics: https://docs.google.com/spreadsheets/d/1NOEGvRaJT8NgiSsDcnWVKtNCJIlOScpIcTQBraye9RY/edit?usp=sharing