What is customer retention rate and how is it calculated?

BUCURESTI, Romania - May 30, 2018 - PRLog -- Running an eCommerce business involves working with a lot of numbers and KPIs. While this can seem overwhelming sometimes, if you understand their purpose and how they work, it becomes quite an easy process to follow. Among the many KPIs used by online shops to evaluate their success, customer retention rate is quite easy to calculate.

Customer retention rate is a metric that can help you figure out why your customers remain loyal to your brand and it's very useful when creating the online marketing strategies to approach new prospects. Therefore, customer retention rate helps your business grow and plants the seed of brand loyalty in the hearts and minds of your website's visitors.

What is customer retention rate and why is it important for your business?

Customer retention rate helps you create an effective strategy in order to persuade your prospects to keep buying from you. Retention refers to a process that begins with the first interaction between your brand and a new prospect, has the role of guiding him through the sales funnel and continues along the post-sale customer relationship.

For example, the starting point can be the moment when a Facebook user "Likes" your page. Keeping him happy is a never ending process, unless he chooses to stop "following" you and your posts by "unliking" your Facebook page, deleting your e-mail messages or unsubscribing from your newsletter.

According to statistics, measuring your customer retention is essential to the success of your business. Here's why:

- customer retention is 7 times faster and less expensive than acquiring new leads, due to the fact that selling to your existing customers is more efficient than attracting, educating and converting new prospects;

- a 5% increase in customer retention can lead to a profit growth between 25 and 95%;

- the likeliness of converting an existing customer into a repeat customer is somewhere between 60-70%, while the chances of this to happen with a new prospect is somewhere between 5% and 20%;

- loyal customers are worth up to 10 times as much as their first purchase.

How can you calculate your customer retention rate?

This KPI reveals the number of customers that keep buying from you at the end of a predetermined period of time, minus the number of new prospects that were converted into customer during the same period.

The formula for calculating the customer retention rate is:

CRR = ((E-N)/S) x 100

Where CRR = customer retention rate; 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.

Calculating the customer retention rate should be an important activity to include in the "to do" list of every eCommerce business. This metric can offer you real insights into the performances of your online business, so you can pave the way to sustainable growth and success.

For more info, please access https://retargeting.biz/conversion-rate-optimization/cust...