How to Measure Customer Retention: A Comprehensive Guide

Customer Retention

With the proper measurements, a company may learn more about its clients, brand, business model, engagement, and points of attrition. When looking at key performance indicators, it might be hard for business owners to put customer retention metrics e-commerce at the top.

This blog post will explain what a good customer retention rate is, how it can help your business, and which retention metrics are most important for an eCommerce company to track to increase customer loyalty.

Firstly, let us begin by understanding what customer retention metrics e-commerce is

Customer Retention Metrics: Definition

Simply put, customer retention metrics measure how well a business or organization keeps its current customers coming back for more of its goods and services. It has essential parts that explain why people keep buying from or using the business.

The organization can learn a lot about its current status, product demand, repeat purchases, incremental sales, product return rate, the number of active product users per month or week, and the rate at which customers leave.

These steps are vital to making sales and keeping customers happy. It would be best to record everything from the beginning to the end of the period. This record must include measurements that show how well a business did during that time. Documents that show how retention metrics are tracked across several parameters can help a company make strategic plans and decisions.

Why Are Customer Retention Metrics Important?

These signs are vital for showing a business how to keep customers longer and increase their lifetime value. These numbers can be a starting point for any company’s branding and customer service efforts.

Rising customer retention rates can be linked to more upsells and cross-sells. Everyone knows that happy customers are the best way to get free product advertising and recommendations. Any business that wants to succeed must be able to keep and grow its customer base.

Now, let’s say you want to know how many of your customers who have always been reliable need to be placing orders right now. This can also be done by looking at other ways to keep customers, such as the rate of customers who leave and the percentage of loyal customers.

On the other hand, you can figure out how long it usually takes customers to come back to your store for more by looking at how long it has been since they last bought something from you.

What is a Good Customer Retention Rate?

A good customer retention rate is how many customers buy from you after a particular period. It’s an essential metric for any business because keeping customers you already have can be much cheaper than getting new ones.

So, what is a good customer retention rate? Well, that depends on many things, like the business you run and your industry. A retention rate of 80% or more is considered pretty good.

Obviously, it’s not just about the number itself; the trend is more important.

  • If your customer retention rate keeps increasing, you’re doing something correctly regarding customer service and satisfaction.
  • On the other hand, if your retention rate is going down, that’s a warning sign that you need to figure out what’s wrong and change how you do things.
  • Ultimately, a good customer retention rate shows that your company and its customers have a strong relationship.

When your customers feel valued, understood, and supported, they are more likely to keep coming back to you for their needs. So, it’s essential to pay attention to the numbers and how you treat your customers.

How to Measure Customer Retention?

To determine how well you keep customers, you need to figure out what percentage of your customers still do business with you after a certain amount of time, usually a year.

Here’s how you do it:

  • First, count how many customers you had at the beginning of the time frame you’re looking at.
  • Next, take away from your starting number the number of customers who made no purchases during that time. These are called “churned” customers.
  • Then, divide the number you got by the number you started with and multiply by 100 to get your retention rate percentage.

Let’s have a look at a customer retention rate example. If you had 1,000 customers at the beginning of the year and 800 of them bought something, your retention rate would be 80%.

Remember that a high retention rate is a good sign that your customers are happy and satisfied with your business, so it’s important to keep track of this metric to ensure you meet their needs and expectations. The customer retention KPI formula can be used to determine the retention rate.

Lastly, let us look at a few customer retention metrics for e-commerce.

5 Customer Retention Metrics 

Customer Retention Rate:

A company’s customer retention rate is the percentage of its original customers who are still with it after a certain time. This simple metric shows if a customer has used the service or product again within a certain time. If there is a program to keep customers coming back, the retention rate can show how well it works.

Customers using your e-commerce platform to buy appliances monthly are a good example. No matter what they buy from you, the fact that they are a reliable and consistent customer is the most important thing.

Customer Churn Rate:

A company’s Customer Churn Rate (CCR) is the percentage of its current customers who have stopped doing business with the company in a certain amount of time. If this is tracked, it can show us what makes our existing client relationships good or bad. Analyzing this rate can also tell us how well our associated program, like the discounts and bonuses we give to customers who keep coming back, keeps them as customers. This allows us to learn more about why customers leave and develop new ways to support them.

The “churn rate” is a way to figure out how fast your clients are leaving (CCR). To find your monthly retention rate, take the number of active customers on the first of the month (ECB), subtract the number of active customers on the last day of the month, divide by the number of active customers on the first of the month, and multiply by 100 percent.

Customer Lifetime Value

The amount of money a single customer brings to your business is their “lifetime value.” The best thing to do with a CLV is to keep it in good shape or improve it. A falling CLV could mean that a customer is unhappy or that you must keep looking for new customers who will likely buy from you again.

Customer value is calculated by multiplying a customer’s APV by the ANP he is expected to bring in during a specific period (CV). Then, we multiply the ACV by the ANY, the average number of years a customer stays with a business.

Loyal Customer Rate

Here, we’re trying to determine how likely a customer will buy from the company again. There is a good amount of product satisfaction and usefulness.

Customers who stick with you are the reason you can say that about them.

  • Customers were generally happy with what they bought and how they used it.
  • Describe the foundation you’ve made for your career. If you have more loyal customers, your company’s income will be more stable, and your customer base will grow.
  • Customers keep returning to you because they know they are getting a good deal.

Divide the number of repeat buyers by the total number of people who have bought from you to get your LCR (LCB). New customers who bought several things in a certain amount of time are included, as are existing customers who bought more. Then, divide that amount by the total number of customers during that time (TNC). Then add one hundred to that number.

Net Promoter Score

The Net Promoter Score (NPS) is a number that shows how happy and loyal your customers are to your brand as a whole. The Net Promoter Score is a simple way to determine if your customers are satisfied with your products or services and likely to tell others about them.

Also, you can predict future growth through customer retention and referrals by comparing your Net Promoter Score to your revenue growth rate and customer turnover rate.

A high Net Promoter Score (NPS) doesn’t mean your business will grow and keep customers, but it can help you find and reward your brand’s most vocal fans. This type of content marketing goes well with case studies, website testimonials, and other types of social proof.

If the score is low to medium, on the other hand, it means that there is still time to fix whatever is making people unhappy.

Finally, by the end of this post, you must have understood what a good customer retention rate is. The best solution is to decode how to measure customer retention. There are various retention metrics for apps that can be taken into consideration.

Retention Metrics for Apps

App retention metrics are the measurements and data points used to track how often users come back to an app and how engaged they are with it over time. These metrics can tell app developers and businesses a lot about how users behave and what they like, which helps them improve their strategies for keeping users and improving the user experience.

Some standard measures of app retention are:

User retention rate:

This shows how many users return to the app after their first visit.

Daily active users (DAU):

This metric counts the number of people who use the app daily.

Monthly active users (MAU):

This metric tracks how many people use the app each month.

Churn rate:

This shows how many people stop using the app after a certain time.

Session length and frequency:

These metrics track how long people use an app and how often they return.

By keeping an eye on these retention metrics and analyzing how users act, app developers and businesses can find places to improve and put in place plans to keep users engaged and coming back. This can lead to better ratings for the app, more money, and happier users.


Find meaningful and valuable customer retention metrics to make a self-directed assessment that will help the company decide how to interact with customers, get them to buy from them again and again, and turn them into loyal customers, no matter what market or trade the company is in. As a result, the number of people who buy the product and those who buy it will continue to grow.

But there are also a lot of benefits for the customers. Customers who stick with a company are rewarded with better services, products, and perks.

It works in both directions because it has several parameters. With these metrics, you can learn a lot about the different parts of your organization, and they are also easy to use.

Survey Point Team
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