Top 10 Customer Retention KPIs for eCommerce Businesses

Are you looking for the best KPIs (Key Performance Indicators) to improve the customer retention of your eCommerce business? Without any doubt, customer retention is vital to growing your online business. Practically, keeping existing customers is 5 times cheaper than getting onboard with new ones, according to Forbes. To do so, you need to choose the right customer retention KPIs that can set realistic targets for your business. In this blog, we will discuss why customer retention is key for your eCommerce business and what are the important KPIs for it.

customer retention KPI

What is Customer Retention and Its KPIs?

In simple terms, klantenbehoud refers to keeping new customers engaged and coming back to purchase your product or service. It only happens when you provide enough value in your products, as a result; customers stay loyal over time.

KPIs aka keys Customer Retention Metrics help you track how many customers stick around. These customer numbers show the total value these loyal customers bring to your business over time. Examples of customer retention metrics include customer retention rates, customer lifetime value, customer churn rates, and Net Promoter Scores.

Why is Customer Retention Important for eCommerce Business Growth?

Whether it is one or thousands, getting new customers is always exciting for eCommerce businesses. Conversely, not being able to retain that customer for overtime impacts business greatly. Besides, new customer acquisition, keeping existing customers satisfied with the product or service is much more important for growth and profitability.

A successful eCommerce businessman like you should know and realize the balance between the old and new customers. Both strategies are needed to thrive in your business. If you can retain your existing customers, it adds to the credibility of your business, boosts social proof and brings more new customers automatically. The more you build credibility among your existing customers, the more your business will grow.

10+ Most Important Customer Retention KPIs for Your eCommerce Business?

In order to build long-term relationships with customers, tracking the right customer retention KPIs is a crucial aspect. Knowing these KPIs you can understand how to keep yourself engaged with your customers and satisfy them. Let us explore the top 10+ key performance indicators that help you make a customer retention plan.

Customer Retention KPI #1: Customer Retention Rate

CRR (Customer Retention Rate) refers to the percentage of users who continue to use your product after the initial purchase. With this rate, you can evaluate if your products can keep customers loyal to you for a long period of time. Here is a rule of thumb— the more your conversion rate is, the more you make a profit out of it.

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Calculating customer retention rates is easy and simple. You have to follow this chronologically— 

  1. Subtract the number of new customers gained during the period from the total number of customers at the end of the period.
  2. Divide that result by the total number of customers at the beginning of the period.
  3. Multiply the final number by 100 & get your retention rate.

Tips to Improve Customer Retention Rate

  • Provide top-notch customer service by responding to queries as fast as it could be.
  • Reward (discounts, points, exclusive offers) repeat customers & encourage them to shop more.
  • Make sure the products meet the expectations of the purchaser.
  • Get engaged with customers after purchase with thank you notes and tips to take care of the products
  • Offer a smooth return policy to make customers feel confident while purchasing.

Customer Retention KPI #2: Monthly Recurring Revenue

MRR stands for Monthly Recurring Revenue— the revenue that your product generates in a particular month mainly through subscriptions. Using this KPI, as an eCommerce business owner, you can forecast, do the financial planning, and measure your product growth.

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Calculate MRR following the below steps:

  1. Find the average revenue per active account (ARPU).
  2. Multiply the ARPU by the total number of active users for the month.

Tips to Improve Monthly Recurring Revenue

  • Raise your subscription fees strategically.
  • Offer new, valuable features to attract and retain customers.
  • Encourage upgrades or additional purchases.
  • Enhance support and engagement to keep users.
  • Target new customer segments or geographic areas.

Customer Retention KPI #3: Product Stickiness

The KPI— product stickiness, refers to the measurement of DAU (Daily Active Users) to MAU (Monthly Active Users). It is the rate at which users return to your product regularly. To understand whether your products are creating value or not among users, this key metric you should apply. 

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To calculate the product stickiness, all you need to do is:

  1. Find the daily and monthly active users.
  2. Divide both the user counts.

Follow the below tips to improve product stickiness:

  • Simplify the process of using the product.
  • Bring new features and improvements to your product.
  • Prioritize individual user persona in your product.
  • Address user needs and respond accordingly.
  • Provide valuable and relevant content that keeps users engaged.

Customer Retention KPI #4: Customer Lifetime Value

CLV (Customer Lifetime Value) makes you understand how much money you can expect from one particular customer with the time you stick with them. It mainly helps you realize the value of the customers for you and how you will act or invest in them. If you find your CLV high, it means your customers see long-term value in your products and would like to be with your business.

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To calculate your CLV, you need to divide the average revenue per customer by the customer churn rate for a certain period.

Tips to improve customer lifetime value:

  • Offer support quickly to keep customers happy.
  • Meet individual customer needs with messages and offers.
  • Give exclusive offers to the repetitive purchaser.
  • Make sure your product does not lose its standard.
  • Stay in touch with your customers via email, social media, or other channels.

Customer Retention KPI #5: Repeat Purchase Rate

This is one of the important KPIs that needs to be tracked properly to retain customers. In comparison to your total customer base, this KPI tracks the percentage of your customers who make repeat purchases. With this KPI, you can identify the number of your repetitive customers and realize the customer’s loyalty to your brand.

Top 10 Customer Retention KPIs for eCommerce Businesses

To calculate the repeat purchase ratio, follow the below guidelines:

  1. Find out the number of repetitive customers.
  2. The total number of customers in a specific period.
  3. Finally, divide the two numbers.

Tips to improve your repeat purchase rate:

  • Offer loyalty programs through points, discounts, and more to the customers.
  • Send customers texts or emails by referring to relevant products based on the last purchase.
  • Provide quick support and an easy return policy.
  • Give early access or special deals to sales to encourage repeat buying.
  • Stay in touch with your customers through regular updates, newsletters, or any other platforms.

Customer Retention KPI #6: Expansion MRR

In simple terms, expansion MRR (Monthly Recurring Revenue) refers to the extra money your products earn from existing customers through methods like cross-sells, upsells, and more. This KPI matters and is effective because it is cheaper to increase the value of existing customers than to find new ones.

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Follow the steps to calculate the expansion MRR

  1. Find the expansion MRR at the start and end of the month.
  2. Subtract the starting amount from the ending amount.
  3.  Divide the difference by the starting expansion MRR.

Customer Retention KPI #7: Customer Satisfaction Score

To measure how happy the customers are, the Customer Satisfaction Score (CSAT) is the KPI you need to know and understand. With this KPI, understanding the customers’ satisfaction with different parts of your products—whether it be features or support, is easy.

How you can find the CSAT? Simply create a survey asking customers to comment on their satisfaction level (e.g., after each customer support section, try to ask them, “How satisfied you were with this support session?).”

customer-retention-kpi

How to calculate the CSAT? 

  • Find the number of happy customers
  • Also the total number of respondents
  • Finally, divide the first count with the second to get the CSAT 

Remember, the more your CSAT scores are, the more satisfied customers you have who are likely to keep using your product.

Customer Retention KPI #8: Revenue Churn Rate

Revenue Churn Rate refers to the monthly income your product loses from the existing customers over a specific period. This happens when your eCommerce products can no longer meet the customers’ expectations and they switch to the competitors’ products.

To calculate the revenue churn rate, follow the guidelines:

  • Start with identifying the MRR (monthly recurring revenue) from the start and period
  • Subtract the end MRR from the start MRR and get revenue churn
  • Now divide the revenue churn rate by the start MRR
customer-retention-kpi

Customer Retention KPI #9: Net Promoter Score

NPS (Net Promoter Score) refers to the likelihood of whether your customers are promoting your products or not. This customer retention KPI also indicates customer loyalty. To calculate NPS, a survey needs to be conducted. 

What you can ask your customers in that survey? For example, ask your customers a question on a scale of 1 to 10—how likely do you recommend our products to your close ones, please rate.

Let us say that in your survey, 60% of the respondents chose 9 or 10, while 30% chose 6 or below. So, your NPS score is 30%. Keep in mind that a high NPS score encourages customer advocacy.

Customer Retention KPI #10: Customer Health Score

One of the most important customer retention KPIs, the customer health score, which determines whether a customer is likely to—grow, remain loyal, or leave. This KPI allows you to track that and helps you identify potential churning customers, expansion opportunities, and customer success and failure patterns.

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However, to figure out how healthy a customer is, you need to know what they do and how important those actions are. You can give each action a number based on how much it affects their health. For example, you could give points for how many features they use or how often they ask for help. Add up all the points to get their overall health score.

Implement Customer Retention KPIs Into Marketing Strategy Today

To achieve sustainable eCommerce business success, customer retention is key. With the right KPIs in focus, tracking and improving customer loyalty is much easier and more effective which ultimately helps you drive growth and profitability. Once you start, it is an unending process—a customer retention strategy.

Abonneer je op onze blog for more valuable insights and actionable tips on eCommerce business. Join our Facebook-gemeenschap to connect with people like you and share your experiences.

Foto van Shahidul Islam

Shahidul Islam

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