1. Blog
  2. Uncategorized

6 Customer Retention Metrics & How to Increase Them

May 31, 2021

6 Customer Retention Metrics & How to Increase Them

Kelsey Clutter

Kelsey Clutter, Content Marketing Manager

Headshot of Kelsey Clutter


Customer retention is thought to be as much five times cheaper than acquiring new customers, so it’s hardly surprising that brands are increasingly focused on improving their retention rates.

Retention metrics are an important part of understanding how successful you are with engaging customers. Customers are the lifeline of your business, and without digging into your customer retention metrics on a regular basis, you fail to keep a finger on the pulse.

Download abandoned cart email template

6 Customer Retention Metrics to Apply to Your Ecommerce Store

1. Customer Churn Rate

Your customer churn rate refers to the amount of customers you’ve lost over a given period of time.

It’s a good metric that identifies how satisfied or dissatisfied customers are with your product or service. And more importantly, it helps you identify that improvements need to be made to your current retention strategy and puts an emphasis on acquisition strategies that will need to be put in place in order to regain lost revenue.

The simplest way to calculate your churn rate percentage is:

Number of customers lost during the defined period (A) divided by the number of customers at the start of the defined period (B) multiplied by 100 is equal to the customer churn rate

2. Customer Retention Rate

Customer retention rate is essentially the opposite of your churn rate. It’s also expressed as a percentage and defines the customers who remained loyal to your business, within a set period of time.

To calculate your customer retention rate:

Number of customers at the end of the defined period (A) minus the number of new customers acquired during the defined period (B) divided by the number of customers at the beginning of the defined period (S) multiplied by 100 is equal to the customer retention rate

3. Repeat Purchase Rate

This metric relates to the percentage of customers who return to your brand to make another purchase, after their initial purchase from you.

This metric gives you good insights into how effective your marketing efforts are at encouraging customers to come back and make another purchase with your brand.

To calculate your repeat purchase rate:

Number of customers who bought more than once in the defiend period (A) divided by the total number of customers in the defiend period (B) multiplied by 100 is equal to the repeat purchase rate

4. Average Order Value

One of the benefits of retaining customers is that they tend to spend more during each purchase.

Keeping an eye on average order value can give great insight into how your retention affects the average amount each customer spends per checkout.

To calculate your average order value:

Total order revenue in the defined period (A) divided by the number of orders in the defined period (B) is equal to the average order value

5. Customer Lifetime Value (CLTV)

This metric describes the average amount of revenue that a customer is expected to bring to your business within their lifetime.

CLTV is a great metric to track if you’re looking to see which customer segments are most profitable (to help you focus your retention efforts most productively).

Calculating your customer lifetime value necessitates a few steps:

  1. Calculate the average purchase value (total revenue / number of purchases)
  2. Calculate the average purchase frequency rate (number of purchases / number of customers)
  3. Calculate the average customer’s value (average purchase value / average purchase frequency rate.)
  4. Calculate the average customer’s lifetime span (sum of customer lifespans / number of customers)

After you’ve made those calculations, you’ll be able to work out Customer Lifetime Value using the following formula:

Customer value multiplied by the average customer lifespan is equal to the customer lifetime value (or CLTV)

Hubspot offers a brilliant walkthrough here.

6. Customer Acquisition Cost (CAC)

This metric describes the cost to your business when acquiring new customers.

CAC is a great metric to determine whether your business can become profitable over a defined period of growth.

To calculate your customer acquisition cost:

Cost of Marketing & Sales divided by the number of new customers is equal to the customer acquisition cost (or CAC)

Tidio offers a more in-depth walkthrough here.

How to Increase Customer Retention Using Reviews

Now that you know how to track your customer retention metrics, you’ll want to put some effort into improving them.

A customer review program like Okendo can have a very positive effect on your rates of customer retention.

Let’s take a look at 3 simple ways you can use customer reviews to increase your online store’s customer retention.

1. Improve the Customer Experience

When it comes to creating a direct, personal connection to your customers, nothing beats reviews. Reviews allow you to collect valuable feedback, which when acted upon, can help to improve your ongoing customer experience. This applies to both products and the customer service that you provide.

For example, if your customers have left less than 5-star reviews expressing concerns around a specific attribute of your product, you can use this information to accelerate product development and sell more products that your customers love!

Content management tools such as review replies and helpdesk integrations with partners like Gorgias allow you to follow up on less than 5-star reviews and provide personalized solutions for your customers. This also helps you signal your care and consideration to other customers browsing your website, who’ll be reassured by your attitude to ongoing customer service.

Q&A widget for LSKD

Okendo’s Q&A feature can also help here, enabling shoppers to get answers to their questions directly from your team. This helps to inspire the customers confidence purchasing with you while giving them an instant solution to their concern or query.

By improving both your products and the processes surrounding their sale, you can make huge leaps forward in terms of customer satisfaction. Happy customers are less likely to churn, keeping this metric low.

2. Deepen Customer Relationships

Using the valuable product and customer attributes that your reviews provide, you can use this data from your customer reviews to hone hyper-personalized messaging. This can be achieved using smart segmentation of your email lists. For example, you could deliver customized content in the form of specific product recommendations to a subset of your audience who you know to have children under the age of 5 (as a result of providing this information in their previous reviews).

Using Okendo’s extensive integration with Klaviyo, you can leverage this smart use of review data in hyper segmented email marketing campaigns to skyrocket your repeat purchase rate. A great customer example is natural & healthy dog treat brand WAG. They launched a series of product recommendation emails targeted towards the specific customer traits provided in their eviews and witnessed an impressive 300% increase in placed order rate and a 423% increase in revenue-per-recipient.

Email for WAG

By offering this kind of relevant, engaging content, your audience feels recognized and appreciated. They’re also in a better position for successful ongoing product discovery. You’re exposing them to well-targeted, perfectly positioned items which increases the chances of additional purchases being made, boosting your customer lifetime value.

3. Showcase and Reward Customer Loyalty

Collecting and displaying customer content helps boost the level of social proof associated with your store, building an engaged and loyal community. Positive reviews from brand advocates who are keen to emphasize their love of your products are a fantastic and deeply compelling way to showcase your offer and encourage similar loyalty in others.

A perfect customer example is Freshly Picked. The baby accessory knew that new parents relied heavily on word-of-mouth recommendations. Using Okendo, the brand was able to display customer reviews and instill trust in Freshly Picked’s customers which influenced an $11 increase in average order value.

Instagram post with UGC for BaliBody

By displaying social proof, you can continue to build trust with your shoppers, increasing their confidence in the products that you offer and improving the chance of them wanting to increase their order value as a result.

In addition, it’s important to acknowledge who your brand advocates are and reward them for sharing their experiences. Using Okendo’s integrations with loyalty programs like LoyaltyLion, Smile.io, and Rise.ai, merchants can incentivize and reward their biggest fans in exchange for sharing their experience via customer reviews. As a result, this strengthens the brand-buyer relationship and encourages future purchases.

Ready to Increase Customer Retention? Okendo Can Help

By ensuring you have a firm handle on the current state of your customer retention, you can easily monitor the improvement that your enhanced retention strategies bring.

Okendo offers a wide range of integrations that allow you to combine the power of customer reviews with leading loyalty programs, helpdesks, and marketing suites for optimal retention results.

Book a demo with Okendo

Ready to learn more?

Let's Talk