So you’ve identified your leads and converted them into customers. Your marketing efforts have paid off, right? Think again! Now the real hard work begins!
It’s now time to focus on retaining those customers and building the relationships. Customer retention rate is a crucial indicator of how your brand is being perceived and the profits you can hope to achieve on a recurring basis. It is demonstrated by the proportion of customers a company has maintained over a defined period.
It’s absolutely essential that you observe the metrics that determine your customer retention rate. A 5% increase could boost your revenue by as much as 95%! Insight into these figures will show whether your efforts to create a successful buyer's journey are driving the desired outcomes.
Focusing on this data and optimising your strategy will help to increase loyalty, referrals, and return on investment in a way that's far more affordable than continuously injecting money into acquisition.
So, what are the metrics to monitor when it comes to customer retention rate?
1.Customer effort score (CES)
Your customer effort score reflects the service that your buyers experience – how easy or how difficult it was to buy from you.
To calculate CES, you'd typically ask the customer to rate their experience using specific questions relating to an action they've taken such as visiting your website, signing up for a subscription or making a purchase. If you’re looking to make your life easier, using a numeric rating will let you quantify your score and digest the data more simply.
Not paying attention to who's disengaging with your brand and is instead heading for the exit sign is a costly mistake. Seeing a drop off in subscribers, a sudden (or even gradual) downturn in sales indicates that something is changing for your buyers.
The issues could be related to price and purchasing power. However, it may also be that the customers are unhappy with your service. Even worse, they may be finding better alternatives with your competitors. Without knowing why customers are churning, you can't come up with a strategy to retain them.
To calculate your churn score, you need the following formula:
Number of users who cancelled their service / Total number of users
3. Customer satisfaction
Customer surveys and customer data are the best way of finding out how satisfied purchasers are with the services and products they get from you. Frequently gathering feedback will help you to make impactful changes to the buyer's journey and improve your offering where necessary. Like CES, it's best to use a scale that will allow users to rate their satisfaction levels around specific interactions they've had with your brand.
4. Customer engagement
Customer engagement is a classic key performance indicator. It shows how your target audience is responding to the marketing content you put out and how much interaction they are having with your brand across the different channels you use such as email, social media, and your website.
When studying engagement, you may wish to focus on particular campaigns or observe the overall brand engagement you're getting. This will incorporate metrics such as:
- website bounce rate
- time spent on your website
- participation in events
- social media mentions and shares
- email open and click through rate
- loyalty programme activity
- participation in competitions you run
5. Customer lifetime value (CLV)
This metric refers to a customer's total worth to your business. It shows you the value of the relationship between your brand and the customer and what that means in terms of future revenue you can hope to receive.
Understanding CLV with the aim of creating loyal customers is less costly than generating new customers. That's because happy and loyal customers aren't only repeat spenders, they also advocate for your brand – for free!
6. Repeat purchase probability (RPP)
What is the likelihood of a customer buying from you again? In an economy that's already struggling to inspire brand loyalty, understanding RPP can help you to become more strategic about customer retention.
RPP and customer churn are closely related and can be positively affected by making meaningful improvements to your customer journey – on time.
Many businesses use reward and loyalty platforms to encourage customers to come back. Inspiring users through meaningful rewards that make their experience with your brand more valuable is a great way to ensure that you keep engagement high and purchases frequent.
7. Time between purchases (TBP)
Time between purchases will vary depending on the utility and shelf life of your product or service. This doesn't mean that you should stop communicating with your customer after they've made the purchase and assume that they'll come back.
Calculating TBP will help you understand buying patterns so that you can deploy the relevant customer nurture strategies to ensure that you're top-of-mind when it's time to replenish stocks.
You can calculate the TBP by dividing 365 days by the current purchase frequency of existing customers. By doing this, you get a better understanding of how consumers are using your product and what you can do to stay on their radar.
Are you ready to improve your customer retention strategy? Start by following our step-by-step guide and learn more about how to maintain customer loyalty.