Top Customer Retention Metrics Important for Business Growth

    Customer Retention Metrics

    Acquiring customers can cost five times more than retaining customers, studies say. Since customer retention is key to business growth, companies need these metrics to strategize for growth.

    Brain & Company’s research study found that a 5% rise in customer retention rate can lead to a 25-95% increase in revenue.

    Focusing on customer acquisition increases business revenue, but how can companies achieve it? A Harvard Business Review Blog, ‘The Value of Keeping the Right Customers’, says that “ acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one”.

    An effective customer retention metrics measurement will allow marketers to build a strong customer base and equation with them. In his research Prescription for cutting costs, Frederick Reichheld of Bain & Company proves that ‘ increasing customer retention rates by 5% increases profits by 25% to 95%’. Incidentally, he is the inventor of the Net Promoter Score.

    What are Customer Retention Metrics?

    Customer Retention Metrics (CRM) is a significant performance indicator to track the number of customers retained in a particular period.

    It includes customer retention rate, churn rate, repeat purchase rate, Net promoter score (NPS), and more.

    The most common way to calculate customer retention rate involves the number of customers from the start (S), at the end (E), and number of customers acquired (N).

    So, it looks like CRR = ((E-N)/S) x 100.

    Marketers can use this formula to determine if their strategies are doing enough for customer retention.

    With this metric, they can plan for ways to improve customer retention rates, and if needed, create strategies to increase the rates as per business needs.

    Reasons why retention is important for growth

    • ROI: Customers will increase their buying activities as they engage more with brands. Such activities will boost sales numbers, which eventually will turn into profits. That’s how ROI will increase.
    • Loyalty: Existing customers buy more. It is possible when they get value from a brand’s products and services, making them keep returning for new products.

    Put, retention determines what keeps customers coming back to brands. Personalization, expertise, engagements, and customers’ priorities are among the top factors that lead to repeat purchases.

    • Affordability: Retaining customers is a much easier and straightforward way to boost company profits. That said, companies spend less to retain than attract new customers.

    While this metric is important to measure, other metrics under it need equal attention to measure.

    Let’s look into other metrics marketers should be proactively looking into.

    Customer Retention Metrics to Measure:

    1. Churn Rate

    Customer churn rate refers to the proportion of customers who actively disconnect with brands to the whole number of active customers. To calculate it, marketers need to divide the number of customers left by the total number of customers.

    Furthermore, churn rates also identify which products or services perform poorly. So it can help make strategic improvements in the retention plan.

    Every brand faces some amount of customer churn. But it should not be too high, or it will impact the CRM.

    2. Net Promoter Score

    It identifies how many customers recommend a particular product or service to others. It also includes factors that customers found satisfactory, which made them want to stay connected with the brand.

    This metric is also crucial to understanding how much customer retention is necessary to meet business revenues.

    To calculate it, marketers will need to conduct sentiment analysis. They should have data on the percentage of customers recommending and the percentage of detractors.

    We are reducing the detractor percentage from the promoter percentage, resulting in an overall net promoter score.

    3. Repeat Purchase Rates

    The repeat purchase rate applies to customers who buy a brand more than once. This metric rate helps brands understand the possibility of the customers returning after their first purchase.

    This helps marketers design loyalty programs to engage customers and encourage them across their buying journey.

    To calculate it, marketers must divide the number of customers who paused buying more than once by the total number of customers.

    So, when customers buy more than two times, it has an assertive effect on the repeat purchase rate. It also increases customer retention rates.

    4. Repeat Purchase Probability rates

    Repeat purchase probability (RPP) rates are advanced versions of repeat purchase rates. It helps marketers predict the future of customer retention and its growth possibilities.

    Marketers analyze it, gaining predictive data of customers who show interest in a brand’s product or service, their search activities across the website, and engage in seeking solutions.

    Marketers can strategize customer retention actions by making these predictions and encouraging customers to buy.

    To calculate it, marketers can use the repeat purchase rate formula and implement predictive analytics to gain key metrics. The predictive data provides RPP rates in new ways instead of relying on past purchase performances of customers.

    5. Loyal customer rate

    As stated above, loyalty is one of the key customer retention metrics for company growth. A higher g loyalty rate will boost the retention rate automatically.

    Loyalty rates refer to the number of customers who have made repeat purchases within a specified period. The success of retention is when the majority of customers are monthly retainers.

    To calculate this, marketers must determine the number of customers who made repeat purchases during a specific period.

    Dividing these by the overall number of unique customers in that period will give marketers the overall percentage.

    6. Customer Satisfaction (CSat) Rate

    CSat is a similar metric to Net Promoter Score.

    While NPS shows the loyalty quotient of a customer, CSAT shows the customer’s satisfaction level with the product/services.

    Marketers need to calculate this metric using a CSAT survey or a feedback channel such as NPS. They need to pick up the satisfaction level of the customers on a particular product/service in points.

    Based on the points from multiple customers, marketers calculate an average score for CSat. This score gives information on what and where to make immediate improvements to retain customers.

    Quick tips to improve Customer retention rates

    As customer retention rates indicate the market-facing health of a company, they need to visit it constantly to stay updated. They need to use this number to plan strategies to boost company growth and increase the rates.

    Here are some ideas marketers can follow to achieve this:

    • Hyper-personalize communication channels with customers: It is important to build good customer relationships.

    Personal outreach through emails, social media, ads, and calls will help top-of-the-mind recall for the brands.

    • Rewards are one of the best ways to retain customers. Through these, customers stay loyal to brands and repeat purchases on new launches.

    Discount coupons, free event passes, personalized vouchers for their next purchases, and more can boost loyalty.

    • Customer feedback surveys also help marketers understand customers’ inclination toward products and services. Surveys indicate where their brand stands and what more could be done to reach a desirable level.


    With increasing competition across industries, companies must allocate proper resources for their customer retention plans. They can plan for higher customer loyalty and retention by working on metrics like CRM.

    Based on these insights, they need to make continuous, ongoing improvements in measuring customer retention metrics.

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