Customer retention is the ability to turn out the customer’s ability into repeat buyers instead of switching to their competitors. It also indicates whether our product and service are satisfying your existing customer.
The main motive is to increase repeat purchasing by building a loyal customer through excellent service, product value and small advantages on both.
Customer Retention Analytics
Customer retention analytics is something that we examine when the data is gathered to understand some major facts that drive customer retention and churn.
How will you grow your B2B without acquiring new customers?
Customer Retention, in very simple way it means that the more revenue you generate from your existing customers, the less pressure you put on customer acquisition efforts.
Your customer retention depends upon on your ability to analyse them, because 80% of future profits come from 20% of existing customers.
Let’s get a little deeper and check what Analytics parameter one need to check for better customer retention.
What is retention analysis?
Retention analysis or survival analysis is another activity or method of analyzing user metric to understand why and how customers churn.
This analysis is the key to maintain the customers by improving retention and also to balance the new acquisition.
Running out continuous Customer retention, you will get to know:
- Why customers are churning
- When are the chances of customers leaving?
- How churn can affect your bottom line
- How to improve retention strategies
What are Customer retention Strategies?
Customer retention strategies is the process in the business place to build out customer loyalty and improve customer lifetime value
Example: We can collect feedback, do surveys, offer fast delivery and easy return etc.
How will Customer Retention analysis work?
Managing customer retention analysis is much more than calculating the churn rate. You need to have a clear picture and figure out when, where and how customers are leaving.
This can help you to adjust the retention strategy and achieve sustainable business growth.
Customer Lifetime Value
Customer Lifetime value or CLV, CLTV is the net profit of the upcoming entire future relationship with your customers. CLV helps in segmenting customer’s that are worth retaining and the one that are not.
You can assign monetary value to specific customer and can assess the spending limit behind acquiring such customers. This also help to set a benchmark for COA (Cost of Acquisition) or COR (Cost of Retention)
How to calculate Lifetime Value (CLV)
- T = Total number of transactions per year
- AOV = Average Order Value
- AGM = Average Gross Margin
- ALT = Average Customer lifespan in year
Identify where customer churn
A well-organized analysis can help you to identify and understand at what point of your journey, customers are more likely to churn.
This can be done by calculating existing customer behaviour and pattern and retention rate fluctuations, then you can find out the new user journey.
Customer Churn Rate Formula:
Why Customer Churn
Customer retention analysis can show you the number of churn and why. By this, you can identify customer behaviour and acquire direct Feedback.
Figuring out why customer leave you can help you in understanding what is your weak point. And by getting some feedback and analyzing it can help you to increase rates quickly and efficiently.
Customer Retention Rate and how will you calculate
The Customers Retention metric is an ideal place to start measuring customer loyalty. Basically, it reflects the percentage % of customer who remained loyal over a specific period of time.
Customer Retention rate formula:
According to your business what Retention means for you
Customer retention can slightly differ from the company. But what do you expect to improve this?
- Increase Revenue
- Spend less money
- Build better customer relationship
- Can improve marketing strategies
Repeat Purchase repeat
Repeat purchase repeat means the customer who has shopped more than once. It helps out the retailers to understand the tendency of customer tendency of the return customer after the first purchase and hence design loyal customers.
Average Order Value
Average order value is something that measures average ticket size per order. It is a simple measure that calculate the value impact of the individual customer through their purchase.
The more money the customer spends on a brand the cheaper it gets to advertise offer to such customers. Suggesting product and bundling product for complementary categories help in increasing the AOV.
Profitability Per Order
Profitability Per order is kind of as similar to AOV as it calculates the profit upon each order and it is directly proportional to overall profits.
To increase Profitability Per Order (PP0) bundle high margin products with low margin to increase overall margin per order.
Loyal Customer Rate
A loyal customer is the one that has made a repeat purchase with you within a given time range, the metric identifies in your business which part of the portion has customer drive more.
It is important to know who are your loyal customers because these customers help out in the revenue. Also, they are most likely to share out positive responses and do mouth publicity.
Customer Satisfaction
Customer satisfaction is ensuring customer needs, his problems are handled, and whether they are satisfied and have a good experience with your product and service. It is captured using feedback or survey but they are asked on 5-point scale.
- Highly unsatisfied
- Somewhat satisfied
- Neutral
- Somewhat satisfied
- Highly Satisfied
CONCLUSION
Analyze product usage to capture at-risk as part of your customer retention analytics. You can identify which customers are churning for which you can create campaign and get customer’s interest once again in your product and service.
Customer Retention analytics also helps your company to avoid customer loss and maximize customer potential.
Customer retention metric that gathers and measure the information that how are previous or existing customer are satisfied and what you can do to improve on to and keep them satisfied with your service and products.
It measures the relationship between customer and brand to help them predict when the customer might leave.