Measuring your customer retention rate allows you to know where your business is located and where you want to direct it.
Build customer loyalty is the main objective you should have in your E-commerce, since sustainable business growth and profitability depend on this factor, to the extent that the costs derived from acquisition strategies are minimized: the more customers we lose, the greater the expense to get new ones.
Surely you have asked yourself: How to make those who have already made purchases ever do it again? What is the key to retention? Strange as it sounds, It's Not the Price. Over the value of the product, 80% of people prioritize qualities such as speed of delivery, service and convenience.
Following this line, the first step in finding opportunities for improvement is Evaluate your retention rate Of customers or Customer Retention Rate, in English (CRR).
In this post, we explain how to calculate this metric and how it relates to The Frequency of Buying per customer, which is also useful for developing an effective action plan for the benefit of your business.
How to measure your retention rate (TRC)?
The retention rate is a metric used to Evaluate the service you offer and the loyalty of your customers. The higher your percentage, the better your repurchase levels and the positive perception your users have. To find this indicator, you must know the total number of your customers in a given period of time, and of those, how many are recurring.
In the following example, let's consider an E-commerce, which had 600 customers during the last month, of which 200 were recurring: 👇
Now that you know how to do this calculation, you can do it monthly, quarterly or biannually according to your objectives.
You can also compare the result from one period to another to evaluate their behavior:
- If you TRC remains stable or increases Fabulous! You're doing things right, your operation is generating happy and engaged customers.
- However, If Your Performance Drops, could be an alert for dissatisfied customers or customers with bad experiences, so you'll have to review your strategy, processes and other variables in your operations that allow you to identify improvements, to increase the likelihood of a repurchase.
Retention rate over time Are you or are you not a returning customer?
What happens when a customer stops buying from you for a certain amount of time? Are you no longer a returning customer? Does this necessarily indicate that your level of loyalty has decreased? This is relative. Let's see it in the following example, where we'll assume that you have an E-commerce of appliances and technology products:
👉 Maria is a woman who enjoys Christmas and sharing it with her loved ones, every year, in December, buy a product from your E-commerce for each of your family members, as a gift for the end of the year. Generally, it favors technological items that are educational or promote entertainment. For María, it has become a tradition to shop on your E-commerce during these dates, as she receives the advice and support she needs to choose the ideal gift for each member of her family.
👉 Now let's see Juan, a technology retailer who buys products on your website and sells them in a small store located in his neighborhood. Juan Has a Quarterly Rotation, which means that it takes you 3 months to sell all the units you purchased. After this time, buy again in your store, as you will find good prices and after-sales service.
👉 Finally we found Francisco, who has an independent company with several stores in different parts of the city, his sales volume allows him to buy from you Twice a month to meet your demand. Choose your online store because it always finds inventory available, and you also enjoy other advantages such as the speed and quality of delivery, which you can't find in others E-commerce.
As we can see, they are all customers, although with different consumption frequencies. They choose your store on a monthly, quarterly and annual basis according to their needs. Would you evaluate all 3 of them as returning customers? Do you measure the Retention rate generally, individually or both? Monthly, quarterly, yearly, or all of the above? Everything will depend on your measurement objectives, marketing strategy and planning, which will be different in each company.
That is why there is no stipulated deadline or frequency for a customer to stop being considered as a recurrent, it will be Each E-commerce who will determine how to evaluate their TRC, and under what periods. Some companies may decide to classify the user who buys from them on a monthly basis as a recurring one, others only the one who does so at least once every 3 months.
In this case, the general formula for calculating the TRC changes and you can adjust it according to the frequency with which you are going to measure this indicator. For example, if within your strategy, a returning customer is one who has made a transaction in the last 3 months, the formula would look like this:
You can also measure your TRC in specific periods with high sales levels, where customers increase their intention to buy, thanks to greater benefits and offers; dates with this effect are, for example: the Cyber Monday, the Buen Fin, the Black Friday, the Christmas holidays, among others. Have you identified users who only buy from you for these dates within your database? It's more common than you think, you can have repeat customers here too, and take advantage of this information to deploy your advertising campaigns to these profiles with high chances of buying.
💡 #CubboInsight The Is Coming Buen Fin, how many of the customers in your base purchased from you in past editions of this event? Many of them may be returning customers this year.
What is the optimal retention value?
At a general level, there is no stipulated optimal value of TRC, since it does not behave the same in all categories, for example, it will not be the same rate in a grocery business that is consumed on a recurring basis, as in an appliance company that is renewed less frequently.
⚡ CubboHack: If you have a business focused on selling electronics, check this mini-video “What E-commerce Doesn't Tell You”, where experts in the technology industry will tell you how they apply repurchase strategies.
Therefore, it is best to focus on your own retention rate, based on your existing customers, the new ones and the amount you get in the end; always try to monitor their behavior to take care of their evolution over time, while maintaining their chances of repurchasing.
To adjust this to your ecommerce, we suggest that you consider the following:
What was your customer retention rate in other months? If you compare the current one with the previous ones, you can identify its trend. If it's ascending, identify what new action you implemented and enhance it. If it decreases and you are losing customers, detect the error and correct it.
Compare with your competitors. Although it may not be easy to obtain this information, if you have the opportunity to do so, it will be an excellent reference to validate how your E-commerce is doing compared to other businesses of its kind. Another option is to search for studies and surveys on the subject in the sector in which you operate, many organizations carry out this type of research.
Benefits of measuring the retention rate
Get to know the Customer Retention Rate, allows us to know where we are and what is the capacity of the e-commerce business, in order to be able to project where we want to go. In that regard, evaluating your TRC will help you:
- Measure the level of satisfaction of your customers for Identify opportunities within your operation.
- Take a periodic measurement that allows you Carry Out Retention and Investment Strategies based on experiences, satisfaction and customer services.
- Get to know and Monitor valuable data for the sustainable growth of the company.
- Identify your most loyal customers, request reviews and testimonials to show them to your site visitors, in order to inspire confidence in the purchase.
- Design marketing and social media strategies with a better focus on customer conversion and retention.
In search of loyalty: 5 #CubboTips to improve your Retention Rate
The first step in retaining existing customers is to understand them, understand and meet their current and future needs after the first purchase; seek that you can Foster a long-term relationship where new sales, recommendations, savings in recruitment strategies and a longer customer lifespan are generated, to improve the retention rate.
The following tips will help you in this regard:
1. Know your customer
Nothing will be more useful for deploying a loyalty strategy than knowing who and how your consumers are, for which it is essential to stipulate a buyer persona, that profile with the characteristics of your ideal customer, where you can identify their desires and expectations. This way, you'll know what's most important to him and how to satisfy him to gain his loyalty.
2. Make him feel like someone special for your brand
The more they feel that your online business values and cares about them, the greater their satisfaction and the more likely they will want to buy from you again. For this:
- Conduct surveys and Analyze shopping preferences and interests, to carry out segmentation and personalize your communication.
- Share valuable information, through constant communications, emails or messages with a high level of personalization.
- Offers rewards and incentives, make suggestions, invite him to learn about other products. Let him know that you remember his birthday or other special dates.
- Encourage feedback and ask them about their shopping experience and interaction with business employees, ask for useful feedback.
⚡ #CubboHack: Within the Cubbo platform, you can identify who are new customers and set up a retention method focused on new customers, to whom you can offer exclusive discounts or gift items to boost the retention rate and your number of customers in the end.
Identify new buyers on the Cubbo platform
3. Treat it in a specific way
According to data from various studies, those businesses that base their operations on their customers are 60% more profitable. All your customers deserve attention, and this is where service quality plays a decisive role in their loyalty and retention; this area must Ensure that everyone has an extraordinary experience in each of their interactions.
Focus on the moment each buyer is living in to improve your rates:
- For those users who don't know you and are just getting close, captivate them with valuable content that builds trust.
- If you already buy your products regularly, create a close relationship, using tools such as personalized email marketing and other communication channels.
- If you are a returning and loyal customer, in addition to the above, offer them greater incentives and differentials that impact your portfolio and make your money return.
- If you haven't bought from you for a long time, give them promotions and other attractions that help you not to lose it and keep your number of customers.
In all cases, you must make them feel that they are important for your E-commerce.
4. Fidelity
For a customer to be loyal in addition to economic benefits and service, you must create affective bonds with the brand, through strategies that are aligned with their desires, needs and aspirations, in this way you will be giving them more than an attractive promotion or offer, a value proposition focused on the customer. Users will value discounts, raffles, free services, payment facilities or other conditions more, if they perceive that they were designed for them, to support them or solve any of their needs.
Among the loyalty strategies with the best results are gift vouchers or accumulated points programs for purchases to redeem for preferential discounts or other benefits. This initiative has contributed excellently to the generation of links with the brand and repurchases in giants such as Mercado Libre. Analyze this option and evaluate its viability to implement it in your online store
5. Surprise with your service
A satisfied customer is a happy and loyal customer. Excellent service should be your cover letter and a constant in your relationship with the customer. Evaluate each stage of the process and implement improvement actions, analyze factors such as product readiness and delivery time (the faster the better), the follow-up provided to the customer on the status of their order, the conditions under which it is delivered, the after-sales service, the attention to changes and returns, among others. Remember that customer service and logistics are two fundamental components in their mechanism and operation, depending largely on the perception and experience that the customer has.
Do you want to know more about the importance of logistics in loyalty? Read our article: Fulfillment, the solution for loyalty in ecommerce
The work doesn't end when you capture a customer and get them to buy from you, this is where it really starts, retention is that quality that allows your online store to be scalable over time and maintain sales growth that makes it more relevant in the market. Protect and retain your current customer base, then complement your actions by attracting new buyers.
If you liked this content and want to know more about other measurement indicators that are very useful for your Online business, visit our article: 6 indicators you can't stop measuring in your ecommerce
In Cubbo We Help You Improve Your Retention rate through the best delivery times and after-sales service, don't worry about your operation, we do it for you. Let's start working together, send us a message Here and we will be happy to contact you.
Information Sources:
Hubspot / Doofinder / Vtex / Hubspot Content
