Customer retention is the number of customers that have bought from you in the past and still actively buy from you.
It’s important because it shows your business performance, if majority of your customers don’t come back to buy from you again — then something is wrong.
So how do you measure your customer retention to know if you are doing good or bad?
There’s a formula to help you do it:
Customer Retention = ((E-N)/S) x 100
E: customers at the end of a period of time.
N: new customers acquired in the period of time.
S: customers at the start of a period of time.
For example if your online business measures it’s customer retention based on the past 90 days, you want to do the following:
- Find E: how many customers you have today
- Find N: how many new customers joined you in the past 90 days
- Find S: how many customers you had 90 days ago
The question is how do you determine the number of days? you can put a number there that you believe matches your business model, but it’s best to make it based on actual user behaviour.
That’s why we built WebMedic with an easy to use method of measuring and improving your customer retention, you simply connect your online store and the calculations will be done for you.
Did you know customer retention alone is not enough to get a clear picture of your online business performance? this is where customer retention funnel is very useful.