What is Retention Rate?

The Retention Rate is calculated using three inputs:

• Beginning customers: the number of customers at the start of the observed period
• New customers: the number of customers acquired in the observed period
• Ending customers: the number of customers at the end of the observed period

To determine the Retention Rate, subtract the number of new customers from the number of ending customers, then divide the result by the number of beginning customers.

Retention Rate = ( Ending Customers - New Customers) / Beginning Customers) * 100

Let's say you run an online store. You started the year with 1,000 customers, and over the course of the year, you gained 300 more and lost 50. At the end of the year, you have 1,250.

To calculate your Retention Rate, you'd use the following calculation:

• Retention Rate = (1,250-300) / 1,000 * 100 = 95%

Retaining customers is essential for the long-term sustainability of an eCommerce business. It is more cost-effective to keep existing customers than to acquire new ones. A high Retention Rate indicates that customers are satisfied with their experience and are more likely to become brand advocates and refer others.

To improve your Retention Rate, you need to focus on customer satisfaction and loyalty. Here are some tips to help you achieve this:

• Offer excellent customer service: Respond to customer queries and complaints promptly and professionally.
• Provide a personalized experience: Tailor your communication and offers to suit each customer's needs and preferences.
• Build a loyalty program: Reward customers for their repeat business with discounts, exclusive deals, or free products.
• Keep in touch: Engage with customers through email newsletters, social media, or other channels to stay top of mind.
• Monitor feedback: Listen to customer feedback and use it to improve your products, services, and customer experience.