Customer Retention Rate: The Whys and Hows

For e-commerce brands, customer acquisition is a much sought-after metric. Ads, promotions, and social media campaigns all garner attention, promising new customers. However new customers are not going to be helpful if your company is unable to retain them and therefore tracking and optimizing it is of the utmost importance.

Therefore Customer Retention Rate (CRR) has maximum relevance for e-commerce success. In this blog, we will delve into the significance of CRR for e-commerce businesses, exploring its importance along with strategies and solutions for optimizing it.

But first, let us highlight it with an example!

Let us assume,

Pomato Ltd. is an e-commerce brand offering the latest in fashion and trendy sportswear. They had 1,000 customers at the beginning of the month. They acquired 500 new customers and were left with 1,250 customers at the end of the month.

Number of customers at the end of the period = 750

Number of customers acquired during the period = 500

Number of customers at the start of the period = 1000

CRR = {(Final Customers - New Customers) / Initial Customers} * 100

Now, we can calculate the CRR:

CRR = ((750 customers - 500 new customers) / 1,000 customers) x 100

= (250 customers / 1,000 customers) x 100 = 0.25 x 100 = 25%

Since the CRR for Pomato Ltd. is 25% only around 2 of every 10 customers stick with them for a year. This is a problem as the average customer retention rate for e-commerce is closer to 38%, meaning that the company is losing more customers on average than its competitors are.

What is the solution?

The Importance of Customer Retention Rate

Cost Savings

Acquiring new customers is a notoriously expensive endeavor. Therefore companies nowadays place greater importance on ensuring that customers do not stop engaging in business with them. This is particularly relevant for e-commerce brands that exist within a sea of competitors. By focusing on retention, you also free up resources for other areas like product development or customer service improvements.

Predictable Revenue

Loyal customers are repeat customers, translating to a more predictable revenue stream. This allows for better financial planning, forecasting, and investment decisions. The confidence of knowing a loyal customer base will consistently contribute to your bottom line. Additionally, a 5% increase in customer retention can positively impact the company's revenue by anywhere between 25%-95%!

Increased Customer Lifetime Value

CLTV refers to the total revenue a customer generates throughout their relationship with your brand. Loyal customers tend to spend more over time, trying new products, taking advantage of loyalty programs, and becoming brand advocates. A focus on CRR directly impacts your CLTV, leading to sustainable growth.

How Do Our Solutions Help?

Our integrations let you directly track the new customers who have engaged or made a purchase from your company. This comes in the form of KPIs and actionable metrics that your company can leverage to optimize your business practices.

With our chatbots, you can keep up your engagement with all customers, both old and new, nurturing them for brand loyalty and conversion. You can market and sell on the same platform, and remarket as well, helping you monitor a customers journey and tailor it to create a memorable experience that they will want to revisit over and over.

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So, seize the opportunity, and propel your business toward sustainable growth and success! Know more about kwiqreply by clicking the link below.

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