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What is the Customer Retention Rate? How to calculate and boost your CRR?

Vinh Jacker | 02-24-2020

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What is the most effective way to grow your business?

You might believe that the answer is to sell more to your new customers, but that’s only the tip of the iceberg. It involves not only more time, money, and effort to convince and convert someone to come, sign up for your services, and make a purchase.

Meanwhile, retaining an existing customer and encouraging them to return to your store for purchases is much easier. That’s precisely why every eCommerce business should pay attention to the retention rate.

Make new friends, but keep the old. One is silver and the other gold.

Are you spending enough resources on retaining your existing customer base, your true gold?

Follow this guide until the last words to learn all about customer retention in eCommerce - how to calculate it, why it matters, and how to foster it more efficiently.

Table Of Contents

What is the customer retention rate?

Customer retention rate (CRR) is simply defined as the ability of a company to retain its customers over a period of time. It measures how many customers a company still keeps at the end of a fixed period, relative to the number you had when the period started.

Customer retention rate
What is the customer retention rate?

Your CRR is a metric that reveals whether your marketing and customer care efforts are bleeding dollars or fortifying your business. The most useful customer retention strategies enable you to establish lasting relationships with consumers who will eventually become loyal to your brand. They might even speak out loud within their own circles of influence, which can contribute to attracting more newcomers to your brand.

How to calculate eCommerce retention rate?

To measure normal CRR, you simply use the following formula:

CRR = [(E-N)/S] * 100

This formula might look a bit “mathy,” so just break down a bit to make it more simple to understand

  • E = number of customers you have at the end of a period (week/month/year or other duration)
  • N = number of new customers your business made a sale to or acquired in some other ways during a specific period
  • S = number of customers you had at the start of the period

For example, you launched a mobile game with the start of 1000 players. Over the course of a month, you gained another 500, but 200 stopped playing your game.

Your time period = 1 month

  • E = 1000+500-200 = 1300
  • N = 500
  • S = 1000 Then your CRR = [(1300-500)/1000] * 100 = 80%

You can also use the Churn Rate, which is simply the inverse of CRR. In other words, CRR is the percentage you retained. At the same time, Churn Rate is the percentage you lost, by measuring how many existing customers cancel their subscription, not returning to buy, or closing a contract. So, the formula would be:

CR = L/S * 100

(with L is the number of customers you lost)

According to the above example, your Churn rate would be CR = 200/1000 * 100 = 20%

Even in the context of eCommerce, these formulas remain the same.

The customer retention formula is not complicated, but it’s powerful. It illustrates how well you’re forming relationships and drawing existing customers back for the next purchases.

What is a good customer retention rate?

NPS and CX Benchmarks Report is a great source that gives information on the customer retention rate of the business worldwide by industry.

Good customer retention rate for different businesses
Good customer retention rate for different businesses

The media and professional services industries lead the way with the customer retention rate of 84%, while hospitality, travel, and restaurants lag behind with 55%.

For eCommerce, the average customer retention rate is typically around 30%. If it exceeds this level, it indicates that your eCommerce business is doing very well in keeping customers satisfied throughout their shopping journey and product quality experience.

In a perfect world, all our retention rates would be 100%, but reality shows us that it isn’t likely to happen due to forces both inside and outside of your control. Some companies achieve higher retention rates than the rest, just because each business has unique characteristics, and retention strategies vary from industry to industry.

The most pragmatic approach to establish an excellent retention rate is to measure and compare your current CRR against your own past performance. According to research by Frederick Reichheld of Bain & Company, an increase in customer retention rate by 5% boosts profits by 25% to 95%. Thus, even a slight improvement in your retention rate over time can accelerate your revenue manyfold.

Why does customer retention matter a lot to your eCommerce business?

Tracking the percentage of customers you retain weekly, monthly, annually, or multiple years if you want to see the big picture, is one of the most efficient ways to determine if your eCommerce business is going to prosper in the future.

There are a few reasons to explain why customer retention is critical to business growth and success:

  • Predict revenue: According to Invespcro, your existing customers are 50% more likely to experience new products and spend 31% more when compared to first-time customers. As a result, customer retention is a good predictor of whether your business will generate higher or lower revenue in the upcoming periods.

  • Re-strategize loyalty programs: Loyalty programs have a significant influence on your customer retention rate. If your CRR takes a dip, it could be that your loyalty programs are not effectively working. You would probably want to make appropriate changes to your reward partnership, promotions, gift cards, and coupons to encourage customer loyalty and repeat purchases. Besides, measuring CRR will indicate how long you’ll be able to keep your customers if you continue with your existing loyalty programs.

  • Boost referral programs: Happy and loyal customers are more likely to sing a company’s praises and refer their friends, family, and coworkers - bringing in new customers and lead generations. It will be a seamless and effective process if the customer retention rate is taken into account.

In addition to the above reasons, you’ll also be able to recognize when a problem is likely to emerge. When your CRR drops below your target or industry averages, it may be due to:

  • A problem with your product or service, which may badly cause unwanted user experiences.
  • A customer service situation, which is making your customers dissatisfied.
  • A competitor or competitors who may have jumped into the game with a newfound competitive advantage, such as more advanced technology, improved buying experiences, better customer services, or product improvement.

Learn more: B2B Loyalty Programs: Top 5 Successful Strategies for Businesses

11 awesome strategies you can take to boost eCommerce customer retention rate

According to Brandongaille, 12-15% of loyal customers to a single retailer can generate 55-70% of sales. Therefore, you can’t underestimate the power of a loyal customer base. Don’t rely on customers who stumble on your website, place an order, and leave right away - without the thought of coming back one more time.

If you’re not sure where to start your CRR programs, here’s a list of customer retention strategies you can implement at your business.

Create peaks in customer experience

A recent report asked companies to indicate the single most exciting opportunity for their organization in the upcoming year. Can you guess what the most exciting chance for a business is?

the single most exciting opportunity for organizations
the single most exciting opportunity for organizations

It’s no surprise that customer experience leads the way, especially in the realm of eCommerce. No matter if your business works as a bricks-and-mortar model or online platform, building an outstanding and practical user experience is a critical requirement. To do that, you should put these things in mind:

  • Know who your customers are by understanding their wants and needs
  • Create an emotional connection with them
  • Make everyday customers delight by surprises

When it comes to enhancing your customer experience, think of valuable ways that make them stick to your brand.

For example, send your customers a handwritten note or gift cards. Customers enjoy it because it shows how much the brand values them as they could spend time writing to every customer manually or provide customers creative ideas for holiday seasons.

These types of stunning displays of appreciation could go a long way, especially in this social sharing world, to improve customer experience and keep your consumers stay for a long time.


Add in-depth personalization

Frequent consumers, bombarded with various marketing and advertising channels every day, are demanding tailored experiences, products, and offers from the brands they support.

Customers want to see products and offers that are directly relevant to their needs and interests. You might have so many products and services, and it’s hard for customers to understand which ones are the best fit for them.

This leads many to puzzle and leave your store (or website) before they can make a decision. Therefore, it urges your company to go through and create ways to make every customer touchpoint personalized.

For example, you can ask yourself:

  • Are your landing and product pages flexible, depending on your website traffic?
  • Are your retention campaigns tailored to each customer based on data insights and segmentation?
  • How can you enhance your offerings based on different ways a user interacts with your site?

Gone are the days of only using keywords to target users. Now marketers can use different ways to target their audience personalization, such as by demographics, live events, purchase intent, behavioral patterns, and so on.

Leverage email marketing

Achieving success in the inbox is vital in a robust customer retention strategy. Amid the dominance of social media and other marketing channels, email marketing continues to be the most effective and in-use way of marketing. In fact, it is the most powerful marketing channel that returns $44 for each $1 spent.

Email marketing
Leverage email marketing

Your retention emails have to be specific. They must reflect an in-depth knowledge of your customers, their pain points, and the desire to encourage customers to continue with subsequent purchases.

One retention campaign best practice is to personalize your customers’ email marketing experience by:

  • Identifying yourself by name and company
  • Addressing them in subject lines by their names
  • Leveraging information about their shopping history in the email itself
  • Including a clear call-to-action (CTA) button

Your retention emails must show customers that you have taken time to understand their needs and journey with your product, and you really want them to come back to your business with deep satisfaction.

You can use professional email marketing extensions to help you deal with this.

Create special customer loyalty programs

Everyone wants to feel special and treated well; therefore, by creating a customer loyalty program, you give them an incentive to continue shopping in your store. You can offer a reward points system, in which customers will collect points. A certain number of points will be rewarded or traded for discounts.

It’s also essential to create specialized loyalty programs for different customer groups and reward your VIP customers with the most benefits. This keeps customers happy and avoids the risk of churn, as they’re getting more experience than just your product or service.

Also, since the top 10% of your customers spend three times more than the rest of your customer base, you’ll want to make sure they are more satisfied.

Learn more: 3 Case studies of outstanding Reward Programs

Loyalty Program

Loyalty Program for Magento 2

Build up a proper tiered program that offers a special discount by order & customer data

Check it out!

Build an engaged community

An engaged brand community connects businesses and customers closer together. It creates benefits in many ways:

  • Creates a space to discuss all updated information about your brands, products, and services
  • Increases interaction, as customers can ask questions, and business owners can answer their queries.
  • Shares events, contests, and other contents
  • Reduces business costs, such as advertising, or word-of-mouth marketing
  • Increases brand loyalty

An easy way to set up a brand community is to take advantage of online platforms, such as groups on Facebook or LinkedIn that fosters engagement.

Incentivize social media

Social media is so much more than just a platform to attract new customers and push new products. It can be and should be used to retain existing customers. When customers follow you on social media, part of your strategy should be building a relationship, trust, and loyalty with your following.

Social media
Incentivize social media

More than being means of building relationships with your current customers, social media may contribute to connecting highly potential ones, because existing consumers may spread the word about your brand, product, or service. This kind of social share appears to be a stone that kills two birds, helping you a lot with your business goals.

Learn more: The Ultimate Guide to Social Media Marketing Strategy!

Offer stellar customer support

Many companies assume that customer service just plays a minor part in their business process.

However, excellent customer support can make a change in your business’s success. Take advantage of advanced artificial intelligence tools like chatbots to handle interactions and augment your customer support.

Using chatbots for minor inquiries can help save time when users need information that can be extracted from a database. At the same time, your live customer care staff can focus on other critical issues.

Meanwhile, you have to take these key facets into consideration:

  • Dedicate to customer satisfaction by every employee
  • Respond immediately
  • Ensure consistent on-time delivery
  • Deliver what you promise BEFORE & AFTER the sale
  • A zero-defects and error-free-delivery process

Leverage customer feedback

Satisfied customers will stay with you, while unhappy ones will eventually leave you and find a better alternative. Customer feedback helps you realize if your clients are happy with your service and detect areas where you should improve.

Leverage customer feedback
Leverage customer feedback

Thanks to asking for customer reviews, you can always keep a finger on the pulse. Each time a dissatisfied customer expresses his disappointment, you can immediately react and find a solution to tackle that issue.

This is a perfect moment to “tow” a client back and even increase his level of loyalty. You can gather customer feedback via email automation to deliver personalized content, customer surveys, or direct conversation to listen to them.

Learn more: How to Improve Your Business By Listening to Your Customer Data

Create customer education programs

By having an online educational presence, you can show your customers that they’re important to you, and you’re willing to provide something of value-free. It could be an effective way to position your company as an industry expert and easily show customers why they should choose you for their next shopping adventures. Your customers learn to trust you through your blog, and they can stick to your brand more easily.

Customer education programs
Create customer education programs

There are lots of different ways to train and educate your customers on how to use your product and service:

  • Create an online academy of training tutorials
  • Build a community of product experts
  • Send a series of emails to guide them
  • Write and update blogs to share knowledge
  • Use live webinars or social media channels

Build long-lasting relationships

Building a relationship with your existing customers is an ongoing process and needs a lot of care and attention.

“It’s important to remember that relationships are a two-way street, “Taylor Fulton, senior manager, marketing services at Allen Press said to He believes that “Brands should both listen and communicate with its audience to build meaningful engagements. This means talking with people, not just talking at them.”

To build relationships, you need to create content that is useful and valuable to your audience and not to be over promotional. Moreover, don’t forget to say “Thank you” as a way of expressing your gratitude to your customers.

You can do this by sending a Thank You card, giving a gift, hosting an event (may be costly, but it is worth it!), or just simply say thanks to them.

thank you page

Thank You Page for Magento 2

Show gratitude for customers, strengthening the relationship between buyers and sellers

Check it out!

Leverage employee base

Last but not least, you need to promote your most invaluable assets - your customer base. Passionate, truly engaged employees are inspired by the company strategies and goals and are compelled to share that passion with customers by delivering excellent customer service and interaction. This creates the company’s brand story from the inside out - from employees to consumers.

Employee base
Leverage employee base

More and more companies are leveraging their employee base by caring for their employees and clearly defining their values and mission and the role each employee plays in retaining their customer base.


Customer retention is about keeping your current consumers happy. Done well, customers become unwilling to switch to other businesses, and you can make it more convenient for them to stay with you than to buy from a competitor.

Hopefully, the above strategies would give you some fresh ideas for approaching retention. However, remember that they’re not a cure-all. Your product and service quality will do most of the heavy lifting in keeping customers loyal, and there are no shortcuts for that.

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Hello, I'm the Chief Technology Officer of Mageplaza, and I am thrilled to share my story with you. My deep love and passion for technology have fueled my journey as a professional coder and an ultra-marathon runner. Over the past decade, I have accumulated extensive experience and honed my expertise in PHP development.

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