What, Why & How of Retention Marketing Metrics for E-commerce

Retention Marketing Metrics for E-commerce

As per a report by Walker, businesses need to immediately shift their approach from “customer-focused” to “customer-committed.” 

The reason is simple – happier customers stick with brands for long and become the most profitable pool of all amongst the target audience. For e-commerce brands, this mantra is critical. 

As the cost of containment becomes a priority for e-commerce enterprises looking to grow in the digital landscape, keeping existing customers happy and loyal is now of prime importance. 

“Did you know that 80% of your revenue and profits are bound to come from just 20% of your top retained customers?” 

This is exactly where retention marketing for e-commerce comes into play.

What is Retention Marketing?

Simply put, retention marketing is the business strategy that nurtures and engages customers to come back and buy more. 

For any given D2C or e-commerce brand, retention marketing has 3 goals;

  1. Increase customer repeat purchase rate and bring old customers back into the buying cycle.
  2. Decrease customer churn rates and keep existing customers in the buying cycle.
  3. Increase purchase frequency and get customers to enter the buying cycle more often.

Moreover, retention marketing offers inherent benefits to e-commerce businesses as far as the growth metrics are concerned. 

However, formulating effective customer retention strategies calls for a deep understanding of your brand’s target audience, current customer analysis, and brand engagement. While these retention metrics can be viewed and analyzed within Wigzo’s dashboard itself, let us delve a little deeper for the sake of this blog. 

Before you can formulate an impactful retention marketing plan, you must ask yourself; 

  • How fast are you losing/gaining customers?
  • Are there any revenue leakages? If yes, where are they? 
  • How fast are you losing the revenue? 
  • Why are loyal clients turning away? 

And so on!

What value can an effective retention marketing strategy add to your e-commerce business?

A meticulous customer retention strategy can;

  • Boost your profits by 25-95% 
  • You are 65% more likely to convert an existing customer than a newly acquired one. 
  • You save 5x the costs of acquiring new customers. 
  • Retention marketing boosts your average order value for existing customers – which can be up to 3x more than new acquisitions. 

Also Read: 10 Advanced Customer Retention Strategies for E-commerce

While there are many critical retention marketing metrics, you must track, for the sake of this blog, let us focus on the ones mentioned below. 

1. Revenue Churn Rate (RCR)

What is Revenue Churn Rate?

In simple terms, Revenue Churn Rate represents the revenue you’ve lost from existing customers in a given period of time. 

For instance, you might be losing revenue (leaks) due to product returns, non-returning customers, and so on. Especially for e-commerce companies, RCR is a top-level indicator of customer satisfaction and retention.

Why is RCR important for e-commerce brands?

Overall, RCR provides an overview of your customers’ health and satisfaction with your brand. Your operation and sales teams’ target should be to proactively ensure that no customers have any problems regarding your product or service. They must ensure that customer satisfaction must never reach the point where they choose not to buy from you or decide to shift their loyalty to one of your competitors. 

How to calculate Revenue Churn Rate?

To calculate your RCR, subtract your Monthly Recurring Revenue (MRR) at the end of the month from the MRR at the beginning of the month. You’ll know how much revenue you’ve lost/gained during that period from the retained customers. 

2. Product Return Rate

What is the Product Return Rate?

PRR is simply the percentage of products returned over a given time period compared to the total number of products sold during that period. 

As common sense dictates, your product return rate (PRR) should be as close to 0 as possible!

Why should you focus on PRR?

The product return rate is a crucial metric that all customer success teams must closely focus on. 

If your PRR is going higher, that means you must identify where the products, their delivery, or the overall purchase experience needs to be improved. You can then formulate a damage control strategy to suppress the PRR and take it close to 0 once again. 

For instance, you might be selling fishing gear online. Suppose in Feb, you sold 10k units. However, 3k was returned to you at the end of the month. In that case, your PRR would be 3k/10k x 100 = 30%. You can now investigate the reason for the returns and start controlling your PRR.

3. Customer Retention Rate

What is Customer Retention Rate (CRR)?

CRR is the reverse of your customer churn rate (CCR). It is the number of customers that continue to use your service after a certain time period. It’s the number of customers you keep at the end of the given time period.

Why is CRR important?

Your CRR is the indicator of how well your retention strategy is working. Keeping customers satisfied without much price manipulation will keep your retention rate higher than the average for your niche. 

How to calculate Customer Retention Rate?

Use the following simple formula to figure out your CRR;

Number of customers who continue to buy from you/Total number of customers at the start of a period (multiply this by 100 to get a percentage)

4. Customer Lifetime Value (CLTV)

What is CLTV?

Customer Lifetime Value or CLTV is the measure of how much a customer will spend over the course of his entire tenure with a given brand/business. The average customer lifetime value varies with different niches for e-commerce.

Why should you focus on CLTV?

Customer Lifetime Value is an overall indicator of your profitability vis-a-vis customer acquisition cost. Your CLTV should always be higher than your customer acquisition cost (CAC). 

If you are spending more to acquire a customer than what he/she is bringing in as the revenue throughout their lifetime, your net profit becomes negative. Ideally, your LTV should be higher than the average customer acquisition cost plus other offsets like R&D, etc. 

How to improve your CLTV?

One thing to note is that you can manipulate your CLTV. For instance, you can use a powerful marketing automation tool like Wigzo to increase your CX and kickoff a rewards campaign to extract the most value from each of your paying customers.

5. Time Between Purchases (TBP)

What is Time Between Purchases?

The time between purchases is a retention marketing metric that indicates the time taken by an average customer to buy from a brand again. 

TBP is crucial because it shows you how satisfied customers are with your products and how long they will likely stick with your brand instead of a competitor. 

Why should you optimize TBP?

Optimizing TBP is a core part of boosting your CLTV and overall retention strategy success. 

An increased or rising TBP may indicate that your products are not being recognized well in the market amongst your target audience. I.e., there are likely many similar value options on offer. Or, an increased time between purchases could indicate that your product-life is too long and customers don’t need to rebuy it. 

Comparing TBP with other customer satisfaction metrics is an excellent way to identify the overall strengths and weaknesses of your e-commerce offerings. 

Over to you…

Your retention marketing efforts will work if you’ve correctly figured out the revenue leaks and reasons for customer dropouts. Moreover, you can always power your campaigns with marketing automation to ensure smoother customer acquisition, conversion, and retention. In that case, you can take Wigzo for a FREE spin!

Happy selling 🙂

Saad Mohammad

Saad Mohammad

Full-time marketer, part-time guitar player, and a football fanatic. Saad is a Digital Marketer with 6+ years of experience in the industry.

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