• Main
  • Blogs
  • What does the Customer Retention Rate mean and how to use it correctly?

What does the Customer Retention Rate mean and how to use it correctly?

Customer Retention Rate (CRR) is a key indicator in marketing and customer relationship management. It measures how many customers stay with the company over a period of time compared to the total number of customers at the beginning of that period. CRR helps you evaluate the effectiveness of customer retention strategies and understand how successfully a company retains its customers after their first purchase or registration.


It is important to note that the CRR can be measured for different time periods, such as a month, quarter or year, depending on the needs of the company. A high CRR usually indicates successful customer retention, which contributes to increased revenue and profits through repeat sales and sales of additional services or goods to customers who already have the company.


The Customer Retention Rate (CRR) is not only an indicator of the effectiveness of customer retention strategies, but also a tool for solving several important marketing tasks.


  • Evaluating the effectiveness of retention strategies:

CRR allows you to evaluate the success of retention programs, promotions, and marketing initiatives. Changes in CRR over time help marketers determine which strategies work best.


  • Preventing the loss of customers:

CRR calculation allows companies to quickly identify customers who are starting to leave and take measures to retain them, such as providing discounts or personalized offers.


  • Revenue forecasting:

By knowing the CRR and average revenue per customer, marketers can predict future revenue from the existing customer base and determine the effective cost of attracting new customers.


  • Studying customer needs:

CRR analysis helps you understand what makes customers happy and keeps them happy. This information can be used to improve products and services, as well as to develop more accurate marketing strategies.


Retention Rate is a key metric for assessing the long-term sustainability of a business and understanding how successfully a company builds relationships with customers.


Why should the Retention Rate be considered?


Increased profits. A high Retention Rate means that customers who remain with the company on a long-term basis bring stable and recurring income. This increases the advertising return (ROAS), as such customers are prone to repeat transactions and purchases of additional services. Therefore, the company can reduce advertising costs and use these funds to expand the business.


Customer retention allows companies to reduce the cost of attracting new customers, which usually require large marketing investments. The Retention Rate assessment helps companies determine the effectiveness of investments in customer retention. Long-term customer relationships also contribute to strengthening the company's brand and reputation. Loyal customers, who feel that their interests are important to the company, often recommend the brand to others, which contributes to its growth and success.


The Retention Rate counter helps marketers and managers better understand customers, their needs and expectations, which helps to develop effective retention strategies and increase company revenue.


How to calculate Retention Rate


The formula for calculating the Customer Retention Rate (CRR), as a rule, looks like this:


CRR = ((E — N) / S) * 100


Where:

  • E is the number of customers at the end of the period.
  • N is the number of new clients attracted during the period.
  • S is the number of customers at the beginning of the period.


This formula allows you to estimate how many customers were able to retain in a certain period of time. CRR is usually expressed as a percentage. The higher the CRR, the better it is able to retain customers.


There are 4 different ways to calculate CRR:


1. Rolling retention: This method takes into account users who return on certain days after the attraction. For example, if the application was installed on day 1, and the user returned on day 40, he will be counted in the CRR.


2. Bracket-Dependent Return Retention: In this case, users are counted if they are active in a certain time range after the engagement. For example, if a user is active at least once between 36 and 48 days after installation, they will be counted in the CRR.


3. Return Retention: This method takes into account users only if they periodically return at certain intervals. For example, if the user returns at least once within 40 days, he will be counted.


4. Full Retention: Only users who use the product every day during a certain period are counted here. For example, casino players who play every day from the 1st to the 40th.


Cohort analysis is often used to assess retention over time instead of simply accounting for fixed periods of time. This allows you to more accurately assess the effectiveness of customer retention in different groups and periods.


Yes, it is important to analyze the CRR on different days after the starting point in order to understand how the level of customer retention changes over time. This allows you to identify trends related to the days of the week, seasonality and effectiveness of marketing activities.


Churn Rate is really the opposite of CRR. It measures the percentage of customers who stopped interacting with your company during a certain period of time. The higher the Churn Rate, the faster the company loses customers. Monitoring this metric allows you to identify problem areas in a product or service that may lead to an outflow of customers.


Churn Rate = (N customers who left by the end of the month) * (N customers who bought again) 100 %


LifeTime Value (LTV) estimates the average profit that a company will receive from a customer over its lifecycle. This indicator allows you to assess the value of a client for a company and determine how effectively to invest in attracting and retaining customers.


LTV = (Average revenue from customer purchases) * (The average number of customer purchases over the entire time of interaction with the company)


Studying all these metrics together allows companies to better understand customer behavior, the effectiveness of their retention strategies, and maximize their profitability.


How to understand if your Retention Rate is normal


Indeed, analyzing and understanding Retention Rates in the context of a particular industry and type of business is key to determining what is considered a norm or a good outcome. Here are some additional steps that can help you evaluate and increase your CRR:


  • Do a competitor study: Study the Retention Rate of your main competitors. This will help you understand how your company is doing compared to other players in the market.
  • Conduct customer surveys and interviews: Get feedback directly from your customers. Find out what holds them back, what they value about your product or service, and what can be improved.
  • Analyze outflow points: Examine the points at which customers leave your business and identify possible reasons for leaving. This can help you develop strategies to retain customers.
  • Use Personalization and Recommendations: Use customer behavior data to provide personalized offers and recommendations that can help retain customers and increase their loyalty.
  • Constantly test and optimize: Experiment with different customer retention strategies and analyze their results. This will help you identify the most effective retention methods and optimize your approach to customer retention.
  • Invest in customer training and service: Trained and competent employees can make a significant difference to the customer's experience and loyalty to your company. Invest in staff training and the development of customer service programs to improve the quality of service.


Applying these steps will not only help you evaluate the current Retention Rate, but also develop strategies to improve it, which contributes to the growth of your business and increase customer loyalty.


How to increase Retention Rate


Email Marketing


An email marketing strategy is a powerful tool to increase Retention rates and strengthen customer relationships.


  • Personalization makes your communication with customers more meaningful and relevant to them, which helps to increase their engagement and loyalty.
  • Dividing the audience into segments allows you to send more targeted and relevant messages, which increases the likelihood of their successful delivery and attracting customer attention.
  • Providing useful information helps to keep customers interested in your brand and build their trust.
  • Collecting feedback allows you to better understand your customers' needs and preferences and adapt your retention strategies accordingly.
  • Automating the messaging process allows you to effectively manage communication with customers and send messages at specific times for maximum impact.
  • Continuous monitoring and data analysis helps to determine the effectiveness of your marketing strategies and make the necessary adjustments to improve Retention Rate.


Using these strategies together with the right choice of communication channels will help your company retain customers, strengthen ties with them and increase their loyalty.


Push notifications


Push notifications are indeed a powerful tool for interacting with users of mobile applications, especially in business areas where the customer base actively uses mobile devices. Here are some additional examples of the areas of application and the main reasons for sending push notifications:


  • Notifications about new features or app updates: Push notifications can be used to inform users about new features or functions of your app, which contributes to their engagement and increased activity.
  • Reminders about in-app activity: For example, reminders about an abandoned shopping cart in an online store or about pending tasks in a task management app.
  • Event and News Notifications: Push notifications can be used to inform users about upcoming events, promotions, or important news in your company or industry.
  • Personalized recommendations and suggestions: Sending personalized recommendations and suggestions based on the user's previous actions in the app helps to increase conversion and retain customers.
  • Security notifications: For example, notifications about suspicious activity in the account or the need to update the password to ensure the security of user data.
  • Interesting Facts and articles: Push notifications can be used to send the user interesting facts, articles, or tips on using your application or services.


Using push notifications in combination with user behavior analysis and message personalization allows you to effectively interact with your audience, increase their loyalty and keep them in the app.


Loyalty programs


Loyalty programs are a great way to increase Retention Rates and keep customers in your brand on a long-term basis. Here are a few key types of loyalty programs that can help with this:


  • Bonuses and Rewards: Giving customers bonuses or rewards for each purchase or certain actions helps to stimulate their activity and increase loyalty.
  • Cumulative points: Creating a system of cumulative points that customers can exchange for discounts, gifts or other bonuses motivates them to make repeat purchases.
  • Discounts and Personalized Offers: Giving customers special discounts and personalized offers based on their previous purchases or behavior increases their interest and motivation to purchase.
  • Referral Bonuses: Encouraging customers to attract new customers through referral link programs helps expand the customer base and increase the loyalty of existing customers.
  • Clubs and privileges for regular customers: Creating clubs or programs with privileges for regular customers, such as access to exclusive promotions, events, or personal service, strengthens the bond between the customer and the brand.


It is important not only to offer various bonuses and benefits, but also to interact with the participants of the loyalty program in order to understand their needs and preferences, as well as receive feedback to improve the program and increase its effectiveness.


Chatbots


Chatbots really play a key role in improving the customer experience and increasing Retention Rates. Here are some strategies for using chatbots that can help achieve this goal:


  • Chatbots can promptly answer customer questions at any time of the day, which creates the impression of efficiency and accessibility of your company.
  • Use customer data so that chatbots offer them relevant products and services based on their preferences and purchase history, which helps to increase satisfaction and loyalty.
  • Chatbots can conduct surveys and collect feedback from customers about the quality of service, which will help you improve your product or service.
  • Use chatbots to offer personalized discounts and offers to customers based on their profile and actions, which increases the likelihood of their refund.
  • Chatbots can inform customers about new products, features and updates, which helps to retain and return customers.
  • Set up chatbots to automatically send messages based on events such as customer birthdays or holidays, which strengthens the connection with customers and increases their loyalty.
  • Segmentation and Targeted messages: Use chatbots to send targeted messages to different groups of customers depending on their interests and behavior, which makes your communication with customers more effective and relevant.


Chatbots are indeed an effective tool to increase Retention Rates and improve the customer experience, as they provide a personalized and instant service that facilitates customer retention and return.


Social network


Social networks are a more developed platform compared to chatbots. In them, users can interact not only with the company, but also with each other. They offer a wide range of tools such as text and visual posts, videos, stories, live broadcasts, private messages and comments. This allows companies not only to promote their products, but also to hold contests and warm up the audience before sales. Interacting with company representatives on social media platforms creates a sense of personal connection and trust among customers. Comments on publications also contribute to strengthening this trust relationship.