Customer Retention Metrics

How do you track the success of customer or account management programs?  Here are some examples I’ve seen:

  • Customer retention rate = The percentage of customers who stay with you over the total number of customers.  The downside is that this number ignores the fact that some customers are more important/valuable than others.
  • Revenue retention rate = Percentage of total potential revenue retained.  This metric misses the impact of account expansion but works better in environments with predictable customer contracts.
  • Average customer revenue (revenue yield) = total revenue divided by the number of customers.  This  gives you a sense of how well you are growing your wallet share with customers.
  • Repeat purchase rate: As the name implies, this reflects the percentage of business from existing customers.
  • Net promoter score: The industry standard metric captures how likely a customer is to tell a friend about your business.

I’ve seen a range of approaches and find that more than one metric is often needed to tell the whole story.

Did I miss any other meaningful retention metrics?

Author: Frank Days

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2 Comments

  1. I think there’s something like concentration ratio that’s interesting. What % of revenue do you get from the top x% or top N customers? If that’s a high number, it might be worth tracking your retention metrics separately for top customers and the rest.

    But what’s lacking in most of your metrics above any also in my suggestion here is predictive value for retention. What figures can you derive that can tell you which customers are more likely to stay or leave *before* they do, and can you intervene positively on the latter cases? Net promoter is one, but are there others that are more actionable in a given business?

  2. Like Limeduck, I was going to suggest a concentration ratio or some variant on the Pareto principle. In addition, I would suggest lifetime value (LTV) as a customer retention metric. For a cellular phone company I estimated the lifetime value of its customers by calculating the discounted value of their expected future revenue with the company. This addresses some of the issues raised by Limeduck and enables you to segment customers based on future value as opposed to their value in the past.

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  1. Marketing Analytics » Lifetime Value - [...] had a recent post about customer retention metrics.  To his list, I would add lifetime value.  There are many…

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