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What is Customer Retention Rate?

Customer Retention Rate is the percentage of customers who continue using your product over a given period.


Customer Retention Rate formula.

Customer Retention Rate = [(No. of customers at the end of the time period - No. of new customers gained during the time period) / Number of customers at the beginning of the time period] x 100


A Customer Retention Rate metric is more relevant if you have a subscription model in your online store. Here, the time-period is important because the longer you retain the customer, the more valuable the customer is. While Repeat Customer Rates treat all repeat customers as equal, Customer Retention Rate treats customers who stick around longer as more valuable.

You may also want to look at customer churn rate as a metric, which would be the inverse of the customer retention rate, e.g., if customer retention rate is 30%, churn rate is 70%.


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What are the industry benchmarks for Customer Retention Rate?

Shopify's research indicates that a repeat purchase rate of 27% can be considered a good baseline.


How can you improve Customer Retention Rate for your store?

To increase your customer retention rate, you can offer return shopping discounts. You can give your customers incentives to keep shopping with you by giving them discount coupons and various offers.

Reward points per transaction. You can also give reward points to the customers after every purchase which they can use after reaching specific numbers.

Free gifts and other exclusive offers to create a good first impression on their shopping experience with your store. It’s easier to get the customers to come back when they have a good first impression of your store.


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