7 Driving Strategies for Calculating Customer Retention Rate
Customer retention rate can be one of the most critical metrics in determining your business’s success or failure, especially in highly competitive industries where customers are easily swayed from one brand to another. If you have managed to retain a high percentage of your customers, then congratulations! You’re well on your way to thriving as an entrepreneur because retaining clients means you’re able to grow your business by tapping into those long-term sales channels.
Step 1: List your top 10 customers
To calculate your customer retention rate, you first need to identify your top 10 customers. These are the customers who spend the most money with your business and who you want to keep coming back. To find them, look at your sales records and see who spends the most each month. For example, let’s say that over the past 3 months, one of your customers has spent $1000 per month on products from your store. In this case, that person would be in your top 10 list because they’re spending more than $3000 per year with you. Now, divide the total amount they’ve spent by the number of months (in this case 3) and you’ll get their average monthly spend. You can then multiply that number by 12 to get their annual spending. Finally, divide that number by 2 or whatever number is there (since we’re only counting three months). If we take our previous example where a customer spent $1000/month on products from your store, then we have an annual spend of $36000 divided by 2 equals 18000.
Step 2: Work out when you lost them
The first step in calculating your customer retention rate is to work out when you lost them. You can do this by looking at your records and seeing when they stopped using your product or service, or when they cancelled their subscription. This will give you a good idea of how long you have to retain a customer.
Step 3: How much did they spend with you?
The caculation of customer retention rate is important to businesses because it helps identify how much a customer is worth to the company. To calculate this, you need to take into account how much each customer spends with you over time. This can be done by looking at sales records or invoices. You can also ask customers directly how much they spend on average per month or per year.
Step 4: Divide #2 by #3
To calculate your customer retention rate, divide the number of customers at the end of a period by the number of customers at the beginning of that period. This will give you a percentage that represents how many of your original customers are still using your product or service.
Step 5: Estimate when they left
You can estimate when customers leave by calculating the customer retention rate. This is the percentage of customers who stay with a company over a certain period of time. To calculate customer retention rate, divide the number of customers at the end of the period by the number of customers at the beginning of the period. Then, multiply that number by 100.
Step 6 (Optional): Turn it into a % Number
You can calculate your customer retention rate in a few different ways, but the most common method is to take the number of customers you have at the beginning of a period and divide it by the number of customers you have at the end of that period. This will give you a percentage that represents how many of your customers stuck around during that time frame.
There are a few different driving strategies you can use to improve your customer retention rate.
Step 7 (Optional): What can we do to keep more of our best customers?
There’s no magic number or one-size-fits-all answer to this question – it really depends on your business, your products/services, and your customer base. But there are some general strategies you can use to help improve your customer retention rate.