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Know-How Exchange

Topic: Research/Metrics

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This question has been answered, and points have been awarded.

How To Measure Customer Retention?

Posted by Anonymous on 25 Points
I want to know a formula how to measure the retention of customers, as well as their satisfaction

  • Posted by Carl Crawford on Accepted
    hi try this google search:

    http://www.google.com/search?hl=en&ie=UTF-8&as_qdr=all&q=measure+customer+s...

    http://www.google.com/search?hl=en&lr=&ie=UTF-8&as_qdr=all&q=measure+custom...

    this one has over 150,000 sites!!

    hope this helps

    sorry i dont have time too find the best ones for you

    Carl Crawford
  • Posted by mgoodman on Accepted
    A formula? Isn't "retention" the ratio of customers who come back for more to total old customers? Of course, some customers are going to leave the market, die, chase a lower price somewhere else, etc., but if you know how often a customer typically purchases in your industry/category, you can calculate retention with this formula:

    R = b / t

    where R is the retention rate; b is the number of customers who are reordering; and t is the total number of old customers that could/should have reordered (i.e., purchase cycle suggests they are probably back in the market).

    It's not perfect, but it will give you a start. (Not perfect because the repurchase cycle is not always the same for every customer. As you amass more data, the measure should be increasingly accurate and useful.)

    Satisfaction can be measured with a survey mechanism, but doing that right requires professional market research assistance and may not be worth it. If your retention rate is high, you can assume high satisfaction. If retention is low, you want to know the REASONS for dissatisfaction, not just the absolute level. (Of course, it might be useful to know about competitors' satisfaction levels, and their areas of vulnerability.)

    Hope this helps. Let us know if this is what you were looking for.
  • Posted by pat.divilly on Accepted
    For Customer Satisfaction measurement check out a white paper at http://www.marketware.biz/white_papers.htm

    Working on getting the satisfaction levels up is a necessary but not sufficient requirement to improve retention.
    Regards
    Pat Divilly
    CEO MarketWare International
  • Posted by Blaine Wilkerson on Accepted
    I recommend visiting a website dedicated to CRM:

    www.CRMguru.com

    It is pretty awesome. Subscribe to their newsletter as well..it has a lot of informative articles, seminars, etc.
  • Posted on Accepted
    Hi Aaheneidy

    You should look at your Lifetime Customer Value (LCV) per segment of your customers. You can calculate this on a yearly basis and also estimate average timescales your customers stay with you. You need to know your cost per trier,% conversion from trial to regular purchaser, annual profit value per regular purchaser and likely loyalty time period.

    Knowing your LCV will show you how much you can spend on customer retention and also how much you can spend on gaining new ones.

    Another important measure is Share of Customer. This measure the level of committment from your customer. Share of customer is the brand's market share of individual customer. This also gives you opportunities to increase revenue from existing customers.

    Various studies have shown that if you increase retention by just 5% it can increase operating profits by 50%.(F. Reichheld - The Loyalty Effect, Harvard Business School Press 1996)

    Hope this helps expands your thinking.

    Zahid Adil
  • Posted by Sharon on Moderator
    Hello all. I am closing this question. This is standard procedure when the question author gets busy and falls out of the conversation for a while – or doesn’t understand the procedure for closing.

    Thanks for participating!


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