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Last updated on 2024年8月12日

What are the key consumer goods retention metrics and how to track them?

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Customer retention is crucial for any consumer goods business, as it affects revenue, profitability, and customer loyalty. But how do you measure and improve your retention rate? In this article, we will explore some of the key consumer goods retention metrics and how to track them using various tools and methods.

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Seif Abdelghany

The Master Product Manager The Consumer Electronics Expert
Ryan Murray

Keeping it local | Staff Nantucket

1 Retention rate

Retention rate is the percentage of customers who make repeat purchases within a given time period, such as a month, a quarter, or a year. It indicates how well you are retaining your existing customers and how satisfied they are with your products and services. To calculate your retention rate, you need to know the number of customers who made at least one purchase in the current period (C), the number of customers who made at least one purchase in the previous period (P), and the number of new customers acquired in the current period (N). The formula is: Retention rate = (C - N) / P x 100%. For example, if you had 100 customers in January, 120 customers in February, and 20 new customers in February, your retention rate for February would be: (120 - 20) / 100 x 100% = 100%.

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Seif Abdelghany

The Master Product Manager The Consumer Electronics Expert
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From my experience, "tracking retention metrics is vital for understanding customer loyalty." In the home appliances industry, monitoring our retention rate provided insights into how well our products met customer expectations and where we could improve. 1) Focus on customer feedback to identify areas where your product or service may be falling short, leading to potential churn. 2) Analyze trends in retention over different periods to identify patterns and potential issues. 3) Use retention data to refine customer engagement strategies and enhance product offerings. Ultimately, tracking retention metrics helps ensure that your efforts are aligned with maintaining and improving customer satisfaction.

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2 Repeat purchase rate

Repeat purchase rate is the percentage of customers who make more than one purchase within a given time period, such as a month, a quarter, or a year. It indicates how often your customers come back to buy from you and how loyal they are to your brand. To calculate your repeat purchase rate, you need to know the number of customers who made more than one purchase in the current period (R) and the number of customers who made at least one purchase in the current period (C). The formula is: Repeat purchase rate = R / C x 100%. For example, if you had 120 customers in February and 60 of them made more than one purchase, your repeat purchase rate for February would be: 60 / 120 x 100% = 50%.

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3 Customer lifetime value

Customer lifetime value is the average amount of revenue that a customer generates for your business over their entire relationship with you. It indicates how valuable each customer is to your business and how much you can invest in acquiring and retaining them. To calculate your customer lifetime value, you need to know the average order value (AOV), the average number of purchases per customer (F), and the average retention rate (R). The formula is: Customer lifetime value = AOV x F x R. For example, if your average order value is $50, your average number of purchases per customer is 5, and your average retention rate is 100%, your customer lifetime value would be: $50 x 5 x 100% = $250.

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4 Churn rate

Churn rate is the percentage of customers who stop buying from you within a given time period, such as a month, a quarter, or a year. It indicates how many customers you are losing and how much revenue you are missing out on. To calculate your churn rate, you need to know the number of customers who left your business in the current period (L) and the number of customers who were active at the beginning of the current period (A). The formula is: Churn rate = L / A x 100%. For example, if you had 100 customers at the beginning of February and 10 of them left your business by the end of February, your churn rate for February would be: 10 / 100 x 100% = 10%.

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5 Net promoter score

Net promoter score is a measure of customer satisfaction and loyalty based on a simple question: How likely are you to recommend our product or service to a friend or colleague? It indicates how happy your customers are with your business and how likely they are to spread positive word-of-mouth. To calculate your net promoter score, you need to ask your customers to rate their likelihood of recommending you on a scale of 0 to 10, where 0 is extremely unlikely and 10 is extremely likely. Then, you need to categorize your customers into three groups: promoters (9-10), passives (7-8), and detractors (0-6). The formula is: Net promoter score = (Promoters - Detractors) / Total respondents x 100%. For example, if you had 100 respondents and 50 of them were promoters, 30 were passives, and 20 were detractors, your net promoter score would be: (50 - 20) / 100 x 100% = 30%.

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Marc R?ger

Strategy and Marketing
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When using NPS, it is important to always keep its limitations in mind 1. Lack of actionable insights: NPS is simple but not always actionable. It doesn’t provide data on what needs to be improved. 2. It is inward-looking: NPS is more about the company’s perspective rather than the customer’s perspective. 3. NPS doesn’t account for competitive dynamics such as the competitive landscape. 4. People’s behavior often doesn’t align with their NPS categorizations. Asking about actual advocacy, rather than their inclination to recommend, usually produces more useful data. 5. The concept of passive customers (scoring 7-8).

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Ryan Murray

Keeping it local | Staff Nantucket
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Starbucks is the leader in this. They excel in customer engagement by integrating loyalty programs, a user-friendly mobile app, and personalized marketing to boost retention and repeat purchases. Their strategy includes leveraging customer feedback for a high Net Promoter Score (NPS) and employing personalized offers to increase customer lifetime value. Starbucks’ focus on convenience, rewards, and community engagement minimizes churn and fosters customer loyalty. This comprehensive approach demonstrates how utilizing key retention metrics can drive sustained business success and deepen customer relationships.

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6 How to track them

To track consumer goods retention metrics, you can use a variety of tools and methods that depend on your business model, goals, and resources. Customer relationship management (CRM) software is a popular choice, as it helps manage and analyze customer data, like contact information and purchase history. Additionally, analytics platforms are great for collecting and visualizing website or app data, while surveys and feedback forms can gather direct feedback from customers. These tools can be used to measure retention rate, repeat purchase rate, churn rate, and net promoter score, as well as identify trends, patterns, and opportunities for improvement.

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Ryan Murray

Keeping it local | Staff Nantucket
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The CRM is a necessary tool to centralize customer interactions which is what all these metrics are based off of. Some of my favorite insights from properly utilizing these metrics are finding the most loyal and profitable customer segments. Resulting in more guided targeted marketing efforts. HubSpot has been an incredible tool when properly utilized for finding these conclusions. Typically managing tools like these can require many resources and I see small brands making key hires to be full time CRM managers. That shows how important they are for an organization.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Bradley M.

IT Project Management | SSM | Data & Analytics Platforms
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Data Reliability: Accurate customer data is the foundation. Without it, any metric would be misleading. Reporting Hierarchy: Establish a clear reporting structure. This involves designating roles like market analysts for coherent data interpretation and decision-making. Measurement Intervals: Decide on regular intervals (monthly, quarterly). This helps in identifying trends and implementing timely changes. Business Strategy Alignment: Ensure that the measurements aligns with the overall business strategy and involves key stakeholders for cohesive action. Continuous Improvement: An iterative review process helps in adapting to market changes and maintaining best practices.

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What are the key consumer goods retention metrics and how to track them?

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1 Retention rate

2 Repeat purchase rate

3 Customer lifetime value

4 Churn rate

5 Net promoter score

6 How to track them

7 Here’s what else to consider

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