The 5 key metrics that can be used to evaluate the Customer Retention Strategy are described as follow:
1.Customer Retention Rate (CRR)
The CRR deciphers the percentage of existing customers who made repeated purchases to the business over a timeframe and shows the degree of customer loyalty to the company.
2. Repeat Buyers versus First-Time Buyers Ratio
This metric is a means to measure in a specific period how many of the buyers are repeat buyers and how many are first time buyers.
3. Time Amid Purchase Actions
If the retention strategies are good enough, then it will show off between time amid actions. This metric helps to measure the retention program’s effectiveness to analyse the correlation between the retention strategy and time between the purchase actions.
4. Repeat Purchase Action Frequency and Probability
Customers are more prone to come back for more purchases if they have a great experience. The frequency that customers purchase can be analysed, and the probability of future purchases can be predicted from the spectrum.
5. Lifetime Value of a Customer (LTV)
Lifetime Value (LTV) calculation is the method by which a business calculates the value of a customer. The formula to calculate LTV is as below:
LTV= Average Value of Sale x Number of Transactions x Retention Time Period
The higher the LTV, the more valuable the customers are to the company.
All the above qualitative and quantitative metrics will highlight the effectiveness of customer retention strategy. They will provide the business with in-depth informatory data that will help in fine-tuning the customer retention strategy and plan.