5 indicators of low customer retention

While it is an unfortunate reality of just about any business, no one wants to lose their customers, especially not in significant amounts. Statistically speaking, it can cost around 5 times as much to find new customers as it does to keep an old one you already have. If it’s possible to reduce the drop-off from customers by as little as 5% then you could stand to increase profits anywhere from 25% to 135%. It goes without saying that any unhappy customers won’t want to hang around to do much more business, leaving you continually chasing new ones.

Additionally, the unlimited reach of the internet means negative reviews can spread like wildfire. Any unhappy customers can share their experiences with others like never before, and you can soon find yourself losing business. There’s also a lot more to customer loyalty than just the money it brings in. Not only does it make life much easier, but it’s also a great way to take advantage of some free publicity too. Your satisfied customers are likely to write positive online reviews and spread the word around to their friends.

If this is something you’ve been concerned about then you’ve come to the right place. To make sure you’re getting the most out of your customers, we’ve put together 5 of the top indicators of low customer retention.

 1. Net Promoter Score (NPS)

One of the best ways to understand your customer base is with your net promoter score. All you have to do is survey your existing customers to see who will and who won’t recommend you. An online NPS calculator can help you to work out your score and track changes. Once you’ve input the data from your survey, an NPS calculator will organise it into three different groups:

  • Promoters (anyone giving a rating between 9 and 10)
  • Passives (anyone giving a rating between 7 and 8)
  • Detractors (anyone giving a rating of 6 or below)

Your NPS score is then calculated as a number between -100 and 100, giving you a clear indication of just how satisfied your customers are.

 2. Churn Rate

Another indication of low customer retention is your churn rate. This is essentially the number of customers no longer engaging with your business, which could be a customer that simply had no interest in hanging around or someone that’s opted out of a subscription service. It’s always a good idea to evaluate your churn rate regularly, especially if you have a high number of customers. To calculate your churn rate, simply count up all the customers you have at the end of one month, do the same the next, and work out what percentage was lost. You’ll also want to take into account all the new customers you gained going forward.

3. Repeat Purchase Ratio

Repeat purchase ratio (RPR) is the percentage of customers returning to do more business. This is one of the best ways to establish customer loyalty, and a low RPR will be a pretty definitive indication of low customer retention. Calculating RPR is pretty simple. If you’ve 10,000 subscribers to a product at the beginning of a month and only 5,000 returning at the end then your RPR would be 50%. While your churn rate will need to be worked out at specific times for it to be valuable, your repeat purchase ratio can be calculated at any time.

4. Poor Loyal Customer Rate

A loyal customer rate is pretty self-explanatory: it simply shows the number of customers in a specific timeframe who are continuing to make purchases. With a poor loyal customer rate, you naturally won’t be retaining much business. It’s always a good idea to keep tabs on the number of loyal customers you have. Their repeat purchases are going to be most valuable to your business. As mentioned above, the most loyal customers help not only with sales, but also provide some ever-helpful free publicity. If you’ve noticed your loyal customer rate has started to wane, think about what you can do to reward loyalty and promote more return sales.

5.  Product Return Rate

 The final example of low customer retention is product return rate. While there are countless reasons why someone may choose to return a product, none of them are good for your business. You want to keep your product return rate as close to 0% as possible, as anything too high will be a good indication of low customer retention. The average Rate typically sits somewhere between 9% and 20%. This is something you’ll definitely want to be paying close attention to, especially if it’s reaching 20% or more. If everyone’s sending their items back then there’s a good chance that they won’t be returning to do more business, and neither will they have anything good to say to their friends and family. If you think low customer retention could be causing your business to drag then all of the above indicators are a great place to start. Keeping a regular eye on these will be a huge benefit and can help you to track any patterns that may emerge. To get the best out of your customers, try and think of what offers, promotions or services could encourage them to return and ultimately give a big, long-term boost to your business going forward.


TBN Editor

Time Business News Editor Team