User Retention Rate

User Retention Rate

When looking to improve your e-commerce business, the emphasis typically centers on acquiring new customers. Nevertheless, the significance of existing customers and the untapped potential within this group becomes evident when considering the user retention rate metric. This article will outline what it is and will talk about strategies for boosting your e-commerce customer retention rate, highlighting the value inherent in nurturing and retaining your current customer base alongside acquiring new ones.


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What is user retention rate?

The user retention rate, also called the customer retention rate, is a key metric gauging the continuity of customers within a specified period, offering insights into the churn rate of your e-commerce business. It serves as a benchmark reflecting customer experience and satisfaction. This metric, measured across different periods based on industry standards, provides valuable information about customer loyalty. Understanding the user retention rate enables businesses to strategically address reducing churn and optimizing the potential of their existing customer base.

You can gain valuable customer feedback to understand how they can have a better customer experience with your shop. Getting repeat business from an existing customer is typically easier than seeking a new customer, so maximizing one’s customer retention strategy can boost the bottom line.

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How to calculate user retention rate

Assessing customer retention rate entails examining your eCommerce store analytics to gauge the number of active users who have made repeat purchases. This key performance indicator (KPI) evaluates the ratio of customers acquired and retained over a specific period compared to the total number of customers at the beginning. By focusing on retention metrics, user experience, and customer success, you gain valuable insights into the effectiveness of retaining and engaging active users over time.

User retention rate formula 

User retention rate = [(number of new customers at the end of a given period - number of new users acquired during that given period)/number of customers when the period began] x 100

What is a good customer retention rate?

A good user retention rate can vary depending on the industry, business model, and the specific characteristics of the product or service. Generally, a higher user retention rate is desirable, indicating that a significant proportion of users continue to engage with the product over time. However, what constitutes a "good" retention rate can differ. Regularly monitoring and analyzing your specific industry benchmarks and comparing your rates to those can help you assess the effectiveness of your retention efforts.

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What is a bad customer retention rate?

A "bad" user retention rate is generally one that falls significantly below industry benchmarks or fails to meet the business's goals and expectations. However, it's important to recognize that what might be considered a low retention rate can vary based on factors such as industry, business model, and the nature of the product or service.

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User retention rate KPI examples & templates

You can measure user retention data in some of our templates!

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Ecommerce report template Ecommerce report template

A report with all the most critical metrics for your eCommerce site, like the number of users, shopping cart abandonment, customer lifetime value, click-through rate, and revenue. Gather data from Shopify, Google Analytics, and different advertising platforms.

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Executive report template Executive report template

This dashboard template is filled with user acquisition metrics your C-suite will want to see. Please show them your revenue, new customers, churn rate, and more. For a better overview, you can add some customer satisfaction KPIs, gross margin, or customer data.

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Google Analytics report template Google Analytics report template

Demographics, traffic, time on site, conversion back, new users... your client’s websites generate a lot of GA4 data, and keeping up with it constantly can be tiring. Our GA4 report template lets you gather all those key metrics in one great, custom report that your clients will love.

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User retention rate best practices

If you are seeing low retention, here are a few initiatives you can try to keep retaining customers and turning them into loyal customers.

Customer Retention Rate best practices

step 1 icon Develop a customer loyalty program

Creating an incentive for customers to shop again will help you achieve a good retention rate. Offering referral rewards and pricing discounts will build repeat customer relationships that boost your loyalty and improve the customer's lifetime value. Streamline navigation, ensure intuitive design, and optimize page load times. A positive UX can significantly impact user satisfaction, making them more likely to return.

step 2 icon Learn about your customers

Disseminate surveys, seek feedback, and grasp customer expectations. Leverage social media for direct communication with existing customers, broadening your marketing strategy to incorporate insightful interactions. The depth of your understanding of customers enables enhanced service provision, fostering repeat business. Employ the Net Promoter Score (NPS) to acquire crucial feedback and then delve deeper, particularly focusing on aspects like functionality, onboarding experience, and messaging.

step 3 icon Invest in Customer Success

Reflect on all of your important metrics, the KPIs in your onboarding process, the lifecycle of typical customers, and their behavior within a timeframe. Establish a robust customer support program to support users in achieving their goals with your product or service. Offer proactive assistance, tutorials, and resources to help users derive maximum value. Regularly solicit feedback to understand user needs and concerns and address issues promptly. A satisfied customer is more likely to stay loyal, contributing to a higher retention rate.

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