Retention rate is the percentage of customers who come back to your app/website in order to perform a certain action such as making a purchase. Retention rate measures the percentage of customers who return to your website or app, compared to the percentage of customers who have churned.
To calculate your retention rate, simply subtract your churn rate from 1.
Retention Rate = 1 – Churn Rate
The reasons why the retention rate is an important metric:
According to a Bain & Company report, improving retention rates by even 5% increases profits by more than 25%. Also, the probability of selling to an existing customer is at least 40 %more likely than converting someone who has never bought your product. Hence, retaining users is crucial to driving higher revenue for your app and your business.
To sum up :
- It is important because they’ve already bought from you before. A study shows that repeat customers spend 67% more on average than new customers.
- Earning loyalty and love from current customers increases the chances of them recommending you to their friends. Word-of-mouth, or friendly recommendations made over time, is the most common way your business can find net new customers.
- You don’t have to spend money to go find your existing customers. You already have their email addresses. Now, you just have to figure out how to engage and influence them to convert again.
Effective Ways to Improve Retention Rates:
- Improve customer experience
- Collect customer feedback
- Create a loyalty program
- Offer incentives and discounts