Your goal in calculating the customer retention rate is to find out the number of customers who have stayed till the end of a given period barring the new customers who were acquired during that time. The formula is applicable to any type of e-commerce company, regardless of its size. Let’s get straight down to the calculation.
Key pieces of information you’ll need:
a) The number of customers at the start of a given period, let’s denote it with the letter ‘S’.
b) The number of customers at the end of that time period, denoted by ‘E’.
c) At that period, new customers (represented by the letter ‘N') were acquired.
Once you have these data points, use the following formula to calculate the customer retention rate:
(E-N/S) x 100 = Customer Retention Rate
An example will help you better understand this metric.
Let’s assume you had 100 customers at the beginning of the one-month period you have chosen for tracking (S). During this time, you lost 5 customers but gained 15 new customers (N). So at the end of the one-month period, you have 110 customers (E). Add these numbers to the formula:
CRR= [(110- 15) ÷ 100] x 100 = 95 %
This shows that your customer retention rate for the one-month period
The optimal and desired rate is 100 percent, which means you haven't lost a single customer, but this is unrealistic and shouldn't be a concern; instead, strive for at least 85 percent, which will ensure the company remains safe and scalable.
