What is Customer Retention Rate?
Customer Retention Rate answers the question: how many of your customers are you retaining over time? The first month is always 100% retention. This matches the amount of people you acquired that month, so these are automatically considered “retained.” But after each calendar month, how many customers came back and made yet another purchase? If they came in month 4, Peel considers them not churned in months 1, 2, 3. So, the numbers go up to the left as time goes on if people from that cohort come back and repurchase.
How to use Customer Retention Rate
Peel looks at the percentage of customers retained after the number of months. As you look to the right horizontally, you’ll see the retention rate across each month. It is a number that changes as each month goes by because you are still retaining or churning people as time goes on. The percentages go down only when customers stop purchasing in the future. The higher retention, the stronger the business because it means that more people are coming back and purchasing more. This information can fuel actions like email campaigns or SMS messaging to encourage customers to stay within your ecosystem and make subsequent purchases.