Your current customer base is a great place to look for growth. They are free to re-acquire because you have already acquired them. Depending on your product, acquiring new customers can be very expensive, especially if you are constantly needing to replace customers who are churning. Essentially, avoid trying to fill a bucket with a hole in the bottom. Plug the leak first!
Customer retention is worth your time!
Putting your effort into customer retention is worth it. Want proof? Check your Peel Dashboard for your Customer Lifetime Value
Customer Lifetime Value
You can see from earlier cohorts that the longer customers stick around, the more revenue we earn from them. Putting effort into customer retention will drive up your Customer LTV and bring overall revenue with it.
In this section:
- How to measure overall retention of your store’s customers
- Use segmentation and cohorts to identify which customers are churning
- Best-in-class strategies and tools to boost customer retention
How to measure customer retention for your store
It’s important to find the customer retention metrics that are best suited to your type of business. For example, a subscription business would be more interested in how many customers return each month, where a DTC furniture store would expect higher value but less frequent purchases.
Overall retention metrics for non-subscription businesses:
Repurchase rate measures the percentage of customers who make two or more purchases. To kick start your analysis, start by measuring how many customers you can bring back for at least one more purchase.
Look overall at all the cohorts, and you can spot the cohorts that might have had a stronger or weaker repurchase rate after a few months. You can also find the average row at the bottom to understand your overall average repurchase rate across all the cohorts.
Like all the metrics, you can filter by marketing channels, products, channels, locations, discount codes, sales channels, product bundles, etc. To see if a particular channel, location, product, code, or cohort of customers (aka, subscribers or discount code users) lead to a stronger repurchase rate.
TIP: Filter for a single cohort of customers that purchased 12 months ago (or the longest time frame you have available) and segment by products or any other segment to see if a particular product purchase leads to a higher loyalty or repurchase rate.
Customer Retention by Cohort
Customer Retention aims to add a time dimension to retention. With this metric, you can measure the proportion of a cohort that returns to purchase after certain intervals after their first purchase
Overall retention metrics for subscription businesses:
If you run a DTC subscription business, you’ll want to measure the proportion of your customers who return each month. No need to filter here - this metric takes the total customers at the beginning of the period (we recommend monthly) and measures the proportion that make a purchase by the end of that period. The goal should be to keep subscription MoM Retention as close to 100% as possible.
TIP: If only some of your customers are on a subscription, you can filter by “subscribers”
Your Turn ->
Open your Peel Dashboard and make note of your store’s scores for retention for different months. Peel doesn't show you one overall number since the data changes month to month and by different values, but you can look at the average line at the bottom of the chart for different time frames - post 6 months, post 12 months to get an idea. Also look at each month and see if a particular cohort month's numbers jump out at you.
Customer LTV: ________
Repurchase Rate: ________
Customer Retention: ________
Month-on-month Retention (Subscriptions only): ________
When are customers churning?
With your overall churn measured, the next step is to better understand when customers churn to best tailor your retention strategies:
Questions to answer:
- Do newer groups of users churn at higher rates than more tenured customers?
- Do your customers churn early on after they make their first purchase or later in their tenure?
- How does purchase velocity (the speed in which customers make purchases) impact their retention rate?
Metrics to use:
Cohort customers per order count:
The percentage of your customers who make n number of purchases.
This metric can be used for more than overall retention measurement. It can also clearly illustrate WHEN in the customer lifecycle that customers are churning. It’s a great metric for planning your retention interventions. This metric shows the % of each cohort who has made a certain number of purchases. The “3rd order” would show the % of customers acquired in a certain month that have made 3 purchases.
How to measure:
- Filter for a cohort that was more than 6 months ago (we chose 1 year ago)
- Each column represents the % of the original cohort that made the corresponding number of purchases (Eg “3rd Order” is the % of the cohort who made a 3rd purchase)
What to look for:
- 2nd order: What % of your customers make a 2nd purchase? If it’s low (less than 30%), you likely have an “early churn” issue
- Flattening: Is there a number of orders where the dropoff from the previous number (Eg from order 4 to 5) isn’t so severe? That could be your “loyalty point” - if you get customers to make a nth purchase, they are very likely to make an additional purchase.
Days since first order:
The average number of days that have elapsed since a customer’s first order (averaged for the cohort)
With a better idea of when users are churning, the “Days Since First Order” metric will provide some context on why that churn is happening. As more time elapses since the first purchase, the likelihood of further purchase is diminished. As an overall goal, you should aim to reduce your days since first order.
If you are facing early churn (churn before a 2nd order):
Plan to accelerate the second purchase with targeted post-purchase email campaigns and promotions.
Benchmarking: How to calibrate a goal for “Days since first order”
“Days Since First Order” will vary depending on the store and industry. One great way to benchmark within your own store is to filter the “Days since first order” for only your highest LTV customers. You can do this by tagging your top customers (by all-time spend) in Shopify with “top_loyal”. You can then filter for that tag in your Peel Dashboard.
Using Peel to drive a loyalty program rollout
A DTC apparel company is generating $30,000 in revenue from new customers each month yet overall revenue has stayed constant at $150,000 per month for the past 6 months. They figure that customer churn must be an issue and they are looking to launch a loyalty program. They identified a loyalty program and were looking to implement immediately. Is it a good idea?
Step 1: Using Peel to understand who is churning and when that churn occurs
To measure overall retention they used two metrics from their Peel Dashboard: Customer Retention by Cohort and Repurchase Rate
Customer Retention by Cohort:
They started by looking at their cohort of customers who had made their first purchase 12 months ago. Only 10% of those customers had made a purchase after month 10. They then looked at a cohort who had made their first purchase 4 months ago, and only 20% of customers had made a purchase after the 3rd month. The trend was similar for other cohorts.
Repurchase rate told a more alarming story - Looking at the same cohorts, only 20% of customers had made 2 or more purchases
They determined that customer retention was low, and refined their analysis to focus on when these customers were churning.
- Customers by order count: Only 20% had made 2 purchases, and less than 5% made a 3rd purchase. It seemed that the majority of customers were churning very early on.
Step 2: Turning analysis into action
They quickly determined that a loyalty program would not be appropriate. Customers were clearly not happy with something in the initial product purchase experience, and therefore were not likely to be incentivized by a loyalty program.
The team made a list of all customers who made their first purchase in the past 30 days. They drafted a personalized plain-text email campaign addressed from the founder asking for feedback.
What they heard in the replies:
- From speaking to customers, they learned that their t-shirts, the best selling product, were not fitting true to size. In fact, many customers reported that they fit a size bigger than advertised.
- Customers were also upset with shipping timelines. Customers reported that the time between purchase and receiving their order was more than 3 weeks.
Addressing the issues
Armed with this information, the team set out to improve the initial purchase experience for their customers.
- They worked with suppliers to adjust the sizing of their next run of t-shirts.
- While they were working through their current stock, they posted pop-ups on their website to inform customers that the t-shirts were fitting a size too large and to select a size down.
- They offered all customers who had purchased that t-shirt a free t-shirt from to help improve the relationship.
- They changed shipping providers, and changed all new orders to “1 day shipping”. This option was more expensive, so they set up a structure that offered free shipping over $100 and a fee of $10 for orders below that value.
Step 3: Measuring results
The team was pleased that they did not launch a loyalty, which would have cost money and not addressed their underlying issues. Here is how they measured results:
Repeat purchase rate:
Looking at all cohorts since they made the change, they tracked the % of customers who made a second purchase. This rate increased from a dismal 20% to 45% within 3 months.
Days since first purchase:
To measure if the shipping changes would help drive faster repeat purchase, they tracked “Days since first purchase”. That metric decreased from 70 days (for those who bothered to make a repeat purchase) to 35 days, a massive achievement.
When do your customers churn?
Open your Peel Dashboard and write in your store’s cohorted retention scores
Retention for new customers:
Customer Retention by Cohort (use a cohort from at least 2 months ago)
Customer per Order Number:
Early Churn Check: % of customers who make a 2nd purchase
Curve Flattening: Where does your retention curve flatten (small difference between order X and order Y)
Segmentation: Answering Who is churning
If you have identified that your overall retention is lower than expected, it’s time to figure WHO is churning, and WHEN that churn happens. Your Peel dashboard gives you the power to answer those questions with Segmentation and Cohorting.
Segmentation: Answering the “Who” of customer retention
To boost customer retention, you’ll want to focus on specific groups of customers who are churning rather than your entire customer list. Peel lets you analyze groups of customers by their traits, which can be customer tag, a product purchased, a location where they live, and much more. This is called segmentation.
Key questions segmentation can help answer:
- Are customers in Chicago more loyal than customers in Miami?
- Do customers who purchase with a specific payment gateway (Affirm, Paypal, Shopify, Amazon checkout, etc.) spend more?
- Do customers with the tag “best_tag_ever” make more repeat purchases than your overall group of customers?
- Do customers who purchased “Product ABC” have a higher likelihood of churning?
How to segment with Peel:
You can use segmentation on any of Peel’s 100+ metrics in your dashboard. Peel offers over 20 different segment options - any data dimension found in your datasources can be segmented in Peel. Once in the metric, click on the segment dropdown and select the segment you’d like to analyze.
TRY IT: Retention exercises you can try with your store
In this exercise, make a list of traits that would distinguish your customers from each other. Do you have a group of customers who have opted into subscription? Do you have customers that live across different cities? Do you have groups of customers that prefer a certain product in your line? These are great segments to use in order to identify retention patterns.
Exercise #1: Products that drive the greatest LTV
LTV is a great proxy for loyalty. Customers who stick around the longest tend to purchase the most from your store. You can use Peel to measure how LTV changes based on the product in a customer’s basket.
Tip: Isolate a cohort from 12 months ago, and segment by product to see how LTV changed based on product purchased. This could provide great insight into which products drive loyalty, and which could be great candidates for cross-sell and upsell opportunities.
Turning analysis into action:
I can see clearly that “Product B” drives the highest LTV for my selected cohort. This trend was validated when running this analysis for other cohorts.
- I moved “Product B” onto my store’s homepage and featured it to encourage sales.
- Using the Bold Upsell App, I added “Product B” to the products being offered as upsells on my product pages to increase visibility and sales rate.
- I added an email highlighting “Product B” to my post-purchase email flow in Klaviyo. The email is sent within two weeks of every purchase and says “You may like this product…”
With those initiatives set, I measured sales for Product B and average Customer LTV for the cohort of customers who made their first purchase in the month following my changes.
Exercise #2: Driving higher subscription opt-in
In this exercise, I’m analyzing whether my new subscription program is having the intended impact on retention and LTV. If so, I’ll explore how to expand the subscription program to more customers.
Does my subscription program drive higher retention and LTV?
There's a few different ways I can analyze, but I have chosen to look at “Customer by Number of Orders” and Customer LTV. I’ll then compare how the subscriber segment compared to the non-subscriber segment.
Customers by Number of Orders
TIP: I am isolating for one cohort at a time, and will compare 2 - 3 cohorts to confirm any trends. Also make sure to select “%” of customers for apples-to-apples comparison.
I’ve isolated a single cohort from 1 year ago to capture an accurate snapshot of LTV. I am comparing the Subscription group to the Non-Subscription group.
Turning Analysis Into Action:
It’s very evident that the subscription program drives far higher retention and LTV than the non-subscription program. In fact, the difference in LTV is almost $400 by month 12. I also know that I can spend up to $400 in discounts / promotions per user to drive subscription opt-in and still breakeven. I can track this in Peel by identifying the discount code - and tracking the behavior and the LTV (by segmenting by the code). I am going to make a significant effort to convert all new customers to subscription going forward.
- I am going to reformat my product pages to be “subscription-first”, and heavily promote the subscription program.
- I am going to offer a promotion code with a significant discount to opt-into subscriptions.
- I am going to create a post-purchase email flow in Klaviyo that advertises the subscription program to all customers who did not yet opt into it.
- I am going to include subscription products into more ad creative to get people into the program.
I have set a goal that I would like 50% of new customers to be subscribers. To track that, I will use the “Customers” metric that tracks all new customers. I can check the breakdown by selecting the format as “Stacked Bar” and segmenting by subscriber status.
To get more granular, I can track how successful my post-purchase email flow was. I can track “Total Sales” for subscriptions and filter only by customers who were served my subscription promotion flow in Klaviyo (named “Welcome Series”.)
Exercise #3: Do new customer discounts promote long term retention or short term purchase at a loss?
In this example, I compare customers who redeemed a discount in the past month to those that did not. I want to be sure that new customer promotions drive loyalty rather than one-time purchase at low margin / negative margins.
LTV by discount code
In this example I’ll analyze LTV, and I’ll pick a particular discount code. The discount code was for 30% off a first purchase. At that discount rate, the first order will not be profitable, but everything beyond a second order will be profitable.
Turning analysis into action:
It’s clear that the discounts had the acquired effect. They helped convert new customers and those customers turned out to be loyal, high LTV acquisitions.
- Experiment with expanding the discount to drive higher initial conversion.
Strategies and tools to boost customer retention
Once you identify your group(s) of customers who are likely to churn, you can focus on these strategies to retain them.
Boost Repeat Purchases
Great for: Reducing early churn (customers who churn immediately after first purchase)
Work the phones!
Sometimes the best way to find out why customers leave after only purchasing once is to speak to them! They can tell you about any challenges of learning your product or any hiccups in the experience that may have caused them to look elsewhere. They’ll also be surprised and delighted with a personalized phone call!
Accelerate a 2nd purchase:
One way to encourage a repeat purchase is to provide a target promotional offer to customers immediately after they have made their first purchase. Try using a “limited-time” based promotion to encourage customers to act quickly.
Check out how Verve Coffee Roasters encourages repeat customers through email:
Drive higher long-term customer retention
Great for: Keeping repeat customers engaged, making more purchases, and making more frequent purchases.
Up your customer support game:
A fast, responsive, and helpful customer support operation can help overcome breakdowns elsewhere in your customer experience. We love Gorgias - a helpdesk platform that is purpose-built for Shopify. Gorgias pulls your customer data directly from Shopify to give you all the information you need to answer questions quickly. Automations also allow you to crush your ticket queue before your tickets go stale and your customers become frustrated!
Keep your customers engaged with email automation:
Drive revenue and retention by building a relationship with your customers. The key here is to routinely drive your customers back to your site with engaging content. This could be:
- New blog content that your customers would find interesting
- Regular sales and promotions (we recommend a new one every 6 weeks)
- New product launch announcements
- Product features
We love Klaviyo, an email marketing platform that connects directly to Shopify, for email automation. You can easily set up campaigns that are sent to your customers based on shopify tags, when they made their last purchase, and many other dimensions.
Need some email inspiration? Check out mailcharts, a platform that aggregates the best emails sent from top brands around the world. There is no need to reinvent the wheel here. Sometimes it’s best to see what works and copy it!
Install a loyalty program:
Shopify has plenty of apps that can instantly setup a loyalty rewards program and integrate directly with your Shopify customer data. Smile.io, Talon.One, Loyalty Lion
Try subscribe and save:
The Recharge Payments App allows you to sell your products as a one-time purchase or as a regular subscription. Customers set their desired purchase frequency, input their credit card, and Recharge does the rest. The Recharge app integrates directly with Shopify and subscription orders appear as regular orders in your Shopify orders list. No new processes to install!
Drive higher purchase values
Great for: Generating higher value sales with greater profit per order.
Once your customers are repurchasing at higher rates, a great way to boost your revenue is having them purchase more with each transaction. Knowing the starting Average Order Value and tracking it is the starting point. You can track it using Peel's linear AOV metric but to be more granular and on a cohort basis you can use the Cohort AOV metric.
Cohort AOV Per Month:
You can measure the Average Order Value for your customers and how it changes over time.
Things to look out for:
- Customers AOV per month increases with each additional month that they are a customer. As customer loyalty increases, so should the size of their basket.
- Check your progress: Cohorting lets you measure if your customers are responding to new experiments you are running. For example, if you install an app that helps with Upsells at checkout, it will be easiest to track how that impacts customers by looking only at your customers acquired since you installed the app.
Upselling allows you to offer new and higher value items to your customers while they are shopping. As a customer is checking out, offers for related or higher value products will appear. The Bold Upsell App and Cart Hook app allows you to seamlessly integrate this functionality into your Shopify Store.
Supercharging your store starts with retaining your customers. Boosting your retention will help increase the lifetime value of your customers, all of which you can measure easily with Peel!
Remember to tailor your metrics to your store
Successful retention looks different for different styles of store. A subscription business will want to measure regular monthly retention of its customers while other stores will focus on driving customers to make repeat purchases. At a high level:
Subscription business: Focus on Month-on-month retention .
Non-subscription business: Focus on Repeat Purchase Rate and Customer Retention Rate.
Then there are so many more angles to look at your business and you can do all of this with ease by using Peel.
The Who of Customer Retention
Always zero in on the segments of customers who are churning with Peel’s segmentation filter. You can filter your customer base by location, products purchased, month of first purchase, subscriber status, and much more. There is no “one size fits all” solution for an entire customer base.
The When of Customer Retention
Churn can happen at any point in the customer lifecycle. Use Peel metrics such as Customers by Number of Orders and Days Since First Order to answer if customers churn immediately after the first purchase or later on in the lifecycle. With that data, you can deploy strategies to help address that churn such as a post purchase email flow or loyalty program.