Retention in ecommerce is becoming more and more popular. It works for ecommerce stores the same way it has been working for B2B SaaS companies in the last decade.
In SaaS, you have to fight churn and maximize monthly recurring revenue (MRR) because that’s the metric for stable user base and growth.
In ecommerce, retention is gaining attention for the same reason: the more returning customers a shop has, the better it’s positioned to grow.
A stable flow of orders from existing customers keeps the business running. You may acquire new customers or occasionally lose some, but it won’t break the business.
If you have to get new customers all the time, that would restrict your growth to as much as you can pay for. Acquisition costs are high – and getting higher now – so orders from old customers are a cheap and sustainable way of going forward without losing control.
Also, how big is your market? Because when relying on constant acquisition, you’ll run out of market at some point. We’ve seen a client’s sales go drastically down as their ads can’t reach new audiences and stop performing.
Only when you cement your position with a loyal customer base, you can predict growth and scale in a financially healthy way – at a pace you can afford.
That’s where retention analysis comes in play.
Below, we’ll give you TWO ways of doing retention analysis for your store – one free and DIY, and one free and easy if you run on Shopify, WooCommerce or Magento. Pick yours!
When you know how customer retention works for your store, you’ll be able to do it even better:
And so on.
The basis of retention analysis is customer behavior over time.
You’re concerned with when and for how much people shop from you over their lifetime as a customer. That includes all customers, since the launch of your store (for most accurate analysis).
Step 1 Using an Excel sheet, you should be able to map out all sales made to all customers.
To start organizing, it’s easier to divide customers into cohorts – coherent groups of people sharing something in common.
A basic cohort division is by the month of their first order. Then, you can neatly put the orders that followed on the timeline of each cohort.
Another useful cohort divisions are by campaign and by product bought. Note it’s always the first interaction with your online store because that’s when and why they became customers and it affects their whole behavior after that.
Step 2 Put formulas in place to calculate the major KPIs of retention:
Sum (values of all orders of each customer)
Sum (values of all orders) / number of customers
Average (all orders)
Number of customers with 1 order / number of customers with more than 1 order
Revenue from customers with more than 1 order as a percentage of total revenue
Step 3 It’s a good call to make a second table for each cohort with the orders against a timeline. This will show you how much time it takes your customers to order again.
Step 4 To monitor your retention in the future, you’ll need to add all new orders in the respective cohorts so you get the KPIs recalculated.
That was the DIY method if you’re into this kind of stuff. It seems a bit overwhelming, agreed.
But fortunately, there is a simpler way to get to the sweet stuff, understanding how retention works for you now and where you can improve it.
Customer retention analytics give you the whole retention analysis ready-to-use, without filling data in or creating formulas. Analytics include graphs, cohorts and automatic updating with every new order you get.
Plus two metrics it’s hard to calculate in excel – repeat purchase rate and time between orders.
And best of all – you can have it in about 10 minutes.
Use the free trial of Metrilo to access the Retention Analysis, get all the insights you want and leave with no obligations at all.
You get the report right away – with your data, not dummy data! – for free. No need to pay for the tool after that.
You realize I’m telling you how to exploit the Metrilo trial, don’t you?
Аll you have to do is connect your store to Metrilo.
Here’s how easy it is and you can be looking at your very own retention report in about 5 to 10 minutes:
*you don’t need a developer
And when you’re ready, here’s how to get value out of Metrilo’s Retention Analysis.
So, try it – get your Retention Analysis and start growing!
We promise you’ll find out things about your online store you didn’t know!
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