Measuring how well you’re keeping your customers is just as important as winning them over in the first place. Customer retention KPIs (Key Performance Indicators) and metrics are the tools that give you insight into how well your business is doing at keeping customers loyal. As the saying goes, "You can’t improve what you don’t measure." By tracking these metrics, you’ll know exactly where to focus your efforts to keep customers happy and coming back.

Nudge’s personalized onboarding tours, for example, can make a big difference in how new customers experience your service, setting the stage for long-term loyalty.

Curious about where to start? Let's start by deeply understanding why it's important for business to track retention.

Why Is Tracking Retention KPIs Important?

Knowing how well you’re keeping your customers is vital for your business’s growth. Tracking customer retention KPIs gives you insights into how engaged and satisfied your customers are. This isn't just about numbers—it’s about understanding the health of your relationship with your customers and making sure they stick around.

Consider a situation faced by UrbanClap (now Urban Company). 

They noticed that more customers were leaving than expected, which signaled a problem. After digging into the data, they found that inconsistent service quality was driving customers away. By addressing this issue—improving service standards and streamlining the booking process—they were able to retain more customers and boost loyalty.

Just like UrbanClap, by tracking retention KPIs, you can identify issues early, understand what’s causing them, and take proactive steps to keep your customers satisfied. This kind of focus can make all the difference in building a loyal customer base that supports your business in the long run.

Now, let’s look into the first key metric you should be tracking: Customer Retention Rate (CRR).

Customer Retention Rate (CRR)

Customer Retention Rate (CRR) tells you the percentage of customers who keep using your product or service over a certain period. A high CRR means your customers are happy and sticking around, while a low CRR might point to issues like poor customer service, lack of engagement, or tempting offers from competitors.

What’s a Good Number and Why It Matters: A good CRR varies by industry, but generally, keeping at least 85% of your customers is considered strong. High retention means more steady revenue, less money spent on attracting new customers, and a loyal customer base that’s more likely to recommend your business to others. On the other hand, a low CRR can hurt your revenue and force you to spend more on marketing to replace lost customers.

How to Calculate It? 

The formula for CRR is:

CRR=(Number of Customers at End of Period−New Customers Acquired During Period / Number of Customers at Start of Period)×100

For example, if you had 1,000 customers at the beginning of the month, gained 100 new customers, and ended with 950 customers, your CRR would be:

CRR=(950−100/1000)×100=85%

How to Improve CRR?

If your CRR isn’t where you want it to be, start by identifying the reasons why customers might be leaving. Focus on improving customer support, enhancing the user experience, and offering incentives to keep customers engaged. For example, using Nudge’s in-app messages and personalized onboarding tours can create a smoother experience that encourages customers to stay with you longer.

Repeat Purchase Rate (RPR)

Repeat Purchase Rate (RPR) measures the percentage of customers who come back to make another purchase. A high RPR indicates that your customers are satisfied and find ongoing value in your products or services. On the flip side, a low RPR could be due to factors like poor product quality, lack of engagement, or better deals from competitors.

What’s a Good Number and Why Does It Matter? 

A good RPR varies depending on your industry, but generally, an RPR of 20-40% is considered strong. High repeat purchase rates are a clear sign of customer loyalty and can lead to increased lifetime value and more stable revenue. Conversely, a low RPR can signal potential issues with your product or customer satisfaction, which can hurt your business’s growth.

How to Calculate It? 

RPR=(Number of Customers Who Made More Than One Purchase/ Total Number of Customers)×100

This calculation gives you a good sense of how many of your customers are returning for more.

How to Improve It: If your RPR is lower than expected, consider focusing on ways to re-engage customers. Offering special promotions, personalized recommendations, or loyalty programs can encourage repeat purchases. Nudge’s gamified loyalty programs and in-app messages can be particularly effective in reminding customers of the value you offer and prompting them to make another purchase.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is an estimate of the total revenue you can expect from a customer over the entire duration of your relationship with them. A high CLV indicates that your customers are loyal and continue to make repeat purchases, generating significant revenue for your business. On the other hand, a low CLV might suggest that customers aren't staying with you long enough or aren't making enough purchases, which could be due to a lack of engagement or value perception.

What’s a Good Number and Why Does It Matter?

The ideal CLV varies by industry, but generally, the higher your CLV, the better. A strong CLV means that your customers are contributing more to your business over time, which supports long-term growth and profitability. Conversely, a low CLV can indicate that you need to improve your retention and engagement strategies.

How to Calculate It: To calculate CLV, you can use the following formula:

CLV=Average Purchase Value×Average Purchase Frequency×Customer Lifespan

This formula gives you a clear picture of how much revenue each customer is likely to bring in throughout their relationship with your business.

How to Improve It: If you find that your CLV is lower than desired, it’s essential to focus on increasing both the frequency and value of customer purchases. For example, using Nudge’s gamified referral programs can encourage your existing customers to bring in new ones, extending the customer lifespan and increasing overall revenue. 

Additionally, offering personalized recommendations through Nudge’s in-app messages can drive more frequent purchases by suggesting relevant products or services.

Next, let’s explore the importance of the Net Promoter Score (NPS) and how it can impact your business.

Net Promoter Score (NPS)

Net Promoter Score (NPS) measures how likely your customers are to recommend your product or service to others. It’s a simple yet powerful indicator of customer satisfaction and loyalty. A high NPS means your customers are not only happy but also willing to promote your brand. On the other hand, a low NPS might suggest dissatisfaction, poor customer experiences, or unmet expectations.

What’s a Good Number and Why Does It Matter?

NPS is typically measured on a scale from -100 to 100. A score above 50 is generally considered excellent, indicating strong customer loyalty. A high NPS can lead to organic growth through word-of-mouth referrals, while a low score may signal the need for immediate improvements to your customer experience.

How to Calculate It: To calculate NPS, you ask customers a single question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?" Based on their responses, customers are categorized as Promoters (9-10), Passives (7-8), or Detractors (0-6). The NPS is then calculated as follows:

NPS=%Promoters−%Detractors

This score gives you a clear snapshot of overall customer sentiment.

How to Improve It: Improving your NPS involves addressing the concerns of your Detractors while enhancing the experience of your Promoters. For instance, you could use Nudge’s survey feature to gather specific feedback from your customers and quickly identify areas that need improvement.

Customer Satisfaction Score (CSAT)

Customer Satisfaction Score (CSAT) is a straightforward metric that measures how satisfied customers are with a specific interaction, product, or service. After a purchase or service interaction, customers are typically asked to rate their satisfaction on a scale, such as 1 to 5. A low CSAT score may indicate issues like poor customer service, unmet expectations, or product quality concerns.

What’s a Good Number and Why Does It Matter? 

A CSAT score of 80% or higher is generally considered good. High CSAT scores indicate that your customers are happy with your service or product, leading to greater loyalty and reduced churn. On the other hand, low scores can signal that your customers are unhappy, which can impact your retention rates and overall business performance.

How to Calculate It: Calculating CSAT is simple. After an interaction, ask customers to rate their satisfaction, and then use this formula:

CSAT=(Number of Satisfied Customers (4-5 ratings)/Total Number of Responses)×100

This score gives you an immediate view of customer satisfaction levels.

How to Improve It: If your CSAT score is lower than you’d like, focus on identifying and resolving the issues affecting customer satisfaction. Using Nudge’s onboarding checklists can help ensure that customers have a smooth start with your product, reducing potential frustration and improving overall satisfaction. 

Additionally, following up with in-app surveys can provide valuable feedback and show customers that you’re committed to their happiness, which can lead to higher CSAT scores.

Finally, let's look at the last important metric: Customer Churn Rate.

Customer Churn Rate

Customer Churn Rate measures the percentage of customers who stop using your product or service over a specific time period. It’s a critical metric because it directly reflects customer satisfaction and the overall health of your business. Common causes of a high churn rate include poor customer service, lack of engagement, unmet expectations, or customers finding better alternatives.

What’s a Good Number and Why Does It Matter? 

A good churn rate varies by industry, but generally, a monthly churn rate of less than 5% is considered acceptable. Lower churn rates indicate strong customer loyalty and a healthy business, while higher churn rates can be a sign that something is wrong and needs immediate attention. A high churn rate can significantly impact your revenue and increase the cost of acquiring new customers.

How to Calculate It?

Churn Rate=(Customers Lost During Period / Total Customers at Start of Period)×100

This gives you the percentage of customers who have left over the time period you’re measuring.

How to Improve It: If your churn rate is higher than you’d like, focus on identifying the reasons why customers are leaving and address those issues quickly. Implementing Nudge’s personalized onboarding tours can help new customers feel more comfortable with your product, reducing the likelihood of early churn. Additionally, using Nudge’s gamified challenges and rewards can keep customers engaged and incentivized to stick around longer.

Conclusion

Building strong relationships with your customers starts with knowing where you stand. Tracking customer retention KPIs like CRR, RPR, CLV, NPS, CSAT, and Churn Rate gives you a clear view of how well you’re keeping your customers satisfied and loyal. These metrics aren’t just numbers—they’re a way to understand what’s working and where you need to make improvements. Whether it’s enhancing your onboarding process, offering more personalized experiences, or simply listening to customer feedback, these actions can make a real difference in keeping your customers around. And the best part? With Nudge, you can achieve all of this without using any engineering bandwidth. 

If you're ready to take your customer retention to the next level, book a demo with Nudge today and see how our products can help you build stronger customer relationships.