What is customer retention analysis, and how it is done successfully?
March 7, 2023
Attracting new customers costs up to five times more than retaining existing ones.
This makes customer retention analysis necessary for business success. It gives you insight into why customers stop doing business with your brand, so you can fix these issues.
If you want to learn more about customer retention analysis, read on. We’ll cover everything you need to know about customer retention analysis.
What is customer retention analysis?
Customer retention analysis refers to analyzing metrics to understand why customers abandon your product or service after using it. This is essential for customer understanding because it gives you insight into what appeals to customers and what doesn’t.
Tracking customer retention will enable you to understand:
- Why customer segments use your product or service
- Why other segments stop using your product or service
- How you can reduce customer churn
Why is customer retention analysis important?
Considering customer behavior analysis? Awesome! These are some benefits that businesses tend to see:
- It stretches your marketing budget
- It boosts customer loyalty
- It promotes word-of-mouth marketing
It stretches your marketing budget
Because it’s less expensive to retain an existing client, customer retention analysis stretches your marketing budget. This is handy for businesses that are cutting marketing expenses.
It boosts customer loyalty
Research shows that existing customers spend more money than newer customers. This is because they’ve already built a relationship with your brand and are familiar with the sales process.
So not only are you saving money, but when you emphasize customer retention, these loyal customers spend more.
It promotes word-of-mouth marketing
When you build a loyal base of customers, it’s more likely that they’ll refer your business to friends and family. This brings in leads free of charge.
Different ways to analyze customer retention
Consider these three methods when analyzing customer retention:
1. Customer segmentation
Certain audience segments are more likely to abandon your product after a couple of uses while others will love it from the get-go. This is why customer segmentation is a powerful way of conducting retention analysis. By understanding which segments stick with your brand, you can tailor marketing around these customers.
2. Customer lifetime value
Customer lifetime value is the total income that a business can generate from a customer. For example, if someone visits your ecommerce store, buys something worth $100, and you never see them again, their lifetime value will be $100.
This makes customer lifetime value an excellent indicator of how well your customer retention efforts are doing.
3. Net promoter score
A net promoter score (NPS) is a metric that measures the loyalty of your customers. Companies will typically forward a survey to their client base and ask how likely they are to recommend their product or service to a friend.
The results you receive from these surveys will give you an idea of how invested customers are.
Lytics: Your tool for customer retention analysis
You can’t do everything on your own. So if you’re ready to kickstart your customer retention journey, use Lytics customer retention tools to make your life easier:
If you want to collect and organize customer data to gather retention insights, opt for Lytics. The Lytics customer data platform is compatible with most analytics tools like Google Analytics. You can import customer analytics from Google Analytics into Lytics and learn more about your customer. Lytics also has a marketer-friendly UI for audience segmentation and custom reporting. This means you can tailor customer retention metrics around your brand’s needs.
Best practices for customer retention analysis
- Utilize funnel analysis: If you’re trying to learn where most customers are opting out, consider using funnel analysis software. These tools will help you visualize the customer journey and understand where customers are dropping out.
- Forward NPS surveys to your customers: To keep track of customer retention, run NPS surveys so that you can see if customer loyalty and retention are increasing over time.
- Identify churn and retention patterns: If certain customers are giving you a low NPS score, try to spot any patterns. Is your product too expensive or are there any missing features?
