Measuring Retention

Customer retention is important to websites for various reasons. For instance, research shows that keeping existing customers costs less than attracting new customers. Studies have shown that the cost for acquisition on a per-customer basis may be 5 to 10 times that of customer retention. Research also says there is a 5 to 20 percent chance of converting a prospect to first-time customer status, and a 20 to 40 percent chance of reacquiring a lost customer. So customer retention is key.

The metrics and ratios below can help tell you how you rate at customer retention.

• Number of returning visitors
• Average frequency of returning visitors
• Ratio of returning visitors to all visitors
• Frequency of visit
• Recency of visit
• Activity of retained visitors
• Views of key pages and contents
• Retained visitor conversion rate
• Customer retention rate
• Average frequency of return for retained visitors

While some business models do not expect customers to make a second purchase right away (e.g., auto, housing, travel), very few websites are designed for a single visit without return. The KPIs listed below are those that should be tracked regardless of business model or industry.

• The ratio of daily to monthly returning visitors -- quick measure of the average frequency of return for all visitors.
• Percent of returning visitors -- align new/returning visitor mix with new/retention marketing spend.
• Loyalty measurements for groups of returning visitors -- monitor big changes in visitor loyalty.
• Retained visitor conversion rate – determine website or campaign success.
• Customer retention rate – determine website success.