10 Proven Tips For Customer Retention & Loyalty On Shopify
"Customer retention and customer loyalty are crucial for Shopify merchants to drive sustainable business growth and maintain a competitive edge in the marketplace. Businesses nowadays often invest a huge amount of money into acquiring new customers but forget to focus on existing customers, who can help them reach revenue goals more cost-effectively."
Customer Relationship management on Shopify
Retention vs. Loyalty: What is the difference?
First and foremost, we should understand the definition of customer retention and loyalty to see how these two factors are different and related to each other.
Customer retention means how many customers stay with the business over a certain time. This factor is also related to the ‘churn rate’, which is one of the most important metrics for all online or in-store businesses. But keep in mind that customer retention rate highlights the percentage of customers who stay with you, while churn rate is the percentage of customers who leave.
Meanwhile, customer royalty indicates his or her predisposition to choose a business over thousands of other competitors out there. A high rate of customer loyalty means that a customer will consistently respond positively to a brand and also be willing to engage.
How to measure customer retention and customer loyalty?
Customer retention
There is a simple formula to calculate to customer retention rate (CRR), which consists of 3 main elements: the number of customers at the beginning, the number of customers at the end, the number of new customers during the measurement period.
Retention rate (%) = (Ending customers – New customers)/ Beginning customers
Customer loyalty
When it comes to customer loyalty, it is more difficult to measure than customer retention rate because loyalty is an emotion. However, there are a few metrics we can use to grasp a basic understanding of the customer loyalty level. Some of the most common metrics are:
Net Promoter Score (NPS)
Net Promoter Score is used to measure customer loyalty based on their tendency to recommend products or services to other people. Here is how the formula looks like:
NPS = (% Promoters) – (% Detractors), in which:
- Promoters (score 9-10): Customers who are highly satisfied and likely to recommend.
- Passives (score 7-8): Customers who are somewhat satisfied but not willing enough to promote.
- Detractors (score 0-6): Customers who are dissatisfied and may spread negative word-of-mouth.
Key Takeaways
- Customer lifetime value (CLV)
- Customer lifetime value (CLV)
- Customer lifetime value (CLV)
- Customer lifetime value (CLV)