Improving Customer Loyalty? You Should Know These Metrics & Tricks


While working on the reporting module of the CRM system, I’ve compiled a list of metrics that businesses should care about while improving their customer retention.

So why should you care about customer retention in the first place? Here’s why:

  • It is 5-7 times more expensive to acquire a new customer than to keep an old one.
  • Loyal customers are worth up to 10 times as much as their first purchase.
  • Increasing customer retention by just 2% can translate into a 10% cost reduction.
  • Some retailers indicate their top 15% of ‘loyal’ customers comprise 50% of their sales revenue.

Let’s take a look at our first metrics… The Customer Retention Rate of course!

Customer Retention Rate


How do we measure Customer Loyalty without first going into Customer Retention Rate (CRR)? CRR is a measurement of the number of customers that you have successfully retained over a period of time. That means we are not looking at the newly acquired customers.  We are looking at how many people do come back to do business with you within a period of time. The period could be a week, a month or a year. It depends on your type of business. If you have no idea where to start, I will recommend a period of a month or half a year. A good CRR will stand somewhere above 90%. If your CRR is not near that level, you better be working on your product and services. There is a pot of gold there.

Why is CRR Important?

  • It measures how much your customers love you
  • It measures how great is your product/service
  • It measures how awesome is your customer support
  • It measures how effective is your loyalty program

How to Improve CRR

  • Focus on customer relationship
  • Improved products & services
  • New products & services
  • Customer loyalty program

Dollar Retention Rate (DRR)

dollar-retention-rateHow good is it to know that your customers are coming back? It won’t be if they are spending as much. Here’s where Dollar Retention Rate (DRR) comes in useful as a metrics. DDR focuses on the revenue aspects. It doesn’t matter if you have high CRR but your customers are switching to plans and products that cost less. Your DRR falls, so does your revenue. So what is a good DRR? Ideally, you should be aiming for 110% or more. If you are not getting that level, you should first look at CRR. If CRR is high and DRR is low, it means that you need to work on selling your products to your existing customers. If CRR is low, work on that first.

Why is DRR important?

  • It measures how great are your sales people
  • It measures how fast you are coming up with new products
  • It measures how often your customers are coming back

How to Improve DRR

  • Cross-sell, up-sell & re-sell
  • New products & services
  • Pricing strategy

Replacement Rate


We all know that we can’t keep everyone in our lives, some customers will leave. Sobs. But some will come. Yay! What is important is that we have more customers entering than leaving. Replacement rate could simply be the number of customers entering divided by the number of customers that leaves. But that would ignore the fact that not all customers are created equal. So it will be wise to segment your customers. Perhaps you would like to count the customers who are in the top segment, spending above a certain value. So the calculation will be the number of customers who move up into the segment divided by the numbers who falls below.

Why is Replacement Rate Important?

  • It helps you focus on your valuable customers
  • It helps you cultivate the next batch of valuable customers
  • It shows you how well your business is growing

How to Improve Replacement Rate

  • Campaigns, campaigns & more campaigns
  • Understand what makes the existing customers fall out of the segment (Reward them, satisfy them and try converting them again. They will come back more loyal)
  • Focus on building relationship with you top tier customers

Customer Lifetime Value (CLV)


Now you know how you are performing. But how do you project your future success? Customer Lifetime Value (CLV) will help. It measures the average revenue that a single customer will bring to your business in the entire lifespan. That’s your business’s or your customer’s. Morbid, I know.

Measuring CLV is a tedious process. If you would like to find out how, view this infographic by KISSmetrics. Brace yourself though.

Why is CLV Important?

  • You have nothing better to do and need some math problems
  • It forecast your future revenue
  • It measures how much value you are squeezing out form your customers
  • It’s a combination of some of the metrics, giving a pretty good metrics for the overall health of the business

How to Improve CLV

  • Improve customer retention (CRR)
  • Improve customer expenditure (DRR)
  • Improve profit margin

Redemption Rate (RR)

redemption-rateOh you have a loyalty plan like every other business? Do you know how well is it working for you? Redemption Rate(RR) will tell. RR is the percentage of points issued that are eventually redeemed. An effective loyalty system is one that keeps the customer coming back for more and rewarding them. If your redemption rate is low, you might have invested in a wrong loyalty program or your customers are simply not loyal. So what is a good measure? A RR above 20% is pretty healthy – considering that customers are bombarded with lots of loyalty program that they find it hard to keep track of what card is for what shop.

Why is RR Important?

  • It shows how your customers are motivated
  • It shows how loyal are your customers
  • It shows how your loyalty program is performing

How to Improve RR?

How you can work on YOUR customer retention metrics?

your-moveOnce you are done with the calculations and you think your business has room for improvement in the customer loyalty section, you are in for it!

I’m currently in the midst of developing a kick-ass loyalty system. The system allows for business to integrate loyalty system into the business without hefty investment and having customer download any pesky mobile apps. Of course, all these metrics will be readily available so you can track how your loyalty program is performing.

The system is currently in Alpha-testing and will be available soon. If you want to grow your business through customer retention sign up below to be part of the Beta launch.

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