Customer Retention Rate

Customer retention rate is the percentage of customers who continue to purchase from your store over a given period. It is calculated by taking the number of customers at the end of a period minus new customers acquired, divided by the number of customers at the start of the period.

Understanding Customer Retention Rate

The formula is: Retention Rate = ((End Customers - New Customers) / Start Customers) × 100. If you started the month with 1,000 customers, gained 200 new ones, and ended with 1,050, your retention rate is ((1,050 - 200) / 1,000) × 100 = 85%.

Retention rate is the inverse of churn rate. If your retention rate is 85%, your churn rate is 15%. For e-commerce, retention rates vary significantly by category. Consumable products (supplements, skincare, coffee) tend to have higher retention rates than durable goods (furniture, electronics) because of natural repurchase cycles.

The economics of retention are compelling. Acquiring a new customer costs 5-7x more than retaining an existing one. Returning customers spend 67% more on average than first-time buyers. A 5% increase in retention rate can increase profits by 25-95%, according to research by Bain & Company.

Improving retention requires understanding why customers leave. Common churn reasons in e-commerce include product quality disappointment, finding a cheaper alternative, poor post-purchase experience, and forgetting about your brand entirely. Post-purchase review request emails serve double duty: they collect valuable feedback and they keep your brand top-of-mind during the critical post-purchase window.

Why It Matters for E-Commerce

Customer retention is the most cost-effective growth lever in e-commerce. Retained customers cost less to serve, buy more frequently, spend more per order, and generate referrals. Tracking retention rate helps you quantify the health of your customer relationships and the long-term sustainability of your business.

How Eevy AI Helps

Eevy AI post-purchase review request emails keep your brand in front of customers during the post-purchase period. The act of writing a review increases emotional investment in the product, which correlates with higher repeat purchase rates.

Related Terms

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Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is the total net revenue a business can expect from a single customer account throughout their entire relationship. It accounts for repeat purchases, average order value, and the duration of the customer relationship.

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Net Promoter Score (NPS)

Net Promoter Score (NPS) is a customer loyalty metric based on a single question: "How likely are you to recommend this brand to a friend or colleague?" Respondents score 0-10, and NPS is calculated by subtracting the percentage of detractors (0-6) from the percentage of promoters (9-10).

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Post-Purchase Flow

A post-purchase flow is a sequence of automated communications and experiences delivered to customers after they complete a purchase. It typically includes order confirmations, shipping updates, review requests, cross-sell recommendations, and loyalty program invitations.

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Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, calculated by dividing all sales and marketing expenses by the number of new customers gained during a specific period.

Post-Purchase Experience Optimization →

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Repeat Purchase Rate

Repeat purchase rate is the percentage of customers who make more than one purchase from a store within a defined time period, calculated by dividing the number of returning customers by total customers.