E-commerce tips
What is customer retention? 5 keys to retain customers
By Emma on Aug 27, 2025
Table of content
- 1. What is customer retention?
- 2. Why is customer retention the key to business success?
- 3. How to track and measure customer retention performance? 4 essential metrics
- 4. The 5 proven strategies that turn one-time buyers into loyal customers
- 5. Tools for building or improving customer retention for eCommerce
- 6. Final thoughts and key takeaways
- FAQs
Have you ever wondered why customers leave? Oftentimes, we pay more attention to marketing, social media, and other top-of-the-funnel activities. Areas like customer retention have far more impact on the business than you often realize.
Did you know that just a 5% increase in customer retention can result in a startling increase of 25% to 95% in profits? And the finding from Bain & Company still holds to this day.
That said, knowing this is one thing, but understanding customer retention and applying it effectively is another. That’s where our article comes in and provides clear guidance, showing you:
What is customer retention?
How does it differ from customer acquisition and loyalty?
What are the key metrics in tracking retention?
The benefits of customer retention and how to retain customers
1. What is customer retention?
Before diving into strategies that could transform your business, let's establish a crystal-clear understanding of what customer retention means and why most businesses get it completely wrong.
1.1. Customer retention definition
Customer retention is your business's ability to transform one-time buyers into repeat customers who choose you over competitors, spend more per purchase, and become walking advertisements for your brand. The word “retention” itself means the act of keeping or holding onto something. In simple terms, you can think of it as making customers stay with your brand as long as possible while reducing churn, or the number of customers who leave.
In terms of measurement, customer retention is often expressed as a percentage. It shows the proportion of customers who remain active during a period compared to those who leave. As a result, the higher the retention rate, the better.
1.2. The core elements of customer retention
Customer retention does not happen automatically when customers complete a purchase. As a business, your goal is to apply a set of strategic practices and maintain ongoing engagement to strengthen the customer relationship throughout their journey. And by "journey”, it refers to the very first touchpoint, continuing through repeat purchases, and ultimately leading to long-term brand loyalty.
To achieve this, eCommerce businesses should focus on key components:
Consistent product or service quality
A seamless customer experience (convenience and ease of use)
Strong value proposition and branding
Excellent after-sales and customer service
Loyalty programs and appreciation offers
1.3. Customer retention vs. customer acquisition vs. customer satisfaction vs. customer loyalty
Customer retention, customer acquisition, customer satisfaction, and customer loyalty all relate to the practice of managing customer relationships. Because these concepts closely connect and influence one another, they are often used interchangeably. Yet, each has a distinct focus.
At its core, customer retention is about keeping customers. You will try to retain existing customers at a high rate over time. Buyers stay because they continue to see value, convenience, and relevance in your product or service despite alternatives.
However, in the case of customer acquisition, the priority is attracting new customers. It involves such practices as marketing campaigns, lead generation, promotions, and onboarding new users.
(Image: Ideatick)
Customer satisfaction is rather qualitative. It concerns a customer’s emotional response to your product or service. Customer satisfaction does not always equal reorders. Price sensitivity, competitor offers, and changing needs are also among the purchase drivers.
Loyalty refers to a strong emotional commitment and consistent preference for a specific brand over others. It is the state where customers actively choose your business even when alternatives exist. The bottom line is, retention can occur without loyalty. Customer loyalty in eCommerce, however, makes retention stronger and harder to break.
(Image: Trustmary)
Criteria | Retention | Acquisition | Satisfaction | Loyalty |
|---|---|---|---|---|
Primary goal | Keep & grow existing customers | Bring in new customers | Improve customer experience | Build emotional brand connection |
Happens before the first purchase | ❌ | ✅ | ❌ | ❌ |
Starts after the first purchase or activation | ✅ | ❌ | ✅ | ✅ |
Main measure | Behavior | Conversions | Emotion | Emotion and behavior |
2. Why is customer retention the key to business success?
No matter what you sell, customer retention is always a recurring theme in business discussions. Industry leaders consistently emphasize the value of keeping the right customer for overall business performance, especially in an increasingly dog-eat-dog and fast-changing eCommerce environment.
But what are the “values” they are referring to? Or which specific aspects of your business does it influence, and what concrete benefits does it deliver? Let’s dive into the 5 key benefits of customer retention.
Reduced customer acquisition cost: Keeping customers is far more cost-effective than attracting new ones. Studies show it’s 5 to 25 times cheaper to retain an existing customer, depending on the industry you’re in. The cost gap lies in the difference between an already engaged base and starting from cold prospects.
Increased conversion rates and revenue: The success rate of selling to existing customers is around 60-70%, according to MonsterInsights. Besides, just a 5% increase in retention can boost profits by 25-95%. These returning buyers are also more likely to make repeat purchases and are often open to upsells or cross-sells. This comes down to brand trust, product familiarity, and established relationships.
Enhanced customer loyalty: It makes sense. While retention doesn’t necessarily mean loyalty, keeping people longer actually builds the conditions for it. At the same time, strong eCommerce retention programs foster trust, satisfaction, and a sense of belonging, which are key contributors to creating a loyal customer base.
Competitive advantage: When you retain more buyers, competitors have fewer chances to win them over. In other words, you have built a level of trust and connection no rival can easily replace. It reinforces your unique selling point to a great extent.
Operational efficiency and valuable insights: Compared to new ones, retained buyers often require less onboarding, fewer support requests, and adapt faster to changes. They are also more willing to share honest feedback for product and service improvement. In addition, retention unlocks data-driven insights from customer behavior and purchase history for better decision-making.
Overall, with a good customer retention strategy, you can cut costs, grow revenue, and build a brand that’s harder to beat.
3. How to track and measure customer retention performance? 4 essential metrics
As you can see, the importance of keeping your customers is tangible. You now might be eager to get to the nitty-gritty of customer retention strategies. Before diving, it’s important to look at the key customer retention metrics first. Understanding these will help you evaluate performance, see where you’re doing well, and identify areas that need improvement.
3.1. Customer retention rate
The most straightforward and fundamental metric regarding retention performance is the customer retention rate (CRR). It measures the percentage of customers a business keeps over a specific period of time.
Customer retention rate reflects how well you hold on to your audience and the effectiveness of your sales process, customer experience, and after-sales support. From there, you gain insights into what is working well and decide which parts of the strategy should be maintained and which areas need improvement.
So, what is a good customer retention rate? According to Yotpo, the average customer retention rate in eCommerce is around 30% to 40%. Online stores, FMCG, or retail with a CRR of 60-70% is considered strong. If your business follows the subscription-based model, a retention rate of 40%-45% is solid.
These numbers are specific to eCommerce, though. Regarding the cross-industry average, the benchmarks are closer to 75% and they vary vastly depending on your business model and industry. The CRR of service-based businesses is usually much higher than product-based’s, except for one-off sectors like hospitality, travel, or restaurants, where the averages are around 55%.
Average customer retention rate by eCommerce industry (Image: Exploding Topics)
How do you calculate customer retention rate?
To calculate the retention rate, you’ll need the customer count at the start of the chosen period, determine how many new customers joined during that time, and note the total customer count when the period ends.
The customer retention rate formula is:
Customer Retention Rate = [(Number of customers at the end of the period - Number of new customers acquired) / Number of customers at start] x 100
Let’s break it down for clarity. Suppose you want to measure monthly retention. You might start with 1,000 customers at the beginning. That’s your baseline count. Over that month, you acquire 250 new customers, and by the end, your total customer count is 1,100. The customer retention rate of the month will be:
CRR = [(1,100−250)/1,000]×100 =85%
You can apply the same approach to calculate the customer retention eCommerce rate over a different time frame. It can be quarterly, annually, or semi-annually. In case you operate a small customer base, semi-annual tracking may serve.
3.2. Customer churn rate
Customer churn rate is one of the most widely watched metrics. It’s basically the inverse of customer retention rate. One tracks who stays, the other shows the percentage of customers who leave over a given period.
Customer churn rate signals the health of your retention efforts, and your goal is to keep it as low as possible. If it’s low, you are doing okay. The retention strategy is performing. Otherwise, it’s worthy of attention.
Average customer churn rate by eCommerce industry (Image: Finmark)
In eCommerce, a solid churn rate benchmark is under 10% annually. For subscription-based eCommerce, 4% monthly churn is considered healthy. Anything higher than 10% is often a red flag, though. There should be some underlying problems in customer dissatisfaction, friction in purchase paths, or service. Or the competition is getting more intense.
Customer churn rate formula:
Churn Rate = (Number of customers lost during the period / Number of customers at the start of the period) x 100
Let’s revisit the previous example. You begin the month with 1,000 customers and lose 150; the churn rate is: (150/1,000) x 100 = 15%. A 15% churn rate monthly is fairly common, but there is still room for improvement.
3.3. Customer lifetime value
Customer lifetime value (CLV) is the total revenue a business can expect from a single customer throughout their entire relationship with the company. It measures the value of the customer in the long term. This includes not just the money from their first purchase but also all the future purchases, renewals, upsells, cross-sells, and even referrals they generate.
So, how is customer lifetime value a metric in retention analysis? CLV provides you with better insights into overall financial performance and growth potential. A stable or increasing CLV is an indicator of strong customer relationships and effective retention strategies. Meanwhile, a shrinking CLV alerts potential churn, waning engagement, or a growing share of low-value customers.
The formula for calculating lifetime value is:
CLV = Average Order Amount x Purchases per Year x Retention Rate
Here, the average order amount is calculated by dividing the total revenue in a period by the number of orders in that period.
Let’s take an example based on the previous one. Now you have an average purchase frequency of 4 times a year and a retention rate of 85%. Suppose the retention rate here is measured annually instead of monthly, and the average order amount is $50. The CLV then would be:
$50 x 4 x 0.85 = $170
3.4. Repeat purchase rate
Repeated purchase rate (RPR) is the percentage of customers who return to make more than one purchase within a given period. It concerns the buying frequency. While the customer retention rate looks at the number of customers that stay to the end of the measurement period, the RPR focuses on the act of re-purchase. As long as a repeat order is made, it is counted, despite any later churn.
RPR shows how active your retained customers are. It is also a strong indicator of customer loyalty and satisfaction.
What’s a good repeat purchase rate by the way? Generally, the RPR in eCommerce falls between 15% and 30%. This number varies by industry, product types, and business model. For example, consumables like food and pet supplies usually have higher repeat purchase rates than electronics or luxury goods. Still, keeping it at 25% or above is a good target to aim for.
Average eCommerce repeat purchase rate by industry (Image: MobiLoud)
Repeat purchase rate formula:
RPR = Number of Return Customers / Total customers x 100
As per the previous example, you had 1,000 customers in the past month. Among them, 250 returned for another purchase. Then, the RPR would be 25%, which sits within the healthy benchmark range of 15-30%.
Supposing the RPR here is under 15%, it’s high time that you review your retention strategy, identify the drop-off points, and implement targeted campaigns, upsells, and personalized offers.
3.5. Average customer retention metrics by industry and business model
Those are the four key metrics in customer retention. In the previous content, we did mention benchmarks for each metric, but we have not fully covered them across all industries and business models. In this section, we will present them in more detail.
3.5.1. Average customer retention metrics by industry
One thing about these metrics is that the benchmarks not only vary within industries, but eCommerce averages and broader industry standards also differ significantly. The following table focuses on the monthly eCommerce benchmarks only. The included metrics are retention rate, churn rate, and repeat purchase rate based on trusted sources such as Yotpo and MobiLoud. CLV averages are not included as they are not disclosed.
# | Industry | Retention rate | Churn rate | Repeat purchase rate |
|---|---|---|---|---|
1 | Apparel | 26% | 74% | 27% |
2 | Food products | 24.5% | 75.5% | 29% |
3 | Cosmetics | 25.9% | 74.1% | 26% |
4 | Pet Products | 31.5% | 68.5% | 30% |
5 | Supplements | 291% | 70.9% | 29% |
6 | Tea | 20.9% | 79.1% | 21% |
7 | Industry average | 30=40% | 10% (anually) | 15-30% |
3.5.2. Average customer retention benchmarks by business model
Coming to the business model, customer retention metrics also differ depending on whether it is subscription-based or non-subscription and business-to-business (B2B) or business-to-customer (B2C). Below are the benchmark comparisons for each.
Subscription vs. non-subscription eCommerce: Running on recurring revenue, subscription eCommerce tends to achieve higher retention. The reason is that customers stay engaged through ongoing plans. Meanwhile, it’s harder for non-subscription models to retain customers because most purchases are one-time.
Subscription-based: Retention 40%-45%, churn 5-10%
Non-subscription: Retention 25-35%, churn 20-30%
B2B and B2C eCommerce: B2B retention is typically higher because of long-term relationships and high switching costs. B2C retention, on the other hand, is usually lower due to emotional purchase decisions and intense competition.
Metric | B2B eCommerce | B2C eCommerce |
|---|---|---|
Retention rate | Can reach 80% to 90% in long-term B2B | Around 30% to 40% average in eCommerce |
Churn rate | Around 4.91% | Around 5-10% |
Customer lifetime value (CLV) | Higher in B2B due to larger order values and longer relationships | Lower in B2C unless there is a high repeat purchase frequency or a subscription model |
Repeat purchase rate | No precise number available, but expectations are higher due to stable relationships | Around 15% to 30% |
4. The 5 proven strategies that turn one-time buyers into loyal customers
At its core, the practice of improving customer retention rate is to consistently deliver value that meets or exceeds expectations. It’s all about optimizing every element of the customer journey. Without further ado, let’s explore the 5 most effective eCommerce customer retention strategies.
4.1. Consolidate customer data into a single view
Consolidating data refers to the process of combining customer information from all touchpoints into a single, unified repository. In the context of eCommerce, it means you collect and integrate customer data from sources like purchase history, support requests, web behavior, and marketing engagement into one central platform, creating a complete profile.
(Image: Zendesk)
Why is it important, and how does it help to improve retention? Each interaction with a customer is a separate piece of data, but these are only fragmented snapshots. Customer data consolidation now integrates these pieces into a unified customer profile and forms the foundation for a full 360‑degree view of the customer. From there, you can:
Personalize campaigns for higher engagement
Detect churn risks early
Identify your most valuable segments for loyalty incentives
Align teams with a single customer view
Base actions on accurate, complete data
A good case study is the pet subscription and retail brand BARK. By integrating fragmented customer data into a unified 360-degree profile through Simon CDP, it managed to generate an additional $40 million in repeat-purchase revenue. Other achievements include driving 20 percent of total revenue through personalized email and SMS campaigns, reducing manual data handling time, and enabling cross-team access to accurate customer insights.
Pro tips: Merchants on Shopify can leverage Shopify Segmentation. This built-in tool is especially useful for customer data consolidation and targeting owing to its ability to combine demographic and behavioral filters, which allows you to quickly build precise segments and run timely, personalized emails, SMS, and campaigns for retention boosting.
4.2. Deliver personalized experiences
This customer retention program focuses on creating unique and personalized interactions. Basically, you use customer data, ideally consolidated from multiple touchpoints into unified profiles, to send relevant messages, offers, and experiences to each customer at the right time and through the right channel.
Personalization helps drive repeat purchases, increase average order value, and strengthen loyalty. Just a personalized shopping experience can lead nearly 44 % of shoppers to become repeat buyers. Almost half of consumers say they’re more likely to buy again, and 80 percent of consumers are more likely to stay with a brand when their shopping feels personal.
eCommerce personalization often occurs during the engagement and post-purchase stages of the customer journey. You can try:
Product recommendations based on past purchases and browsing history
Dynamic, behavior-triggered email or SMS campaigns
Personalized loyalty rewards for high-value customer segments
Real-time offers in response to cart abandonment or low engagement
4.3. Build an engaged community
Community building is the practice of creating a dedicated space where customers feel connected, engaged, and part of the brand’s story. This space gives customers room to discuss ideas, share experiences, and give feedback.
It is not easy to cultivate a community because building it requires customers to take initiative and invest emotionally. It also involves consistent engagement and effective moderation. Despite these challenges, it is a valuable asset for long-term retention.
Deepens emotional connection and loyalty
Encourages peer-to-peer support and engagement
Generates valuable feedback and insights
Turns customers into brand advocates
One of the most iconic customer retention examples here is LEGO. In 2008, the Danish toy company created LEGO Ideas to let fans submit and vote on product concepts. The result? The platform grew rapidly from about 20,000 members to over 2.8 million, with over 135,000 submitted ideas.
In parallel, sets from LEGO Ideas sell up to 30 percent more than standard sets, and over 65 percent of community members make repeat purchases annually. Such success is contributing to the team’s continued investment in regular contests, featured creator spotlights, and reward programs to build and sustain the community.
What can we learn from the case study from a customer retention perspective? Focus on:
The trust triangle (authenticity, logic, and empathy): fostering genuine relationships, maintaining consistent engagement, and creating a sense of belonging
Encouraging user-generated content (UGC)
Facilitating voting or feedback
Recognizing and rewarding active members
4.4. Implement loyalty and referral programs
Loyalty and referral programs are common incentive-based strategies. How they work is that you reward the customers for making repeat purchases in a loyalty program or for referring new customers in a referral program. The rewards can be discounts, cashback, free products, exclusive offers, or points that can be redeemed later.
Loyalty and referral programs are proven to increase purchase frequency, average order value (AOV), and customer lifetime value. It makes sense. Depending on the industry and which study you believe, a good loyalty product can drive 65% of revenue from repeat customers. The average order value for eCommerce stores with a loyalty program is also 45% higher compared to those without one. Regarding referral programs, 37% of referred customers are more likely to make another purchase.
A close-to-home example would be Shopify loyalty programs, given how many brands on the platform have delivered remarkable results. In early 2018, the fashion brand The Pulse Boutique launched its Pulse Perks loyalty program using a Shopify loyalty app. The strategy focused on rewarding repeat purchases and building long-term customer engagement through exclusive perks. The results? They saw a 39% increase in the returning customer rate, and average order value rose by 19% in less than a year.
Examples of loyalty and referral programs (Image: Voucherify)
So, how do you make your loyalty and referral programs work? Below are some tips and best practices:
Set clear, measurable goals before launching. Define targets for repeat purchase rate, average order value, and customer lifetime value.
Offer the right types of rewards. Monetary rewards like cashback and discounts are effective for driving short-term engagement. For emotional connections, use experiential rewards such as exclusive events and VIP access. Customers who value exclusivity often prefer value-added rewards like free products, upgrades, and early access.
Promote the program across all touchpoints. Make it visible on your website, email, social media, and in-store to ensure maximum reach.
Track and analyze performance data regularly. By monitoring key metrics, you can continuously refine reward structures and marketing messages.
Prevent fraud. Use unique referral codes, purchase validation, and usage limits.
4.5. Apply RFM analysis for targeted retention
Finally is using the RFM framework. RFM stands for Recency, Frequency, and Monetary value. It, in turn, measures how recently a customer purchased, how often they buy, and how much they spend over a period of time.
In RFM analysis, you will analyze purchase data and score each customer on recency, frequency, and monetary value. Each dimension is typically rated on a scale of 1 to 3. In which a score of 3-3-3 is the most valuable customer segment, and 1-1-1 alerts you to at-risk or inactive customers.
(Image: Hive Marketing Cloud)
Here’s how to implement RFM:
Gather transaction data. Find information on dates of recent purchases, total number of purchases per customer, and total spend per customer.
Assign scores. For each metric, divide customers into quantiles or custom ranges and score them. 3 means best and 1 means least.
Segment customers based on combined RFM scores. Then carry out marketing actions designed for each segment, for example, targeted win-backs for low-scoring groups and VIP perks for high scorers.
In eCommerce, RFM analysis allows you to identify your most valuable customers and design better targeted campaigns. Through such practices, you can implement personalized promotion campaigns to drive repeat purchases and boost sales. It can lift the retention rate by 10-20%.
Pro tips: Customer retention is all about delivering exceptional value at every touchpoint. Brands that align strategies across the journey see as much as an 18-25% improvement in retention. For utmost outcomes, make sure to map out key touchpoints, determine pain points, drop-off points, and churn risks. Apply the right strategy at the right stage.
5. Tools for building or improving customer retention for eCommerce
That’s about the core strategies we have covered. In this section, we will look at several tools that can make implementing customer retention programs in your eCommerce business easier.
5.1. Klaviyo: Email and SMS automation
A powerful marketing automation platform that helps you deliver personalized email and SMS campaigns to retain and re‑engage customers. Klaviyo is currently among the most trusted platforms for retention, with a 4.7‑star average rating on the Shopify App Store.
Key features:
Segmentation by behavior and lifecycle to trigger retention workflows
Automated post‑purchase flows (replenishment, win‑backs)
Analytics to track retention rate and ROI from repeat purchases
To make the most of this tool for retention, you can set up automated post-purchase follow-ups and send personalized recommendations. Delivering loyalty updates like point balances or exclusive offers via email and SMS is also a great way to keep customers engaged and coming back.
5.2. ConvertCart: On-site personalization and conversion optimization
ConvertCart is an eCommerce optimization tool that drives customer engagement and loyalty through tailored on-site experiences. It lets you create personalized pop-ups, product recommendations, and targeted offers. Merchants using this app have achieved up to a 30 % higher conversion rate within six months and have significantly boosted repeat purchases.
Key features:
Real-time personalization and dynamic pop-ups to increase repeat visits
Predictive analytics and A/B testing to reduce churn
Product recommendations and exit intent offers to promote second purchases
5.3. Koin: Cashback and store credit rewards
Koin is a loyalty app that turns refunds and cashback into reusable store credits, cleverly boosting customer return rates and lifetime value. It ranks in the top 20 of Shopify’s loyalty and rewards apps and in the top 6 store credit tools.
So, what makes Koin one of the must-have Shopify retention apps? It all comes down to Koin’s flexible rewards system. Merchants can easily track customer spending behavior and turn it into personalized rewards to incentivize repeat purchases.
Key features:
Set custom cashback rates by order value or product to incentivize spending.
Automate issuance of store credit via Shopify Flow integration to streamline reward delivery.
Allow customers to redeem credits directly at checkout, reducing friction.
Promote store credit rewards using widgets on product pages, cart pages, and profiles for visibility.
Offer intuitive dashboards for tracking store credit and retention-based metrics.
We recommend you pair it with the built-in automation tool Shopify Flow for maximum efficiency. This way, you can trigger the right rewards for the right customers at the right time. Here’s exactly what it can do for you:
Issuing store credit automatically after the first purchase
Rewarding repeat purchases by milestone (e.g., 2nd or 3rd order)
Granting referral credit when a customer successfully refers a new buyer
The Shopify customer retention tool, Koin Cashback & store credit rewards, is currently available for free on the Shopify App Store and gets an excellent overall rating of 5.0 stars. Start your free trial and drive customer retention today.
6. Final thoughts and key takeaways
There you have it, a comprehensive look at customer retention. In the end, retaining customers is as important as acquiring new ones for sustaining long-term business growth. Start to measure your retention metrics early and optimize strategies continuously to prevent unnecessary churn.
Don’t forget to leverage the right tools and tactics to make your retention strategy scalable and effective. By focusing on loyalty programs, referral incentives, personalized marketing, and frameworks like RFM analysis, you can build deeper relationships that increase repeat purchases and overall profitability.
FAQs
-About Author
Emma C.
As the Chief Marketing Officer at KOIN app, I’m here to build a robust ecosystem by collaping with Shopify apps. Together, we can create seamless integrations that add more value to our shared customers.
KOIN helps merchants retain customers, increase repeat purchases, and drive loyalty by offering cashback and store credit rewards.
📩 Let’s connect! emma@getkoin.io
