Calculate Retention Rates in Klaviyo to Drive Repeat Sales

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Hello, and welcome back to another edition of eCommerce Alchemy - your one-stop destination for everything related to ecommerce growth.

Ever wondered how to turn those one-time buyers into loyal repeat customers? I've been in your shoes, searching for effective ways to boost customer loyalty.

One key insight I discovered is that calculating your retention rate can provide a clear picture of your customer engagement. Think of it as a roadmap that reveals who’s sticking around and who might need a little extra nudge.

In this newsletter, I’ll guide you through how to measure this vital metric in Klaviyo and how it can transform your approach to retaining customers. Let’s get into it!

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Why Calculate Retention Rate?

Retention rate calculations are more than just numbers—they offer valuable insights into your customer base's loyalty and long-term behaviour. Unlike simply identifying recent purchasers, retention rate measures how many of your customers stay engaged with your brand over a longer period.

This helps you pinpoint where you might need to enhance your strategies to improve customer retention.

Step-by-Step: How to Calculate Your Retention Rate

1. Set Up Your Repeat Customer Segment

Start by creating a segment in Klaviyo that includes customers who made a purchase between 365 and 730 days ago and who have also bought from you in the past 6 months. This segment helps you identify those repeat buyers who have stayed engaged over time.

• Example Segment: Customers who placed at least one order between 365 to 730 days ago and at least one order in the last 182 days.

  

By focusing on this timeframe, you ensure you’re capturing customers who didn’t just make a quick second purchase but have consistently returned over time.

If you don't include the last 6-month condition, you risk including customers who made a second purchase immediately after the first and then never returned. Using monthly time spans helps you gain a better understanding of customer loyalty over time.

2. Create Your Overall Purchasers Segment

Next, you need another segment that includes all customers who purchased from you last year (365 to 730 days ago), without adding the condition of recent purchases. This broader segment helps you see the total pool of buyers from last year, which is essential for comparison.

• Example Segment: Customers who placed at least one order between 365 and 730 days ago.

  

This segment serves as your baseline, showing you the total number of customers from the past year, regardless of whether they made additional purchases recently.

3. Calculate the Retention Rate

With your two segments set up, you’re ready to calculate the retention rate.

Here’s the formula you’ll use:

Let’s apply this with an example. Suppose your first segment (customers who purchased last year and in the last six months) has 2,500 profiles. Your second segment (all customers from last year) includes 10,000 profiles.

Here’s how you’d calculate the retention rate:

In this case, 25% of the customers from last year have returned to make a purchase in the last 6 months. This percentage reflects how many of your previous buyers have continued their engagement with your brand.

Customising for Your Business

Retention rate calculations aren’t one-size-fits-all. Depending on your business model, you might need to adjust the time frames to better fit your customers' buying habits.

For instance, if you run a subscription-based business, customise your segments to align with your subscription cycles. Tailoring the time frame ensures you get the most relevant insights for your specific scenario.

Why This Matters

Understanding and calculating your retention rate provides crucial insights into customer behaviour and loyalty. This data helps you refine your engagement strategies, tailor your marketing efforts, and ultimately enhance overall customer satisfaction.

It’s a vital metric that reveals not just who’s buying from you now, but who’s likely to continue supporting your brand in the future.

So, give this method a try in Klaviyo. It’s a straightforward way to measure and enhance your customer retention strategies, helping you build lasting relationships with your audience.