Customer Retention Rate

Exercise 1: Calculating customer retention rate – hardware store Solid

Hardware store Solid is situated in a competitive market. They would like to know how many customers are returning customers. To analyze their returning customer rate they started collecting information 3 years ago. The group of customers they selected is the total number of customers they had in 2014. This total came to 200,000. Of this group, only 70,000 shopped at their store at least once the following year. In 2016 this number fell to 43,400.

What is the customer retention rate for 2015 and for 2016?

  2014 2015 2016
Customers 200,000 70,000 43,400
Retention rate x    
Orders 256,000 115,500 80,290
Average number orders 1.28 1.65 1.85
Average order size $80.00 $90.00 95.00
Revenue $20,480,000 $10,395,000 $7,627,550

 

Extra Credit (3 pts.):

If the company had maintained a 75% customer retention rate during these two years, what additional revenue would they have earned?

 

Exercise 2: Calculating customer retention rate – Phone Company CallMe

A new phone company, CallMe, wants to see how many of their initially sold data packages are still being used by their customers. They started out in 2011 with a total of 90,000 customers. Of these 90,000 customers only 30,000 stayed with them. This was a tough setback for the company. Fortunately, due to an intensive focus on customer service, they managed to keep the majority of their customers over the following 4 year period.  However, in 2016 a new phone company came to the market and offered a similar package for a lower cost. Many of CallMe’s returning customers were lost to this competitive phone company.

 

What is the customer retention rate for the following years? Write down the percentage with 2 digits after the decimal.

  2011 2012 2013 2014 2015 2016
Customers 90,000 30,000 27,000 26,500 26,000 15,000
Retention rate X          

 

 

 
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