Customer Retention Rate

25 Jul 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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