Cohort retention rate and customer stickiness are two important metrics that businesses use to understand and improve their relationships with their customers. Cohort retention rate measures the percentage of customers who continue to do business with a company over time, while customer stickiness measures the strength of a customer’s loyalty to a company and their likelihood to continue doing business with the company in the future.
By analyzing these metrics, businesses can gain valuable insights into how to retain and engage their customers, and identify potential areas for growth and improvement.
Cohort Retention Rate Definition
Cohort retention rate is a metric that measures the percentage of customers who continue to do business with a company over time. To calculate cohort retention rate, a business first defines a cohort of customers based on a common characteristic or behavior, such as the month in which they made their first purchase.
The business then tracks the behavior of these customers over time, and calculates the percentage of customers who continue to do business with the company after a certain period of time. For example, a business might calculate the cohort retention rate for customers who made their first purchase in January, and track their behavior over the next 12 months.
Benefits of Using Cohort Retention Rate KPI
Cohort retention rate is an important metric for businesses because it allows them to understand how well they are retaining their customers over time. By comparing the cohort retention rate for different groups of customers, businesses can identify trends and patterns in customer behavior, and identify potential areas for improvement.
For example, a business might see that the cohort retention rate for customers who made their first purchase in January is higher than the cohort retention rate for customers who made their first purchase in February. This could indicate that there is an opportunity for the business to target its marketing efforts towards customers who are more likely to continue doing business with the company in the future.
In addition to cohort retention rate, businesses also use the concept of customer stickiness to measure the strength of a customer’s loyalty to a company and their likelihood to continue doing business with the company in the future.
Customer stickiness is typically measured using a formula that takes into account several factors, including the number of products or services that a customer uses, the amount of time they have been a customer, and the amount of money they spend with the company. By analyzing customer stickiness, businesses can identify which customers are most loyal to the company and are likely to continue doing business with it in the future.
One key benefit of analyzing cohort retention rate and customer stickiness is that it allows businesses to develop strategies to retain and engage their customers. By understanding which factors influence customer retention and loyalty, businesses can develop targeted marketing campaigns and other strategies to keep their customers engaged and loyal.
How to Calculate Cohort Stickiness
To calculate cohort stickiness, you need first to define what cohort you want to measure stickiness for. A cohort is a group of people who share a common characteristic, such as joining a website or purchasing a product at the same time. Once you have defined your cohort, you can then measure how “sticky” they are by looking at how often they return to your website or how long they continue to use your product.
To do this, you can use the following formula:
Cohort Stickiness = (1 – (Cohort Churn Rate / Total Churn Rate)) x 100
Where the Cohort Churn Rate is the percentage of people in the cohort who stop using your product or visiting your website, and the Total Churn Rate is the percentage of all users who stop using your product or visiting your website.
For example, a business may have a cohort stickiness rate of 80% for customers who made their first purchase in January. This means that 80% of the customers who made their first purchase in January remained active with the business during the period being measured. By comparing the cohort stickiness rate of different groups, businesses can identify which groups are performing well and which may need additional support to improve their retention rate.
This formula will give you a percentage that indicates how “sticky” your customers are. A higher percentage indicates that a greater proportion of your customers are continuing to use your product or service, while a lower percentage indicates that more of your customers are churning. You can use this information to identify any issues that may be causing customers to churn and take steps to address them.
How to Improve Customers Cohort Stickiness
To improve customer retention, cohort stickiness and encourage repeat purchases, companies can:
- Providing a seamless and user-friendly shopping experience, with fast loading times and easy-to-use navigation.
- Improve customer support to effectively communicate with customers and provide the right level of support.
- Start a loyalty program to motivate customers to purchase more often.
- Send engaging emails to build a good relationship with customers an initial purchase.
- Offering personalized recommendations and product suggestions based on the customer’s previous purchases and browsing history.
- Offer discounts to incentivize customers to return to the site.
- Implementing abandoned cart reminders to remind customers about items they have left in their cart and encourage them to complete their purchase.
- Collect customer feedback to make customers feel valued and invested in the company.
- Start a referral program to use existing customers to bring in new customers.
- Offer personalized shopping experiences to increase revenue.
- Consistently delight customers to exceed their expectations.
- Offer fast delivery to avoid abandoned carts.
- Make returns easy to build trust with customers.
Overall, customer cohort stickiness rate and Cohort retention rate are valuable metrics for eCommerce businesses looking to track the retention rate of their customers and identify opportunities for improvement. By measuring the cohort stickiness rate over time, businesses can gain a better understanding of their customers and take steps to improve their retention rate and drive long-term growth.
What Is Cohort Retention?
Cohort retention is a measure of how well a group of people (a cohort) continues to use a product or service over time. It is often used to track the long-term engagement of a group of users who have joined or signed up for a product or service at the same time.
To calculate cohort retention, you first need to define your cohort and determine how long you want to track their retention.
How Do You Measure Customer Stickiness?
To measure customer stickiness, you can use the same formula as for measuring cohort stickiness:
Customer Stickiness = (1 – (Customer Churn Rate / Total Churn Rate)) x 100
The Customer Churn Rate is the percentage of customers who stop using your product or service, and the Total Churn Rate is the percentage of all users who stop using your product or service.
How Can Cohort Retention Be Improved?
Improving cohort retention in ecommerce can be achieved by offering personalized recommendations, providing a user-friendly shopping experience, implementing a loyalty program, sending abandoned cart reminders, providing excellent customer service, and offering exclusive deals and discounts to returning customers.
Is Stickiness the Same as Retention?
Yes, “stickiness” and “retention” are often used interchangeably when referring to online shops. Both terms refer to the ability of an online shop to retain its customers and keep them coming back to make repeat purchases. A sticky online shop is one that is able to hold the attention of its customers and keep them engaged and interested in the products and services offered, which can improve retention and ultimately lead to more sales and revenue.
How Do You Make Customers Sticky?
To increase customer stickiness, companies can use customer accounts, improve customer support, start a loyalty program, send engaging emails, offer discounts, collect feedback, start a referral program, offer personalized shopping experiences, consistently delight customers, offer fast delivery, and make returns easy. These strategies can help to retain customers and encourage them to make repeat purchases.