Retention Rate measures the portion of your Active Customer Base (ACB) from 12 months ago who have made another purchase since then.
How is Retention Rate for the current month calculated?
First, we look at your Active Customer Base from 1 year prior to the current month. Active Customer Base is defined as customers who made a purchase in the months* prior to that date.
*We prefer to include purchases for the previous 12 months, but limited data may mean we only include purchases for the previous 3 months.
For example: to calculate April 2016’s retention rate, we must look at the Active Customer Base on April 1, 2015. The ACB will include customers who made a purchase between January 1, 2015 - March 31, 2015, or as far back as April 1, 2014 - March 31, 2015 if that length of historical purchase data is available.
Once we've determined the ACB one year prior to the current month, we determine how many of those customers made another purchase between then and now. These are your Repeat Customers (“RC”).
We divide your Repeat Customers by your Active Customer Base (RC ÷ ACB) to surface your current month’s Retention Rate.
Example: Retention Rate for April 2016
- Active Customers (as of April 1, 2015) = 10,000
- Active Customers as of April 1, 2015 who made at least one purchase between April 1, 2015 and April 1, 2016 = 2,000
- Retention Rate for April 2016 = 2,000 ÷ 10,000 = 20%
How is Current 12 Month Retention Average calculated?
Using the method above, we collect the Retention Rates for a 12-month period and then take the average of those Retention Rates.
How is Previous 12 Month Retention Average calculated?
Using the method above, we collect the Retention Rates for the 12-month period ending 12 months prior to the current month and then take the average of those Retention Rates.
How is the Industry Benchmark calculated?
Each WhatCounts customer is categorized by industry. We calculate the average 12-month Retention Rate for all clients with each industry (using the method above) to determine the Industry Benchmark. When calculating Industry Benchmark, we only consider industries for which we have a statistically significant number of clients. For industries where we have too few clients to achieve statistical significance, we use the WhatCounts Client Benchmark, which applies the same formula to all WhatCounts clients across all industries.
Which clients are included in the Industry Benchmark calculation?
Clients for which WhatCounts has at least 15 trailing months of previous customer purchase history will be included in our Industry Benchmark calculations.