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Why Conducting Customer Retention Analysis is Important

by Jerusha Songate. Last updated on June 20, 2024

The result of your customer retention efforts depends on how well you can analyze your efforts.

By knowing when and where to make adjustments and what is better left untouched, you can capitalize on your efforts and slash marketing costs.

free trial from Baremetrics can help you discover the specific metrics you should be tracking for customer retention tactics. Do check out our live demo as well.

Let’s take a look at how you can get the most out of your customer retention analysis.


What is Customer Retention Analysis?

Customer retention analysis helps you discover why your customers choose to leave while also offering insight into how you can change that. By running this analysis you can learn:

  • Why your customers churn
  • When a customer is most likely to leave
  • How customer churn affects the bottom line
  • How to improve – or implement — customer retention strategies

The analysis illustrates how well your current retention efforts work and where they could be tweaked. Without a strong customer retention strategy, you could be spending your marketing dollars less efficiently.

However, calculating your customer churn rate isn’t all there is to conduct a thorough analysis. For a crystal clear image of your customers, you need to uncover when and why your customers choose to take their business elsewhere.

With a clear strategy, you can encourage your customers to stay and achieve real, sustainable growth as a company.


Customer Retention Analysis

Customer Retention Analysis


How to Conduct Customer Retention Analysis

Once you begin customer retention analysis, the key is to make it ongoing. Every time you change or alter your offerings, customer behavior also changes.

It’s only possible to see the whole picture when you continuously analyze by defining and calculating customer retention rate and tracking customer behavior from the initial purchase onward.


Calculate your customer retention rate

Any retention analysis begins first with a calculation of the retention rate. You need to know the ratio between customers staying and those leaving.

Even if you’re satisfied with the current rate, you still need to continuously analyze, to maintain that level.


What does retention mean to your business?

Different companies can have different definitions of customer retention. A SaaS company, for example, may consider a purchase of an annual subscription as retention, whereas an IT service provider’s retention may be a bit tougher to label.

To define what customer retention means to you, specifically, ask which of the following apply to your business:

  • You want to spend less on retention.
  • You want to increase your revenue.
  • You care deeply about building better relationships with your customers.
  • Improving your marketing strategies is high on your to-do list.

All of the above likely apply.

It depends on the service you provide and how large your clients are, but it won’t hurt to calculate your revenue retention alongside customer retention

If you lost one of your biggest clients, how would it affect your revenue retention? Most likely much more significant than customer retention.


Track Customer Behavior from Sign Up to Sign Off

The lifecycle of each customer is unique. Their behavior from the moment they sign up for your service to the moment they decide to leave – if they decide to leave – is all the raw, actionable data you need to conduct customer retention analyses.

Retention rates across customer lifetimes aren’t uniform. This is why you need to know what’s happening at every stage. Each stage requires a different action to keep a customer with your company.


Track Customer Behavior

Track Customer Behavior 


Choose Your Retention Key Performance Indicators (KPIs)

To properly begin retention analysis, you must identify your engagement metrics. Some of the most common KPIs include:

Your company most likely has specific markers of customer experience and engagement that lend themselves to a better understanding of those customers, such as:

  • How many upgrades a customer obtains.
  • How often they leave feedback.
  • If they participate in your loyalty program.

These are just a few metrics to consider as you analyze your customers’ behavior and rethink your retention strategies.


Discover Where Churn Occurs

Oftentimes, companies look at where in the lifecycle a customer normally churns. While this is needed, it’s also necessary to use predictive analytics to employ targeted retention efforts.

Separating your customers into different cohorts: people who signed up at the same time and specific types of customers separated by demographics can aid your efforts.

Learn more about Baremetrics’ segmentation features and how it can help you process these data points with a free 14 day trial from Baremetrics.

Knowing where or when particular cohorts or personas are at risk of churning is a remarkable source of potential revenue for you.

If you take into consideration how much you lose every time several customers churn plus high customer acquisition costs, every churn you prevent is priceless.

By paying attention to behavior patterns and subsequent retention measurements, you can predict future customer behavior.

Accuracy can vary, but you’re likely to get a good picture of possible future churn. This is the key to creating specific actions that can help you retain those customers.

If you’re curious about how your churn stacks up with similar companies, our Open Benchmarks show you average churn rates based on average revenue per user.


Identify Retention Behaviors

You want to track the customers who have stayed with your company and its products for long periods. Whatever retention measures you have in place already are working for these customers.

Take a look at their actions to uncover patterns linked with retention efforts. By comparing the patterns of long-time customers with those who churn, you’ll see what keeps your customers with you and better understand why they tend to leave.

If you’re having trouble identifying these markers on your own, conduct feedback surveys targeted at both sets of customers – long subscribers and recent cancelations.

These surveys offer you an understanding of everything you’re doing right and what could use some work. 


Understand Your Efforts with Baremetrics

Retaining customers boils down to understanding your numbers. The ability to uncover and comprehend metrics helps you adjust your retention strategies and beef up your marketing efforts.

Baremetrics offers access to the accurate insights you need for sustainable business opportunities and growth.

We help you collect your most valuable data and conduct detailed retention analyses. Not sure if we’re right for you?

Have a look at our live demo; you must also sign up for our free Baremetrics trial today!

Jerusha Songate

Jerusha has a strong interest in SaaS and finding new business opportunities. She writes for Baremetrics as part of her passion for business journalism.