First up, let’s take a look at the hard numbers. Here are six key customer retention metrics and the formulas for how to calculate them (in orange) that will help you track the purchase behaviour off the back of your campaign.
The essential metric for all campaigns comes down to return on investment. Calculate revenue uplift and subtract associated campaign costs to find the ROI of sending handwritten notes to customers.
One strategy to increase overall Customer Lifetime Value is to increase the size per order, but how do you motivate customers to spend more money on every transaction? Well, sending handwritten notes has been proven to increase basket size simply by making customers feel special.
While Average Order Value (AOV) focuses on the quality of each transaction, Repeat Purchase Rate (RPR) focuses on quantity. Returning customers that buy from you multiple times within a certain period will boost their overall Customer Lifetime Value.
Another way of tracking repeat purchases is through the use of redemption codes. To calculate the redemption rate…
A word of warning - this metric should be taken with a pinch of salt and analysed alongside Average Order Value. The most regular customers don’t necessarily achieve the best Customer Lifetime Value.
One client might use Inkpact to run a huge event once a year, but simply have no use for our service outside of this period. Meanwhile, another client might use Inkpact to send invites to intimate monthly roundtable events, requiring smaller order volumes on a much more frequent basis.
For this reason, look at overall Customer Lifetime Value which takes both AOV and RPR into account.
Customer Lifetime Value (CLV) examines how much a single customer spends over time.
“Customer lifetime value is the metric that indicates the total revenue a business can reasonably expect from a single customer account. It considers a customer's revenue value, and compares that number to the company's predicted customer lifespan. Businesses use this metric to identify significant customer segments that are the most valuable to the company.” HubSpot
First, calculate Customer Value…
Now, look at a customer’s average lifespan to turn Customer Value into Customer Lifetime Value. This is the average number of years a customer remains active before they lapse and drop off. This varies hugely from sector to sector, but past data can help to determine a suitable average lifespan.
It’s important to track the percentage of customers who stay (or are active) versus those who leave (or have lapsed) over a period of time. Your customer retention rate sits in opposition to your churn rate - the speed at which you expect to lose customers.
This is clear cut for any business with a recurring revenue model (such as a monthly subscription) but can also be a valuable metric for pay-as-you-go businesses. For pay-as-you-go business, use Order Gap Analysis (OGA) to calculate the average time between consecutive orders placed by one purchaser. Once this period is defined, you can calculate the Customer Retention Rate.
For businesses using a recurring revenue model, net monthly recurring revenue (MRR) churn is an essential metric. Not only does it track the number of customers lost or retained, but it also notes the changing value of these customer accounts.
“If you’re consistently hitting <1% net MRR churn, you’re on the right track.”
To calculate Net MRR Churn, you will need the following figures:
Customer engagement is the softer aspect of customer retention. But it’s equally important to track engagement, because it indirectly leads to future purchases and new customers…
"Customer engagement is the ongoing interaction between company and customer, offered by the company, chosen by the customer." - Paul Greenberg, HubSpot
Digital customer engagement is the top strategic priority for C-level business executives. Why? Because engaged customers increase cross-sell and up-sell opportunities, and boost average order sizes too. In other words, high current engagement indicates high future engagement.
Customer engagement can be measured by behaviours such as:
Digital marketers will be used to A/B split testing different landing pages, emails, banner ads and more. A/B testing your handwritten note campaigns can be just as useful, helping you find your sweet spot within this offline channel.
A/B split tests commonly compare handwritten notes to printed direct mail, email or other handwritten campaigns. Running a split test is straightforward, or at least should be, testing one variable at a time.
Simply split your recipient list in half. Track and measure your results based on the goal you’ve set for the campaign. Compare one group to the other. And voila!
Below are a few variations you can test to see which campaigns have the best ROI:
You can even track offline to online conversions using the following:
Being in the business of sending handwritten letters, we work with some of the UK’s most thoughtful fashion brands. These early adopters knew that being human and personal would transform their customer base into a community, even back when Inkpact was brand new and lacking case studies.
These forward-thinking marketers listened to their guts and worked with a small startup with a big mission to make the business world more thoughtful. Now, having worked together over the past few years, we’ve trialled and split tested all sorts of thoughtfulness campaigns, from delighting VIPs at random to sending seasonal wishes, welcoming new customers and thanking people for purchasing. Here are the results…
We helped a designer men’s swimwear brand to send thoughtful thank you notes to customers.
The goal: Welcome new customers and increase repeat purchases
The brief: Split test the impact of handwritten notes versus email when thanking new customers
The result: Looks like the added thoughtfulness really did make a difference...
