Net Retention Score (NRS) is a metric used to measure customer willingness to retention. It measures customer experience after purchase and helps predict retention.
It’s a way to measure willingness of customers to purchase again from you company.
What is Net Retention Score
This metric is created by our company, Vibetrace. It can be used in your marketing campaigns free of charge. Vibetrace provides out of the box solutions to compute it, there are other solutions on the market to do it.
It is a very simple question you should ask your customers post purchase that helps you find immediate answer regarding customer willingness to purchase again from you.
This score helps you retain more customers over a certain period of time.
The score is calculated by taking the number of customers who say they would purchase again from you and subtracting the ones who are not satisfied after purchase.
NPS is a metric designed to measure customer experience. First, you ask your customers a simple question:
“Would you purchase again from us?”
Answers should be Yes, No or Maybe.
Net Retention Score = Customers who say would purchase again – Customers who say would not purchase again
Why Net Retention Score is important?
It helps you get a very quick answer if customer is happy with current business. There are 3 important moments where you can ask this question:
- right after the first purchase. Most insights you’ll find out will be regarding checkout process
- after second purchase. You made it to second purchase, but what about the next ones? They already paid you twice, so insights will help you build a long-term relationship with the customer
The second question you need to address can have 2 versions:
- open ended question with free input: what can we do better, what do you like about us
- present them a list of options and let them choose with a single click
We recommend to try out both options and see which one brings you most of the answers.
Difference from Net Retention Rate
Net Retention Rate = (Ending customers – New customers) / Beginning customers * 100
For example, if a company starts a period with 100 customers and ends it with 110 customers, and during that period it acquired 10 new customers, its Net Retention Score would be: (110 – 10) / 100 = 1.0 or 100%.
This would indicate that the company was able to retain all of its customers and did not lose any, while also acquiring new ones.
Net Retention Score Formula
Net Retention Score = (Customers who say would purchase again – Customers who would not purchase again) * 100
A Net Retention Score of 100% means that the company is doing well retaining customers, while a score of 0% means that the company is at risk of not having any repetitive sales.
A Net Retention Score is an important metric for any businesses as it’s a key indicator of the health of the business and its ability to retain customers over time.
A high Net Retention Score is a good sign that the company is providing value to its customers and that they are satisfied with the service. Having the score high will determine customers to come again and purchase again from the company.
A low Net Retention Score, on the other hand, is a sign that the company has problems to retain customers and should investigate why this is happening and take steps to improve the situation.
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Net Retention Score for Ecommerce
This formula applies best for Saas or Ecommerce companies. It is a metric that together with Net Retention Rate can determine why customers stop buying from you and what you can do to improve it.
There another metric, Net Promotion Score, that can help you find if someone is willing to promote you further.
Advantages over Net Promoter Score
Net Promoter Score it’s a very good metric to determine if someone would recommend your business to their friends or acquaintances. Using it you can find very good insights on how the business and marketing performs.
But you can not control if user actually recommended you or not. And recommending your business to others (promotion) is different then building long term customers and retaining them.
Net Retention Score is actually focusing on Retention only to see how a customer felt after a purchase and if the whole experience made him want to purchase again or it was disappointed.
Also, comparison with Net Retention Rate will help you decide if their answers were valid over a specific period of time.
