What is customer retention rate?
How is retention counted?
No single formula is shared by every tool. Our convention for a shop: retention rate = customers from one first-purchase cohort who ordered again within a set window ÷ all customers in that cohort.
Shopify's reports show the building blocks. A returning customer is "a customer who placed an order, and whose order history already includes at least one order"1. In its customer cohort report, "customers are grouped into cohorts based on the date that they placed their first order"1. Customer retention rate is one of the metrics you can pick there, but the help page gives no formula for it1.
That is why cohort analysis matters here. A single "retention" figure across all customers mixes old loyal buyers with last month's discount hunters.
Why does customer retention matter for growth?
Because you have already paid once to win each customer. Retention feeds LTV, what a customer is worth over time. LTV is what you compare with CAC, the cost of winning that customer in the first place.
Our view: count retention in money, not in opens. A repeat order is worth what it leaves after costs. Our convention is contribution margin before marketing: revenue minus product cost, delivery, payment fees and returns, before any ad spend.
Our view: a retention plan should show which cohorts it moves and what margin that adds. More on that in our customer retention strategy guide.
Worked example
Easily confused with
Retention vs Repeat purchase rate
A related measure, usually the share of customers with two or more orders. Shopify's Returning customers report lists that group: customers "whose order history includes two or more orders"1. It does not say when they came back.
Retention vs User retention in Google Analytics
GA4's retention report counts users who come back to the site or app, not orders. User retention "shows the percentage of users who return each day in their first 42 days"2. A returning visitor is not a returning buyer.
Retention vs Churn
The other side of retention: customers who did not come back in the window you chose.
FAQ
Is retention rate the same as repeat purchase rate?
Not quite. Repeat purchase rate looks at customers with more than one order. Retention rate follows a group of customers over a set period.
Why does retention look different in Shopify and Google Analytics?
Should retention be read for all customers at once?
No. Read it by cohort, so a strong old group does not hide a weak new one.
Sources
- Customers reports - Shopify Help CenterPrimary source
- [GA4] Retention overview report - Analytics HelpPrimary source
Let’s find what’s actually working.
Next step. See what your ad numbers look like once margin is in the picture. Use the Is your ROAS real? calculator.