Measuring Customer Retention in the B2C Electronic Business: An Empirical Study

In a challenging environment where the electronic marketplace is transparent and competitors are only a click away, web retailers are more vulnerable to customer attrition. Despite that customer retention was widely regarded central to business survival and growth and some studies attempted to find factors that influence customer retention, few measured customer retention quantitatively. Businesses have long been eager to know, at a given time how many customers can be considered as retained. Conversely, for how long an existing customer did not return to purchase can we regard him or her as non-retained? In this paper, we answer these questions using real purchasing data from a web retailer. We propose that the 80th percentile of maximum interpurchase times serve as the threshold to determine if a customer is retained. Our approach not only enables researchers to undertake longitudinal studies of customer repatronage behavior, but also helps practitioners monitor customer retention.