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Customer Retention Rate

What is Customer Retention Rate?

Customer Retention Rate calculates the proportion of customers in a particular period that are retained into the next period.

How to calculate Customer Retention Rate

ƒ (Count(Customers End of Period) - Count(Acquired Customers)) / Count(Customers Beginning of Period)

Example

A business had 1,100 customers at the beginning of the year and has 1,000 customers at the end of the year, out of which 100 are newly acquired. In this case, the Customer Retention Rate would be (1,000 - 100) / 1,100 which is approximately 81%.

More about this metric

Customer retention is probably the most important loyalty metric because it represents the proportion of an organization’s customers that remain loyal from year to year. It is the opposite of Churn, which is the rate at which customers cancel subscriptions. Customer retention is critical to success and profitability. It is a well-known fact that it’s far more expensive (upto 10x more) to acquire a new customer than it is to retain an existing one which makes this metric crucial for every organization’s health, performance, and prosperity. A decreasing retention rate is a big warning sign that customers are not happy and must be addressed.

Additional Customer Retention Rate recommended resources

8-week retention benchmark from MixPanel for SaaS apps and websites.

Metrics related to Customer Retention Rate

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