Customer retention rate

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What is customer retention rate?

An organization’s customer retention rate indicates how many customers it retains over time. Customer loyalty is measured as a percentage of existing customers remaining loyal over a certain period of time. Suppose you have ten customers at the beginning of the year and lose two of them. Your retention rate is 80 percent.

Keep in mind that customer retention rate calculators are a little bit more complicated than that. Additionally, you must account for new customers you have acquired so your data doesn’t get thrown off. You don’t have a 120-percent retention rate if you start with 10 customers, lose two, then gain four. By focusing solely on acquiring new customers, you might overlook serious flaws in your business that can lead to churn.

The effectiveness of a company’s marketing strategy and customer service program can be quantified by monitoring retention metrics.

How to measure customer retention rate

Retaining customers begins with the first interaction. Customers may subscribe to your email list or like your Facebook page. In the absence of explicit action from the customer, such as unfollowing your page or unsubscribing from your newsletter, the relationship will continue.

Three numbers are all you need to determine your customer retention rate :

  • At the beginning of a period, customers
  • At the end of that period, customers
  • During that time period, new customers were acquired
Customer Retention Rate formula

To calculate your customer retention rate (CRR) you can use the following simple formula involving the customers you have at the start (S), at the end (E) and customers acquired during the period you’re measuring (N).

It looks like this: CRR = ((E-N)/S) x 100.

You can express your answer as a percentage by multiplying it by 100.

Let’s say you have 106 customers at the beginning of a month. Eight customers left during that period, but 20 new ones appeared. By the end of the period, you have 98 customers from the original group and 20 new customers. At the end of the period, you have 118 customers. Calculate these numbers as follows:

Customer retention rate = 100 x ((118-20)/106)
For that period, you had a retention rate of 92.4%.

When you have a 100% customer retention rate, you have not lost a single customer. When you have a zero retention rate, you have lost all of them. Best practices for customer-centricity will help you improve whatever number you start with.


Customer retention rate
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