Customer retention rate is the rate at which a business can keep customers. The companies with the highest retention rate have low churn and loyal customers. When a retention rate is high, it indicates that customers are happy with the product or service a business is providing because they haven’t left to look for an alternative. A high retention rate can also have major cost savings because acquiring a new customer can cost five to seven times more than retaining an existing one.
Calculating retention rate is fairly easy and requires a simple calculation. Choose a time period and then count the number of customers at the end of that time period, how many of them are new, and how many you had at the start of the period.
Then use the simple calculation below:
(Number of customers at the end of a period - Number of new customers acquired during the period) / Number of customers at the beginning of the period) x 100
Or try our calculator below to find your retention rate.
