Metric · 2 min read
Customer retention rate
Customer Retention Rate measures how well your business keeps its customers over time. Here’s everything you need to know: what it is, why it matters, how to calculate it, and how to improve it!
Formula
Example. If you started the quarter with 1,000 customers, gained 300 new ones, and ended with 1,100 customers, your Customer Retention Rate would be 80%. This means 80% of your existing customers stayed with your business.
What it is
Customer Retention Rate is the percentage of customers who continue doing business with your company over a specific time period. It shows how successful you are at retaining customers after acquisition.
Why it matters
Customer Retention Rate is a key growth and profitability metric. Retaining existing customers is more cost-effective than acquiring new ones – and a high retention rate reflects strong product value, customer satisfaction, and brand loyalty.
How it is calculated
To calculate Customer Retention Rate, subtract the number of new customers gained during the period from the total customers at the end of the period. Then divide by the number of customers at the start of the period, and multiply by 100.
A good value
A good Customer Retention Rate varies by industry, but in SaaS and ecommerce, 85–90% monthly retention or higher is considered strong. High retention leads to higher Customer Lifetime Value and lower churn.
A bad value
A low Customer Retention Rate – especially under 50% – can suggest product dissatisfaction, poor onboarding, or lack of ongoing value, making growth harder and more expensive.
Do
Use these strategies to increase Customer Retention Rate and turn one-time buyers into long-term loyal customers.
- 01
Improve customer onboarding
Help users realize value quickly with a smooth and supportive onboarding experience.
- 02
Deliver ongoing value
Keep customers engaged with product updates, loyalty perks, helpful content, or exclusive access.
- 03
Collect and act on feedback
Regularly ask for feedback and use it to address customer pain points and improve experience.
Avoid
Focusing only on acquisition or failing to track post-purchase behavior can lower retention. Don’t ignore signs of churn or treat all customers the same – segment for more targeted retention.
Related metrics you might be interested in
Average Engagement Rate= (Total Engagements ÷ Total Impressions or Followers) × 100
Conversion Rate= (Total VisitorsConversions) × 100
Customer Acquisition Efficiency= Customer Lifetime Value (CLV) / Customer Acquisition Cost (CAC)
Exit Rate= (Total Exits from Page ÷ Total Pageviews for Page) × 100
Customer Lifetime Value (CLV)= Average Purchase Value × Purchase Frequency × Customer Lifespan
Net Promoter Score (NPS)= % of Promoters − % of Detractors
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