How to Calculate Customer Retention Rate [Calculator]

Calculating retention rate is essential for understanding how well you keep customers over time. This blog breaks down the retention rate formula, provides a handy calculator to simplify the process, and shares actionable insights to help you improve your customer retention strategies.

You’ve successfully brought in a new customer and they’ve made a purchase. Now’s the time to shift focus to acquiring the next customer, right? Not so fast. 

A lasting, thriving company is not just built on customer acquisition but also customer retention.

Attracting new customers is essential, but your success truly depends on how well you keep those customers engaged and coming back. Retaining customers is not just a nice-to-have metric—it’s a key to sustainable growth and long-term profitability. 

What is Customer Retention Rate?

Customer retention rate is the percentage of customers a company keeps over a set period, excluding new acquisitions. It shows how well a business retains customers as it consistently provides value and builds long-term relationships. A high retention rate indicates satisfied, loyal customers, whereas a low rate can signal potential problems.

Retention rate is vital because it ties directly to customer loyalty and profitability. Loyal customers make repeat purchases and often promote your brand. This reduces marketing costs and fuels growth. Focusing on customer retention offers several strategic advantages that can significantly impact your business’s success. Consider these key benefits:

• Cost-efficiency: Retaining customers is cheaper than acquiring new ones.
• Increased profitability: Loyal customers tend to spend more over time.
• Word-of-mouth marketing: Satisfied customers can become brand advocates, referring others.
• Predictable revenue: A high retention rate ensures a steady revenue stream.
• Higher customer lifetime value (CLV): The longer customers stick around, the more valuable they become to your business. 

For various industries, retention rate reveals how successful a brand is in maintaining engagement. For example, e-commerce businesses focus on repeat buyers compared to SaaS companies that prioritize subscription renewals. Retailers rely on customer loyalty to maintain steady revenue streams over time.

Customer Retention Rate Formula

Calculating customer retention rate is straightforward and gives a clear picture of your brand’s ability to maintain its customer base. Here’s the formula:

Customer Retention Rate = ((E-N)/S) x 100

Where:

– E = Number of customers at the end of the period.

– N = Number of new customers acquired during the period.

– S = Number of customers at the start of the period.

By plugging in these numbers, you can quickly find out your customer retention rate and understand how effectively you’re keeping your existing customers.

Retention Rate Calculator

If you’re wondering how to measure retention, we made it easy for you. Simply use the calculator below by filling out the necessary fields and you can calculate your rate quickly and easily.

Retention Rate Calculator

How many customers have you retained over the period in question?

Select a time period Last 1 Month

• Last 1 Months
• Last 3 Months
• Last 6 Months
• Last 9 Months

Number of customers at the end of the period

Number of customers acquired during
the period

Number of customers at the start of
the period

Calculate

Current Period

Annualized

Customer Growth

-7,810

-31,240

Growth Rate

10%

Customer Churn

7,932

31,728

Churn Rate

88.13%

Retention Rate

11.87%

Dollar Retention Rate Calculator

What is the financial value of your retained customers?

Average Sale Amount per Customer at the start of the period

Average Sale Amount per Customer at the end of the period

Profit Margin Percentage

Calculate

Current Period

Annualized

Net Revenue Retained

-7,810

-31,240

Net Profit Retained

7,932

31,728

Is a 70% Retention Rate Good?

A 70% retention rate is often considered good, but this can vary by industry. In sectors like SaaS, a 70% rate might be below average. On the other hand, it can be quite competitive retail or e-commerce businesses. The key is to measure your retention rate against industry benchmarks and track whether your retention strategies are improving over time. 

Generally, a retention rate above 75% is excellent for most businesses, but always consider your own business goals and growth targets.

Strategies to Improve Customer Retention Rate

There are several actionable strategies that businesses can adopt to boost their retention rates. Here are a few:

• Personalized Marketing: Tailor your communication to each customer’s preferences and behavior to increase engagement.
• Exceptional Customer Service: Going the extra mile for your customers can foster long-term loyalty. Think of Zappos’ famous customer support stories that built their reputation.
• Loyalty Programs: Offer incentives to repeat customers through rewards and discounts to make them feel valued.
• Proactive Communication: Send follow-up messages, provide updates, and re-engage customers who haven’t interacted with your brand for a while.
• Offer Value Continuously: Ensure customers consistently find value in your product or service through regular updates, offers, or educational content.

Retention Rate vs. Churn Rate

Retention rate and churn rate are closely related metrics but focus on different aspects of customer behavior. Retention rate measures the percentage of customers who continue to award the company their business compared to the percentage of customers who have churned. Churn rate, the inverse of retention rate, is the percentage of customers who no longer patronize the business. 

Customer retention rate should be a North Star metric — a retention KPI — as it is the basis for the longevity of a sustainable business model.

Oftentimes, the best decisions in business are those that sacrifice profit in the short term but result in long-term gains. The legendary customer service policies at Zappos are a perfect example of short-term losses resulting in long-term customer retention. Their customer retention KPIs are consistently met and exceeded. What’s their secret?

Case Study: How Zappos Maintains Nearly 75% Customer Retention Rate

Zappos has become a gold standard for customer retention due to its unmatched customer service. One well-known story involves a customer, Zaz Lamarr, who called Zappos to return several pairs of shoes her recently deceased mother had purchased. Not only did Zappos offer a full refund, but they also sent a bouquet of flowers to the family to express their condolences.

These acts of kindness build customer loyalty that goes beyond the purchase. Zappos maintains a retention rate of nearly 75%, thanks to their dedication to extraordinary service. Word-of-mouth stories from experiences like these have become an integral part of their brand identity, driving both customer acquisition and retention.

Retention Rate for the Long Haul

Customer retention rate is like a check engine light for your growth machine. If the light indicates a problem, you can start plotting a plan of action. Perhaps that action plan starts with strengthening your customer service strategy with personalized mobile marketing communication.

By measuring and understanding your retention rate, you’re gaining insight into your brand’s long-term growth potential. High retention rates lead to increased profitability, customer satisfaction, and competitive advantage in your market.

One way to ensure long-term retention is to enhance customer experience continuously. Learn more about how you can create an airtight user retention strategy for your mobile app using CleverTap.

Last Words

Customer retention should be a key focus for any business aiming for sustainable growth. Use our free retention rate calculator to measure your performance. Adopt proven strategies to keep your customers coming back. Businesses like Zappos have shown how powerful retention can be when coupled with great customer service and personalized experiences. Hence, make retention a priority, and watch your business thrive for the long haul.

Additional Resource

For an easy way to calculate LTV or CLTV, use our Customer Lifetime Value Calculator.

Q1: What is customer retention rate?
Customer retention rate (CRR) measures the percentage of customers a business retains over a specific period. It reflects how well a company keeps its existing customers.

Q2: What is a good customer retention rate?
Generally, a retention rate of 80-90% is considered strong. However, this can vary by industry, with some sectors aiming for even higher rates.

Q3: How can I improve my customer retention rate?
You can improve retention by enhancing customer satisfaction, offering personalized experiences, maintaining strong communication, and implementing effective loyalty programs.

Q4: How does churn rate relate to customer retention rate?
Churn rate is the percentage of customers lost over a period, and it is essentially the inverse of the retention rate. Lower churn rates mean higher retention.

Q5: Does customer retention rate vary by industry?
Yes, retention rates can vary significantly by industry. For example, subscription-based businesses often have higher retention rates compared to retail or e-commerce sectors.