What is Customer Retention Rate?
Customer retention rate measures the percentage of customers who continue doing business with you over a given period. It's the inverse of churn rate and one of the most important metrics for sustainable growth.
Retention is often more valuable than acquisition. Acquiring a new customer costs 5-25x more than retaining an existing one. Retained customers also tend to spend more and refer others.
Why Retention Rate Matters
A 5% improvement in retention can increase profits by 25-95%, according to research by Bain. Retained customers have lower CAC (they're already acquired), higher lifetime value, and generate referrals.
Retention rate also indicates product-market fit and customer satisfaction. If customers keep coming back, you're delivering value.
Retention Rate Benchmarks
Varies dramatically by business model. Subscription SaaS: 90-95% annually is strong. Ecommerce: 20-40% first-year repurchase is typical. Mobile apps: 25-40% Day 30 retention is good.
Retention Rate = ((Ending Customers - New Customers) ÷ Starting Customers) × 100
Or: (Customers Retained ÷ Starting Customers) × 100
Churn Rate = 100% - Retention Rate
Quarterly retention:
- Customers at start: 1,000
- New customers acquired: 300
- Customers at end: 1,100
- Churned customers: 1,000 + 300 - 1,100 = 200
Retention Rate = (1,100 - 300) ÷ 1,000 = 80%
You retained 800 of your original 1,000 customers. 20% churned.