Customer Retention Rate

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.

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.