What is a retention rate?

A customer’s retention rates define the number of customers who continue to use or subscribe to a product throughout a given period. As a result, it is an essential predictor of its future success.

In business, the customer retention rate is expressed as a proportion of customers who continue to use a service after a specified time. The churn rate, which refers to the percentage of consumers that discontinue a service, impacts the rate of growth.

A company’s retention rate is critical to determining whether its consumers receive value. If clients cancel a subscription after a trial period, for example, the company wants to know why so that it may make improvements.

The Benefits of a Retention Rate

Following are some key benefits of using a well-put Retention rate:

●     Maintaining a high client retention rate is critical since it demonstrates where your company is functioning well.

●     It has the potential to highlight areas of customer service that need to be improved.

●     Clients who are loyal to you will refer other customers to you.

●     Customers pleased with their purchases submit favorable evaluations and share them on social media.

●     It increases the return on investment because more repeat consumers translate into more remarkable future growth.

●     Because the organization has a high customer retention rate, it can recruit new clients.

What constitutes a good or lousy retention rate, and what can be done to improve one?

A business with a customer retention rate of 90 percent would be deemed to be in good health because it demonstrates significant customer loyalty and overall happiness. A company with a 50 percent retention rate, on the other hand, clearly needs to improve its retention rate.

How To calculate a Retention Rate

you can calculate a company’s retention rate by taking into consideration three pieces of information:

●     The number of customers present at the start of a specified time

●     The number of new consumers who signed up within that period

●     The total number of clients after the period

From there, it’s just a matter of following a straightforward formula:

Customers after the period is the sum of the number of new customers over the period divided by the number of customers at the beginning of the period multiplied by 100.

As an illustration of client retention rates, consider the following scenario: your software firm has 5000 users when it reaches Q1 2022. Over the quarter, you gain 250 points while losing 90. If you wait until April, you may compute your retention rate for the first quarter as (5160 – 250) 5000 x 100 = 98.2 percent. Nice!

How to increase your retention rate

Recognize the reasons and times when clients are abandoning your firm.

Customer input is critical. If you’re losing clients at any step of their lifecycle, you need to understand why, when, and how many are losing interest in your product or service (i.e., the churn rate).

To gain a true sense of your company’s health, you must first understand the difference between retention and churn rate.

Manage the expectations of your customers.

If a customer signs up for a service, they expect to know precisely what they are paying for and when they will receive it.

If you promise results within the first month, the customer will expect results within the first month. If they don’t accept any consequences for another six months, you can probably guess where they will end up.

Make use of a marketing approach to keep your clients engaged.

It is incredibly effective to increase client retention and income by cross-selling to existing, loyal consumers. You may increase client retention rates by developing items that solve the needs of your current customers.

Inquire about customer feedback.

Improving customer retention rates begins with asking for feedback. Customers’ evaluations, suggestions, and opinions will help you identify areas where you may make improvements. Clients’ most common complaints and compliments provide essential indicators about what is and isn’t working to keep them as customers.

Always think of methods to personalize your user experience.

A one-size-fits-all strategy is insufficient—several approaches to creating one-of-a-kind user experiences that will hold their interest. Segmenting users is an excellent approach to accomplish this and boost the effectiveness of your remarketing ads.

Hone your messaging

Your creativity is vital to making or breaking user retention, from in-app advertising to push notifications. For example, depending on your industry, you might want to think about using user stories to entice people to return to your app.


It can cost five times to acquire new consumers to retain and monetize existing customers. Furthermore, people devoted to a brand are considerably more inclined to spend their money on that business.

That is why customer retention is so crucial in business – many organizations are missing out on a valuable opportunity by concentrating solely on bringing in new customers.

Start your
trial now!


Try it for free