The share of customers you had at the start of a period who are still customers at the end, leaving out the new ones you added during it.
Formula
Customer retention rate = (customers at end − new customers acquired) ÷ customers at start × 100
Example
Meera starts a quarter with 1,000 active customers, adds 480 new ones (160 a month) and ends with 1,230. Retention = (1,230 − 480) ÷ 1,000 = 75%.
How you'll hear it
“Retention is 85% for people on the WhatsApp list and 60% for everyone else; let's ask at the counter.”
What it helps you decide
Where to spend on keeping customers, which channels or segments keep people best, and whether a loyalty or list sign-up push is worth staff time.
Where people misread it
Comparing groups can mislead: people who join a list may already be more loyal, so the list is not the only reason for their higher retention. Test by inviting a random half of new customers before crediting the channel.
The story
Meera's overall retention for the quarter is 75%. She splits it by whether the customer is on her email or WhatsApp list.
| On the list: 510 kept of 600 | 85% |
| Not on the list: 240 kept of 400 | 60% |
| All customers: 750 kept of 1,000 | 75% |
|---|
The number looks right. 75% overall seems acceptable, and the list looks like it adds 25 points of retention.
What it hides. The overall figure blends two very different groups. And customers who chose to join the list may have been keener to begin with, so not all of the 25-point gap is caused by the messages.
What to look at instead. Meera has staff invite every second new customer at the counter to join the list for two months, then compares retention between invited and not invited. If the invited group retains clearly better, she makes the invitation standard.
All figures are fictional and illustrative.
Work out your customer retention rate
The example's numbers are filled in. Replace them with yours.
Split this by segment or channel to see where retention is strong or weak.
Don't confuse it with
- Churn rate: the share lost; with the same customers and period, retention and churn add up to 100%.
- Repeat purchase rate: share of customers who bought more than once, over any time.