The percentage of customers who remain active or continue their relationship with a business during a defined period.
A key measure of loyalty, satisfaction, and long-term customer value.
Short and sweet:
The percentage of customers who remain active or continue their relationship with a business during a defined period.
A key measure of loyalty, satisfaction, and long-term customer value.
See also: Customer Retention, Churn Rate, Lifetime Value
Retention rate measures the percentage of customers a business keeps over a given period, calculated by comparing how many customers remained active at the end of that period against how many it started with. It’s often treated as a more telling long-term health metric than new customer acquisition alone, since a business bleeding existing customers out the back door can look deceptively healthy if new sign-ups are still masking the loss. Even small improvements in retention tend to compound significantly over time, since retained customers usually cost far less to keep than new ones cost to acquire.
Netflix closely tracks its retention rate, watching how many subscribers stick around after a price increase before deciding whether the tradeoff in canceled accounts is worth the extra revenue.
A gym like Planet Fitness depends heavily on this same number, since the business model relies on far more people paying monthly dues than actually showing up to work out.
SaaS companies obsess over this figure because losing even a small percentage of customers each month compounds into a serious revenue problem over a full year.
