Customer Retention

What is customer retention? 

Customer retention is a metric businesses leverage to understand customer loyalty and get insight into customer churn. It involves understanding how to transform customers into repeat buyers and increase customer lifetime value.  A high customer retention rate indicates: - 

1. Customers are happy with your offerings  
2. Your customer service is top-notch. 
3. Your engagement programs are working. 
4. You have healthy relationships with your customers. 

How to calculate the customer retention rate? 

Customer retention rate (CRR) is the percentage of customers you’ve retained over a set period. The variables include: 

(X): The number of customers at the start of the predetermined time frame  
(Y): The number of customers at the end of the predetermined time frame  
(N): The number of customers acquired throughout the predetermined time frame  

The formula is as follows: 

Take this example, 

Suppose your business starts with 200 clients at the beginning of the month. During the month, you lose 15 customers but acquire 25 new customers. 

X: 200 (customers at the start) 

Y: 210 (customers at the end) 

N: 25 (new customers acquired) 

CRR= (210−25/200) × 100 = 92.5% 

So, the customer retention rate comes out to be 92.5%, which is incredible.