Customer retention rate is the percentage of existing customers who tend to stay with you for a given time. The customer retention rate shows how well your customers interact with you and how much they spend on your products or services.
Understanding customer retention rate is crucial as it’s the foundation for improving loyalty and reducing unsubscription rates. This will create a significant impact on your overall profit margins and ROI.
The ideal formula to calculate customer retention rate is –
Customer Retention Rate = ((EC-NC)/SC) x 100
EC = No.of customers at the end of the period
NC = No.of new customers during that period
SC = No.of customers at the start of the period
For instance, if you released a new gaming app. In the first month, you got 500 customers. You got 200 new ones, but 50 were uninstalled. In the end, you’ve got 650 customers –
Customer Retention Rate = ((650-200)/500) x 100
So you’ve got a retention rate of 90%, which is appreciable. Achieving 100% retention means you are the best.