Customer
Customer Retention Rate
Customer Retention Rate measures the percentage of customers a company retains over a given period without including new customers. It is a vital indicator of customer satisfaction, loyalty, and the effectiveness of retention strategies.
HOW TO MEASURE
Customer Retention Rate is calculated by subtracting the number of new customers acquired during the period from the total number of customers at the end of the period, then dividing this by the number of customers at the start of the period, and multiplying by 100 to express as a percentage.
HOW TO IMPROVE
Improve Customer Service: Offer prompt, helpful, and engaging customer support.
Regular Feedback: Solicit and act on customer feedback to continuously improve the product or service.
Enhance Product Value: Regularly update and improve the product to increase its value to customers.
Customer Engagement Programs: Implement loyalty programs, regular communications, and personalized experiences.
Incentivize Renewals: Offer discounts or special terms for renewing services.
FORMULA
Customer Retention Rate=( Total Customers at End of Period−New Customers during Period/Total Customers at Start of Period )×100%
EXAMPLE
A software company starts the year with 200 customers, loses 20 customers, but gains 30 new customers by the end of the year. The customer retention rate would be calculated as follows:
Total customers at the end = 210 (200 - 20 + 30)
Retained customers = 210 - 30 = 180
Retention rate = (180/200)×100%=90%
DEPARTMENT USAGE
Customer Success: Focuses on improving customer satisfaction and solving issues that may lead to churn.
Marketing: Uses retention rates to understand the effectiveness of customer loyalty strategies and adjust campaigns.
Sales: Assesses the long-term value of customer relationships and the effectiveness of retention tactics.
Leadership: Evaluates overall business health and the success of customer-centric strategies.
Customer Retention Rate is crucial for maintaining a stable revenue base and understanding the effectiveness of customer relationship management strategies.
View the collection of Metrics Workshops.