Retention Rate: Definition and Calculation

What is Retention Rate?

The retention rate measures a company's ability to keep its customers over a given period. This customer loyalty indicator is essential for evaluating the sustainability of your business model.

Specifically, the retention rate answers the question: of the customers you had at the beginning of a period, how many are still customers at the end?

Why is this indicator so important?

• Acquisition cost: acquiring a new customer costs 5 to 25 times more than retaining an existing one
• Profitability: a 5% increase in retention can boost profits by 25 to 95%
• Referrals: loyal customers recommend your business more often
• Customer lifetime value: the longer a customer stays, the higher their total value

How to Calculate Retention Rate

The formula for calculating customer retention rate is:

Retention Rate = ((Customers at end of period - New customers) / Customers at start of period) x 100

Practical example:

• Start of quarter: 1000 customers
• End of quarter: 1100 customers
• New customers acquired: 200
• Calculation: ((1100 - 200) / 1000) x 100 = 90%

A 90% retention rate means you kept 90% of your initial customers and lost 10% (100 customers in this example).

The complement of retention rate is the churn rate. In our example: 100% - 90% = 10% churn.

What is a Good Retention Rate?

The ideal retention rate varies considerably by industry:

• B2B SaaS: 90-95% (annual)
• E-commerce: 20-40% (annual)
• Mobile apps: 20-25% (after 90 days)
• Banking services: 75-85% (annual)
• Telecommunications: 70-80% (annual)

What matters is not just achieving a "good" rate, but continuously improving it and understanding the reasons for customer departures.

Strategies to Improve Your Customer Retention

Improving your customer loyalty rate involves several levers:

Measure Satisfaction Regularly

Implement satisfaction surveys to detect at-risk customers before they leave. The NPS is particularly effective for identifying detractors.

Perfect Your Onboarding

The first days are crucial. A customer well-supported at the start is much more likely to remain loyal.

Deliver Excellent Customer Service

Resolve problems quickly and efficiently. A customer whose issue is well-handled often becomes more loyal than one who never had a problem.

Personalize the Experience

Use customer data to tailor your communications and offers. Personalization reinforces the feeling of attention paid to the customer.

Build a Community

Encourage engagement through user-generated content and ambassador programs. Emotionally engaged customers have significantly higher retention rates.

Use the Right Tools

Solutions like Review Collect automate feedback collection and detect warning signs before customers actually leave.

In conclusion, retention rate is a fundamental indicator for any business seeking sustainable growth. By regularly measuring this indicator and implementing loyalty actions, you optimize each customer's value and reduce acquisition costs.