How to Calculate and Improve Your Customer Retention Rate

Knowing your customer retention rate is the first step to take to reduce churn and increase loyalty.

May 2021 - 5 minutes

Do you know your customer retention rate?

Customer retention rate is the percentage of existing customers who remain customers after a given period. Your customer retention rate can help you better understand what keeps customers with your company, and can also signal opportunities to improve customer service. Once you understand how well or poorly your company retains customers, you can work to improve your customer retention rate. Get started with these tips.

Calculate your customer retention rate

Customer retention begins with the first interaction. The customer may “like” your Facebook page or subscribe to your email list. The relationship will continue unless the customer takes clear actions like unfollowing your page or removing themselves from your email subscriber list.

To determine your customer retention rate, you just need three numbers:

  • Customers at the start of a given period
  • Customers at the end of that period
  • New customers acquired during that period

To calculate your customer retention rate, take the number of customers you have at the end of the period and remove the number of new customers acquired during that period. Then divide that number by the customers you started with. For example, if you start a month with 100 customers, and 85 of them are still customers at the end of the month, your customer retention rate is 85%. Here’s a simple formula:

(Customers you end with - new customers)/customers you started with

To express it as a percentage, simply multiply your answer by 100.)

Let’s say you have 107 customers at the start of a one-month period. During that period, you lost eight customers but gained 21 new ones. This means you have 99 of your original customers and 21 new customers at the end of the period. You now have 120 customers at the end of the period. Input those numbers into the formula:

Customer retention rate = ((120-21)/107) x 100

Your retention rate for that period was 92.5%.

A customer retention rate of 100% means that you didn't lose a single customer. A retention rate of zero means you lost them all. Whatever number you start with, you can improve it with customer-centric best practices.

5 ways to improve your customer retention rate

The best experience from one company raises the bar for all other companies. Just think about how much Amazon meets customer expectations for fast, easy delivery and self-service options.

80% of customers say the experience a company provides is as important as its products or services.

Source: “State of Service,” Salesforce, December 2020.

This presents an opportunity for you to look at your current customer experience and find new ways to meet and exceed expectations. Consider these best practices:

Set realistic expectations

It’s always a good idea to over-deliver on the promises you make to customers. Be clear about what they're getting and what they can expect from your company. Be as realistic as possible and then work to go above and beyond.

Once you've established clear expectations, align your teams to meet these goals. Is every department doing what they can to provide a better customer experience? Don't run the risk of falling short — it can do a lot of harm to your company since customers often recall negatives before positives. Even one mistake could be enough for a customer to leave.


Proactively engage customers

Remind customers about upcoming payments, share details about events, and inform them of problems as soon as possible. This builds trust: Customers will know you have their back. Communicate regularly to help them avoid late charges or other unwanted surprises. While you can simply send an alert to your customer when an invoice is due, consider creative, anticipatory strategies using artificial intelligence (AI) for a personalized approach.

61% of customers say it’s difficult for a company to earn their trust.

Source: “State of the Connected Customer,” Salesforce, October 2020.



Establish clear success metrics

Key performance indicators (KPIs) around customer service let employees know that you are evaluating performance objectively. Ensure agents are up to speed on customer service best practices. Be sure you measure customer satisfaction. Review customer feedback after agents resolve their cases. Check call resolution time. Use these metrics to reward employees who deliver the best customer experiences.

Connect on social media

Social media allows you to connect directly with customers. Showcase your values and brand personality. Deepen relationships with existing customers by sharing promotions and company news. Engage in timely conversations. Listen to what customers are saying to monitor sentiment and address issues as soon as they arise.

Gather customer feedback

Deploy simple surveys following service calls, online interactions, or communications made by email, text, or social media. Gather customer feedback and comments to determine your net promoter score (NPS), customer satisfaction, and customer effort. Use this feedback to inform improvements to your service experience that will boost retention while satisfying new customers.

Take your next steps

Now that you know how to calculate your customer retention rate, you can put a plan in place to improve your customer experience. Ensure that every team member is on board by centering around your customer with the right tools and technology.

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