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