What is retention rate?

Definition

Retention rate measures the percentage of users who stick with your product or service over a set period. It’s a key metric that shows how well you’re keeping your customers around and encouraging them to come back.

Retention rate gives you a clear picture of your business's ability to maintain a loyal customer base. If your users keep coming back, it means they find value in what you offer.

Importance

Retention rate serves as a litmus test for customer satisfaction and loyalty. If users are happy, they’ll stay. If not, they’ll leave. Simple as that.

By tracking retention rate, you can predict future growth and revenue more accurately. A stable or growing retention rate suggests a healthy, sustainable business model.

It's also a crucial metric for evaluating the success of your customer retention strategies. Are your efforts to engage and retain customers paying off? The retention rate will tell you.

In short, a high retention rate means satisfied and loyal customers, which translates to better business outcomes.

How to calculate retention rate

Formula

To find your retention rate, use this formula:

• Retention Rate = [(CE - CN) / S] x 100

Where:

• CE: Customers at the end of the period

• CN: Customers acquired during the period

• S: Customers at the start of the period

For more details on retention metrics, you can refer to Retention Chart | Statsig Docs.

Example calculation

Let's say a company begins with 100 customers, gains 20 new ones, and ends with 110.

The calculation would be:

[(110 - 20) / 100] x 100 = 90%

In this example, the company retains 90% of its customers. It's a straightforward way to measure how well you're keeping your users engaged.

Knowing this rate helps you understand customer behavior and plan future strategies. It's a simple yet powerful metric for any business.

For more insights into measuring and analyzing retention, you can explore Statsig Glossary - Churn Rate and Metrics | Statsig Docs.

Examples of retention rate

Mobile app

• A fitness app begins the month with 1,000 users. It gains 200 new users and ends with 1,150 users. The retention rate is [(1150 - 200) / 1000] x 100 = 95%. For more insights on how to visualize and analyze retention, refer to Retention Chart | Statsig Docs.

Ecommerce site

• An online store starts with 500 customers. It gains 100 new customers and ends with 450 customers. The retention rate is [(450 - 100) / 500] x 100 = 70%. To understand how this metric can affect your product's growth, check out Statsig Glossary - Churn Rate and Statsig Glossary - Monthly Active Users (MAU).