Customer Retention Rates

The customer retention rate is a metric that indicates the proportion of customers that have stayed with you for a while. The retention rate can be calculated annually, monthly or weekly. The periodicity depends on the purchase cycle and the frequency at which the purchases are generally made.

Customer retention rate can be calculated by using the following formula:

Customer retention rate – (total number of customers – new acquisitions) / total number of customers in the previous period

The retention rate gives companies an indication of the performance of the company in terms keeping its customers happy. It is known that acquiring new customers 5 times costlier than retaining existing ones. This means that maintaining a high retention rate can save the company precious dollars every year. If you can increase the customer retention rate by 2 percent you shall be able to get the same effect on the bottom line as having saved 10% of the costs. Working on the retention rate also ensures that there are less disgruntled customers leaving your company. This means that you will have a lesser amount of bad word of mouth.

Examples of customer retention rates

• A retailer can identify when a customer is retained if there is a purchase within a specified time period
• A hotel can compute customer retention using loyalty rewards and time of purchases
• A bank uses inactivity or account cancellation to determine churn
• A telephone company can simply confirm attrition when a customer cancels their account

A simple way to measure the ROI that Mineful can provide your organization is to see the different in retention rates before and after Mineful was used. A small 5% increase in customer retention can lead to a 75% increase in profits. So what are you waiting for, isn't it time to take action?

To see our list of customer analysis examples and the top 10 customer metrics businesses should track visit our Customer Analysis Examples page.