Retention rate

The most important facts about retention rate in brief

Retention rate measures how many existing customers are retained over a certain period of time.
It is a central KPI in marketing, sales and customer success.
A high retention rate indicates strong customer loyalty, trust and product quality.
The key figure is usually given as a percentage and is based on the number of existing customers at the end of a period in relation to the beginning.
Important for SaaS, e-commerce and subscription models, but also relevant for traditional business models.

What does retention rate mean?

The retention rate indicates how many existing customers or users remain loyal to a company within a certain period of time. It shows whether customers return regularly, buy again or continue a subscription.
A high retention rate is an indicator of customer satisfaction, brand loyalty and sustainable business success.

How is the retention rate calculated?

The retention rate is given as a percentage and is calculated using the following formula:

Retention rate = ((customers at the end - new customers) ÷ customers at the beginning) × 100

Example:

Customers at the beginning: 1,000
New customers: 200
Customers at the end: 1,050

→ ((1,050 - 200) ÷ 1,000) × 100 = 85 % retention rate

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Why is the retention rate important?

It shows how strongly customers are retained in the long term.
A high value means lower churn and increasing customer lifetime value (CLV).
It is more cost-efficient than simply acquiring new customers: it is cheaper to keep existing customers than to acquire new ones.
A low retention rate can indicate product problems, poor user experience or inadequate customer service at an early stage.

What factors influence the retention rate?

The higher the satisfaction, the better the bond.

Fairness and transparency promote loyalty.

Simplicity, service quality and smooth processes.

Regular, relevant contact (e.g. e-mail marketing, newsletters).

Fast solutions and good customer service reduce churn.

How can the retention rate be improved?

Personalized customer approach and targeted offers
Reward systems such as loyalty programs or discounts
Optimized onboarding processes, especially for SaaS and apps
Proactive customer service and fast support
Continuous product improvements based on feedback

Retention rate vs. churn rate - what's the difference?

Retention rate: Measures the proportion of customers who stay.
Churn rate: Measures the proportion of customers who drop out or cancel.
Both key figures are closely related: 90% retention rate corresponds to a churn rate of 10%.

Conclusion

The retention rate is a key factor for sustainable business success. It shows how successful a company is at retaining customers in the long term, building trust and securing recurring sales. Companies with a high retention rate have more stable revenues and lower marketing costs.