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Customer retention rate / Customer renewal rate

Definition

The Customer retention rate, Customer renewal rate or sometimes referred to as just retention rate is the percentage of customers who renew their subscription for another period. Customer retention rate is one of the most important metrics for any business. It's a measure of how well a company keeps its customers over time.

A high customer retention rate is a good indicator that a company is doing a good job of keeping its customers happy. It's also a good sign that the company's products or services are in demand.

There are a number of factors that can affect a company's customer retention rate. These include the quality of the products or services, the level of customer service, the pricing, and the overall customer experience.

How is Customer retention rate / Customer renewal rate calculated?

The customer retention rate is calculated by dividing the number of active customers at the end of a period by the number of customers at the beginning of the period. This number is then multiplied by 100 to get a percentage.

The formula for calculating Customer retention rate / Customer renewal rate is:

Customer retention rate % = (No. of active customers in this period / No. of active customers at the end of last period) *100

Example:

A company that has 100,000 subscribers and renews 90,000 of them losing 10,000 to churn would have a renewal rate of 90% and a churn rate of 10%.

Why is Customer retention rate / Customer renewal rate important to measure?

There are a few key reasons why customer retention is so important for businesses.

First, it's cheaper to keep existing customers than to acquire new ones. It costs five times as much to acquire a new customer than it does to keep an existing one.

Second, existing customers are more likely to buy from you again. They're also more likely to recommend your products or services to others.

Third, existing customers have a better understanding of your products or services. They're more likely to be satisfied with your products or services and less likely to churn.

Frequently asked questions

Have another question? Reach out to our retention expert team.

What is customer retention?

Customer retention is the process of keeping existing customers happy and engaged with your products or services.

What is customer churn?

Customer churn is the process of customers leaving or discontinuing their use of your products or services.

What are the causes of customer churn?

There are a number of factors that can cause customer churn, such as the quality of the products or services, the level of customer service, the pricing, and the overall customer experience.

What is a good customer retention rate?

There is no one-size-fits-all answer to this question. The answer depends on a number of factors, such as the industry, the company's goals, and the competition. In general, a customer retention rate of 80% or higher is considered good. A customer retention rate of 90% or higher is considered excellent.

What are some ways to improve customer retention rates?

There are a number of ways to improve customer retention rates. These include:

  • Improving customer service
  • Offering more value to customers
  • Introducing an involuntary churn tool to retry card payments
  • Survey customers that are leaving to find out how you can improve your product(s)
  • Incentivise customer to stay with targeted offers at the point of cancellation

Related terms

Get started today...

  • Step 1

    Create your free Upzelo account and connect your subscription billing data in just a matter of minutes. Invite teammates to help connect accounts with ease.

    Create account button on an example signup screen
  • Step 2

    Obtain real-time subscription analytics, insights and benchmarks. Set up alerts to notify you via email or Slack when a particular event takes place.

    Subscription analytics overview with KPIs for MRR, Active customers and a partially hidden bar chart showing breakdown of MRR
  • Step 3

    Segment your customers into audiences, create surveys, build offers and deliver fully-branded customer flow experiences that increase retention.

    Example of a cancellation flow with Audience at the top, leading to a Bi-monthly billing survey, 10% off next bill and finishing with a Confirmation message