Retention rate
Also known as: customer retention rate, CRR, retention
Retention rate is the share of customers who were active at the start of a period and are still active at its end, counting only that starting group and ignoring anyone acquired during the period.
Retention rate = (customers at end of period − new customers in period) / customers at start × 100%Retention rate tells you how many of the customers you already had are still with you. It counts heads, not money, which separates it from net revenue retention. For a simple monthly or annual period it is the mirror of churn rate: if 8% left, 92% stayed.
Example
A SaaS company starts the quarter with 500 paying accounts. During the quarter it signs 70 new accounts and ends with 530.
Retained accounts: 530 − 70 = 460. Retention rate: 460 / 500 = 92%.
If you skip the subtraction and divide 530 by 500, you get 106%, a number that says nothing about whether existing customers stayed. The figures are illustrative.
How to use it
Define “active” before you measure. For a subscription it is a paid invoice. For a clinic or a store with no contract it is a purchase or visit inside a window you choose, such as 90 days. Then track retention by cohort: customers who joined in January, February and so on. A blended number hides the fact that recent cohorts may leave faster than old ones.
Retention feeds directly into customer lifetime value. A small move in retention changes lifetime value more than most pricing tweaks, so it deserves a monthly review, not an annual one.
Common mistakes
- Leaving new customers in the numerator, which lets acquisition hide losses.
- Comparing monthly retention for one product with annual retention for another.
- Counting paused or non-paying accounts as retained because they still have a login.
- Reporting one company-wide figure when one segment or plan drives most of the losses.