How to Calculate Customer Retention Rate

Customer retention rate measures the percentage of customers from the start of a period who are still customers at the end, after removing customers newly acquired during that period.

Customer retention rate formula

((Customers at end of period – new customers acquired) ÷ customers at start of period) × 100.

Worked example

A business starts the quarter with 1,000 customers, ends with 1,100 and acquired 300 new customers.

((1,100 – 300) ÷ 1,000) × 100 = 80% retention.

Choose a meaningful definition

For ecommerce, a customer may be considered retained when they purchase again within an expected cycle. For services or subscriptions, active status may be clearer. Document the period and rule so comparisons remain valid.

Related metrics

• Repeat customer rate: customers who purchased more than once ÷ unique customers.
• Purchase frequency: orders ÷ unique customers.
• Time to second purchase: days between first and second order.
• Churn: customers lost during the period.
• Customer lifetime value: expected value across the relationship.

Segment the result

Compare by first product, acquisition source, first-order discount, geography and customer cohort. A healthy overall rate can hide an expensive acquisition source that produces customers who never return.

Use the metric to decide

Retention data should change onboarding, product education, service recovery, merchandising or audience selection. A dashboard without an owner and response is decoration.

Place the metric inside the customer retention strategy and calculate customer lifetime value alongside it.

This article provides general business and marketing information. Results, platform features and legal obligations vary; use your own data and obtain appropriate advice.