Retention rate: calculation formula, ways to increase
Posted: Sun Jan 19, 2025 3:42 am
What is it? Retention Rate is a metric that reflects the effectiveness of customer retention over a certain period. It is calculated to assess profit growth, understand the value of the product, and optimize the company's resources.
How to find out? The indicator is calculated using a formula. You need to set the period, know the number of clients, new leads. RR also depends on other metrics - LTV, NPS, RPR. They also need to be taken into account in the calculations.
The article explains:
What is Retention Rate and why is it important to calculate it
Retention Rate Formula chinese singapore b2c cell phone number data and Calculation Example
Metrics that impact Retention Rate
Retention Rate Calculation Periods
5 templates for setting Retention Rate
12 Ways to Increase Your Retention Rate
How to Increase RR with Email Marketing
4 RR Increasing Tools
Frequently Asked Questions about Retention Rate
5 Scenarios for Using Neural Networks to Increase Website Conversion by 40%
Download for free
What is Retention Rate and why is it important to calculate it
This is the company's customer retention rate (RR). In other words, a coefficient that clearly demonstrates the organization's ability to build strong and long-term relationships with its audience. The analysis takes into account a certain time interval, which is an indicator of business success. Another name for this metric is Customer Retention Rate, or CRR.
Beginning entrepreneurs always strive to attract new users and completely forget about those who have already chosen them as a partner and supplier. This strategy of work is wrong, since it is much easier to do business with old clients, because their trust has already been won, they are familiar with your product or service and are satisfied with their quality. They are a priori disposed to business interaction with your company, which means they will bring you profit by making new purchases.
Of all the companies, those that sell their services using subscriptions or memberships can be singled out as a separate category. These can be online cinemas, libraries, website builders, Internet providers. For them, this indicator is the most significant when tracking efficiency.
Retention Rate
Source: shutterstock.com
Why should entrepreneurs track and analyze Retention Rate and make every effort to interest old customers?
Saving resources
If you work with old clients, you will get the same profit, but at the same time you will reduce the costs of advertising and promotion - this is your effort, money and time.
Profit growth
Harvard Business Review published the results of a marketing study that clearly demonstrates that with an increase in the CRR indicator by even five percent, the profit of an enterprise can increase from 25 to 95%. In addition, it is reliably known that the probability of selling a product to an old client is 60-70%, while the share of a deal with a new buyer is from five to 20%.
Product or service evaluation
CRR allows you to objectively weigh the risks associated with the quality of the goods or services provided. For example, if the indicator is very low, then you need to improve them, the client does not want to come back to you, which means that his needs are not fully satisfied. In this way, you can quickly identify growth areas and carry out the necessary work in this direction.
How to find out? The indicator is calculated using a formula. You need to set the period, know the number of clients, new leads. RR also depends on other metrics - LTV, NPS, RPR. They also need to be taken into account in the calculations.
The article explains:
What is Retention Rate and why is it important to calculate it
Retention Rate Formula chinese singapore b2c cell phone number data and Calculation Example
Metrics that impact Retention Rate
Retention Rate Calculation Periods
5 templates for setting Retention Rate
12 Ways to Increase Your Retention Rate
How to Increase RR with Email Marketing
4 RR Increasing Tools
Frequently Asked Questions about Retention Rate
5 Scenarios for Using Neural Networks to Increase Website Conversion by 40%
Download for free
What is Retention Rate and why is it important to calculate it
This is the company's customer retention rate (RR). In other words, a coefficient that clearly demonstrates the organization's ability to build strong and long-term relationships with its audience. The analysis takes into account a certain time interval, which is an indicator of business success. Another name for this metric is Customer Retention Rate, or CRR.
Beginning entrepreneurs always strive to attract new users and completely forget about those who have already chosen them as a partner and supplier. This strategy of work is wrong, since it is much easier to do business with old clients, because their trust has already been won, they are familiar with your product or service and are satisfied with their quality. They are a priori disposed to business interaction with your company, which means they will bring you profit by making new purchases.
Of all the companies, those that sell their services using subscriptions or memberships can be singled out as a separate category. These can be online cinemas, libraries, website builders, Internet providers. For them, this indicator is the most significant when tracking efficiency.
Retention Rate
Source: shutterstock.com
Why should entrepreneurs track and analyze Retention Rate and make every effort to interest old customers?
Saving resources
If you work with old clients, you will get the same profit, but at the same time you will reduce the costs of advertising and promotion - this is your effort, money and time.
Profit growth
Harvard Business Review published the results of a marketing study that clearly demonstrates that with an increase in the CRR indicator by even five percent, the profit of an enterprise can increase from 25 to 95%. In addition, it is reliably known that the probability of selling a product to an old client is 60-70%, while the share of a deal with a new buyer is from five to 20%.
Product or service evaluation
CRR allows you to objectively weigh the risks associated with the quality of the goods or services provided. For example, if the indicator is very low, then you need to improve them, the client does not want to come back to you, which means that his needs are not fully satisfied. In this way, you can quickly identify growth areas and carry out the necessary work in this direction.