Customer retention

Customer retention rate shows you the number of customers your company has kept in a given period of time. The metric is expressed as a percentage value and is essential to forecast your business growth. As already stressed, it is much more expensive to win new customers than to keep existing ones, and many Startups fail because of a lack of retaining their customers and not as a lack of acquiring them. Also, loyal customers help you reduce customer acquisition cost by recommending your service to other people. Therefore, it makes sense to focus on retention. Since companies evaluate retention on an annual, quarterly, monthly, or weekly basis, first think about what time frame makes sense for your business model.

How to calculate retention rate

Calculate the retention rate by dividing the number of customers at the end of a period (minus new customers during that period) by the number of customers at the start of the period.

Customer Retention Rate = (Customers at the end of a month – New customers in a month) / Customers at the start of the month.

For example, if you have 200 customers at the beginning of January, you added 40 new customers in the same month and 20 customers churned, you would have 220 customers at the end of the month. Your retention rate would therefore be 90%. ( (220-40) / 200) = 90%

How to improve retention rate

• Provide an exceptional customer experience, right in the beginning
• Learn from churned customers
• Reward people to upgrade
• Make upgrading to higher plans easy
• Provide value regularly
• Improve and expand your service

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