What is retention rate?

Retention rate is the percentage of customers who remain active or continue doing business with a company during a specific period. It is commonly used to measure how effectively a business keeps existing customers instead of losing them to churn.

A basic customer retention rate formula is:

Retention Rate = [(Customers at End of Period − New Customers Acquired) ÷ Customers at Start of Period] × 100

For example, if a B2B company starts the month with 500 customers, gains 50 new customers, and ends with 525 customers, its retention rate is:

[(525 − 50) ÷ 500] × 100 = 95%

Retention rate can help businesses:

• Measure customer loyalty and continued engagement.
• Identify changes in customer churn.
• Evaluate retention and customer-success strategies.
• Understand the effectiveness of onboarding and support.
• Analyze repeat purchases and recurring orders.
• Assess long-term customer value such as CLV.

In eCommerce, retention might be measured by whether customers make another purchase within a defined period. In subscription or B2B businesses, it may be based on active accounts, renewals, or continued contracts.

The calculation and appropriate time period can vary depending on the business model, so retention rate should be interpreted alongside churn rate, repeat purchase rate, revenue retention, and CLV.