How to Calculate Your Customer Retention Rate | Formula and Example

Martin Perez -

Do you know if you’re keeping or losing customers? Do you know the rate at which you are keeping them?

This is where calculating your customer retention rate comes in!

Today we’ll explain what a customer retention rate is, how to calculate it, and our recommendations to increase your CRR.

So let’s get into it!

What is a Customer retention rate?

Your customer retention rate refers to the rate your business keeps your current customers for a given period. This is an important number to understand because it’s usually cheaper to keep a current customer than it is to get a new one.

The customer retention rate formula

Now that we know what the customer retention rate is, let’s show you to calculate it.

To calculate your CRR, you’ll need a few things

  1. You’ll need to set which period you want to calculate. Will you calculate your CRR for the month, quarterly or annually?
  2. Number of customers you have at the end of the given period
  3. Number of new customers you’ve acquired in the period
  4. Number of new customers you had at the beginning of that period

Now that we have all the numbers and period you’ll be calculating, here’s how to calculate your CRR step by step:

  1. Find out how many customers you have at the end of the period you are calculating.
  2. Subtract the number of new customers in that period
  3. Divide by the number of customers you had at the beginning of the period
  4. Multiply by 100

Pretty simple huh?

Take a look at the CRR formula below:

So, for example

Say you had 100 customers at the beginning of the month and ended the month with 120 customers. During that month you had 30 new customers. So to calculate your CRR refer to the image below

120 customers at the end of the period – 30 new customers

____

100 Customers at the beginning of the period

*100

Your CRR for the month would be 90%

What’s a good CRR?

In a perfect world, you want to retain all of your customers! 100% customer retention rate is ideal, but we know that it’s impossible.

The higher your customer retention rate, the better. But your retention rate will depend on what industry you’re in.

Here is the reported Customer Retention Rate by industry:

  • Retail: 63%
  • Banking: 75%
  • Telecom: 78%
  • IT Services: 81%
  • Insurance: 83%
  • Professional Services: 84%
  • Media: 84%

How can you increase your customer retention rate?

If your customer retention rate is lower than your industry average, here are some strategies you can use to increase it:

  1. Implement a CRM and start collecting customer data
  2. Increase your value by offering bonus perks
  3. Personalize the customer return experience
  4. Create a Loyalty Program
  5. Create a customer community
  6. Focus on customer success strategies
  7. Adopt a socially responsible goal
  8. Use subscriptions to create commitment
  9. Focus on Customer Care
  10. Provide fast and efficient Customer Support

You can read our guide on customer retention strategies where we go more into detail for each

Other Formulas to calculate besides your Customer Retention Rate

Now that you know how to calculate your CRR, there are other formulas and numbers that you should calculate: