Definition of customer retention rate

  • Meaning of customer retention rate in CRM software

    Customer retention rate designates the percentage of customers the company has retained over a given time period. Retention rate is a reverse side of churn rate, which shows the percentage of customers a company has lost over a specific period. The importance of retention rate as a metric varies depending on the industry, for example for businesses providing services or selling software goods, customer retention is crucial and it directly affects profitability of the business.

    There are several formulas to calculate customer retention rate, one of the most used and easy one is the following:

    Customer Retention Rate = ((EC-NC)/SC)*100, where:

    EC - number of customers at the end of a period
    NC - number of new customers during that period
    SC - number of customers at the start of that period

    Let's say you released a mobile game. On September 1st you had 1000 players. You got 500 new players by September 30, however 200 players stopped playing the game. So, at the end of a period (in our case one month) you had 1300 playing customers. Let's calculate the retention rate:

    ((1300-500)/1000)*100=80

    So, you manage to retain 80% of your customers. Each industry has their own "good" and "bad" retention rates. Needless to say, every company tries to retain maximum percentage of customers. Proper customer relationship management software, like Bitrix24, aims at increasing customer satisfaction and loyalty thus improving customer retention rate.

    If you are looking for free CRM software with over 20 sales and marketing tools, consider Bitrix24 CRM.
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