Why Calculate Customer Retention Rate

[rumiaktar39]

Dependence on the maturity of the company


It is also worth noting that at the initial stages of a business, customer retention is usually low. As the company grows and optimizes the product to meet market needs, the retention rate increases.

For companies with annual revenues of $3 million to $8 million, it is 80.4%. When revenue accounting directors email list reaches $15 million to $30 million, the retention rate increases to 84.2%.

Startups with revenues under $1 million have a wide range of customer retention rates. This is because few companies achieve sufficient product-market-customer fit in the early stages. As the product improves, demand increases, and the startup's revenue grows, this range narrows.


It is profitable. If one new client costs the same money as retaining 5-6 existing ones, then it is more profitable to work in both directions. And understanding the Retention Rate helps to optimize and redirect expenses to marketing and advertising campaigns.



Satisfied customers try new products of the company because they trust them and are willing to spend more on them. Loyal users become brand advocates, recommending it to their circle of friends, bringing in new customers.

RR analysis helps to identify weaknesses of goods and services, and improve the product in time. As a result, customer satisfaction increases: they see that the company cares about them, that it listens to their opinion. In this case, people are more likely to come back again.

Working on user retention helps to better forecast future revenues and plan strategic initiatives. This allows the business to be more resilient and prepared for changes in the market.

How to Calculate Retention Rate
The formula for calculating Retention Rate is simple:



Let's calculate the user retention rate:

Take the number of customers at the beginning of the billing period.