The customer retention rate is one of the essential KPIs for a business to look at. The customer retention rate shows companies how many customers they keep and how many they lose. The customer retention rate will determine the effectiveness of your marketing campaigns and, most importantly, your service delivery process. The customer retention rate is used for specific periods, such as a month, quarter, or year. A percentage value indicates the customer retention rate (CRR). The value is 100% if there is the same number of customers at the end of the term as at the beginning of the term.

We’ll look at a short example to further explain the customer retention rate. Let us assume that at the beginning of a period there were 200 customers. This value is displayed as ‘CS’ (customers at the beginning). At the end of the period, there were 224 customers. This value is displayed as ‘CE’ (customers at the end). The difference between CS and CE is that there are 24 customers. However, this does not mean that the CCR is high. This is due to a third factor: the new customers acquired during this period. Let’s say that 41 additional customers were added during this period. CN is the value here (new customers). The average person should be able to see that even though the number of customers increased over the period, some also left. Here, 41 new customers were added, resulting in a net gain of 24. During the same period, 17 customers were lost.

The customer retention rate is the only parameter that’ll help you determine the percentage of customers that have remained loyal to your business. This rate will account for customers gained at the beginning of the period, new customers that came in during the period, and the number of customers left at the end of the period.