Retention Rate

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What is retention rate? How to calculate retention rate?

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Team Storyly
May 22, 2023
0 min read

What is retention rate?

Retention rate is a metric that measures the percentage of customers, users, or employees who continue to engage or remain employed with a company over a period of time. 

It is calculated by dividing the number of customers or employees who stayed with the company by the total number of customers or employees at the beginning of the period and multiplying the result by 100.

Why is retention rate important?

Retention rate is important because a high retention rate indicates that the company is doing a good job in keeping its customers or employees satisfied and loyal, which can lead to increased revenue, reduced costs, and a positive reputation.

 On the other hand, a low retention rate can signal problems with customer or employee satisfaction, which can lead to decreased revenue, increased costs, and a negative reputation. Therefore, monitoring and improving retention rate is essential for the long-term success of a business.

Why maintaining a good retention rate is important for businesses?

Maintaining a good retention rate is important for businesses of all kinds because it is a strong indication of how well a business is doing overall. Generally speaking, it is far more expensive to acquire customers than to maintain a customer base, so maintaining a good retention rate means that a business is investing its marketing budget wisely and that customers are happy with its products, services, and offerings.

How to Calculate Retention Rate?

To calculate the retention rate of your customer base, first, decide on a period of time to evaluate and then divide the number of customers that have sustained their subscription throughout the period by the number of active users at the beginning of the period. Multiply the result by 100 to express the value as a percentage. 

The visual displays the formula for "Retention Rate". It is found by dividing the number of customers who have sustained subscription by the number of customers at the beginning of the period and hen multiplying the result with 100. There is a Storyly Glossary logo at the bottom right.
Calculation of retention rate

What is the retention rate formula?

To calculate the customer retention rate over a period of time, use the following formula:

# of customers who have sustained subscription / # of customers at beginning of period X100 = retention rate.

Example of retention rate

Let’s take an example of a retention rate calculation. Say a company wants to calculate its retention rate for the first quarter. At the beginning of the quarter, they had 2,000 subscribers. 1,600 of those subscribers stayed throughout the quarter, 200 discontinued their subscription, and the company gained 300 new subscribers. At the end of the quarter, the company had 2,100 subscribers total. 

To calculate their retention rate, they would divide 1,200 (the number of sustained subscribers) by 2,000 (the number of subscribers at the beginning of the quarter) for a total of .6. To express that result as a percentage, one would multiply by 100 for a retention rate of 60%.

4 strategies for improving your retention rate

Improving one’s retention rate is mostly about satisfying the needs and expectations of ones existing customer base so any strategy that supports customer satisfaction and nurtures lifetime customer value will improve your retention rate. Some proven strategies include:

Create a Loyalty Program

Everyone likes to be rewarded, and loyalty programs are an excellent way to keep your best customers coming back for more. From first dibs on new products, collections, or sales to discounts on ongoing purchases, there are many perks that can be offered to a customer base to reward their loyalty. 

Be Responsive to Customer Feedback

High retention rates are proof that a company is meeting the needs of their customer base, so it stands to reason that they would need to understand those needs in order to meet them. Gathering a variety of high quality customer feedback with both quantitative and qualitative insight is key to creating and maintaining a product or service that keeps customers satisfied. Consider using interactive channels like Stories to collect zero-party data on actionable audience insights. 

Focus on a Great Customer Experience

Top brands are known for providing a customer experience that is reliably simple, smooth, and satisfying. From their first introduction to a product or service, customers are able to get real value out of what a company offers, regardless of the industry. By creating a customer-centric business model, retention rates will naturally rise. 

Keep your Audience Engaged

High engagement and high retention go hand in hand, and the more engaging your product, service, or app, the more your customer base will want to stick around. Check out some of Storyly’s top engagement features here!

ABOUT THE AUTHOR

Team Storyly

Group of experts from Storyly's team who writes about their proficiency.