Retention

Customer Retention is the full range of activities and strategies implemented by a company to retain its customers over time. As a metric, the Retention Rate measures the percentage of customers who remain active (e.g. continuing to purchase or renewing a subscription) within a defined period.

What is it for / Why it is important

Retention is crucial because acquiring a new customer (CAC) is almost always far more expensive than retaining an existing one. A high retention rate indicates satisfied customers and leads to direct benefits such as: an increase in Customer Lifetime Value (LTV), greater revenue stability, positive word-of-mouth, and better resilience against competitors.

When is it used / In what context is it useful

It's a key concept in Relationship Marketing, CRM (Customer Relationship Management), and all business models that rely on repeat purchases (e-commerce) or subscriptions (SaaS, media services). It is the opposite objective of the Churn Rate (Attrition Rate): if the Retention Rate is 90%, the Churn Rate is 10%.

Practical Example

A streaming service starts the month with 1,000 subscribers. During the month, it acquires 200 new customers but loses 50 of the original customers. At the end of the month, it has 1,150 customers. Its monthly Retention Rate is not 95% (1150/1200), but 80% (calculated on the initial customers who remained, 800/1000). [Formula: ((Customers at end of period - New customers) / Customers at start of period) * 100].