How do you calculate retention rate?

To calculate retention rate, you need the number of customers at the start and end of a period and the number of new customers acquired during this time. The formula is: [(Ending Customers - New Customers) / Starting Customers] x 100. This provides the percentage of customers retained.

What is the difference between retention rate and churn rate?

Retention rate indicates the percentage of customers who continue to use a service or product over a given period, while churn rate measures the percentage of customers who stop using the services within the same period. High retention typically means sustainable revenue, whereas high churn can impact ROI.

How does retention rate relate to customer lifetime value (LTV)?

While retention rate focuses on the percentage of retained customers over a period, LTV estimates the total revenue a business can expect from a single customer account throughout their relationship. High LTV implies strong brand loyalty and recurring revenue from existing customers.

Why is retention rate considered important for a business's success?

Retention rate is vital because it reflects product or service performance, impacting monetization opportunities and business growth. It helps you identify reasons customers leave, assess customer service quality, and evaluate marketing campaign effectiveness.

What strategies can improve retention rate?

To improve retention, you should use customer feedback to identify weaknesses, map and improve customer journeys, and set realistic expectations. Enhancing user onboarding and using product data to improve personalization will help, while further strategies include keeping the product top of mind through marketing, rewarding loyal customers, and re-engaging inactive customers through automated emails.

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