Retention Rate
Retention Rate is the percentage of customers who renew, stay active, or remain customers over a defined period. A 90% annual retention rate means 90% of customers from year one are still customers in year two. High retention is far cheaper than constant acquisition.
What Is Customer Retention Rate?
Retention Rate = (Customers at End of Period - New Customers) / Customers at Start of Period. If you start with 100 customers, add 20 new ones, and end with 105, retention is (105-20)/100 = 85%. This simple formula reveals customer loyalty. High retention means your product is working; low retention means customers are leaving for competitors.
Retention vs. Churn (Inverse Metrics)
These describe the same phenomenon:
- Retention: 85% stayed = positive framing
- Churn: 15% left = negative framing
- In practice: Focus on retention to stay motivated; monitor churn to spot problems
- Math check: Retention% + Churn% = 100%
Why Retention Matters More Than Acquisition
Revenue = Acquisition + Expansion + Retention. A 5% improvement in retention can double company profit because retained customers become expansion revenue (upgrades, cross-sells) and refer new customers. Plura's omnichannel support improves retention by providing customers with 24/7 help, reducing frustration and churn risk.
How Plura Improves Retention
Plura's platform reduces churn through:
- Proactive Support: AI agents answer questions 24/7, preventing frustration-driven churn
- Sentiment Monitoring: Conversation analysis detects when customers are dissatisfied before they leave
- Issue Resolution: Real-time coaching helps agents resolve problems faster, improving satisfaction
- Expansion Opportunities: Conversation intelligence identifies upsell moments
Retention Metrics by Business Model
Benchmarks vary:
- SaaS Annual Retention: 85-95% is healthy (5-15% annual churn)
- E-Commerce Repeat Rate: 20-40% is healthy (customers return for new purchases)
- B2B Renewal Rate: 80%+ is expected (contracts renew annually)
- Subscription Retention: 90%+ is target (churn costs growth)
FAQs related to
Retention Rate
What's a good retention rate?
Depends on your model. SaaS targets 90%+ annual retention. Consumer apps settle for 40-50% monthly retention. B2B enterprise expects 95%+. Benchmark against competitors, then improve incrementally.
How do I improve retention?
Identify churn reasons (bad product? poor support? found cheaper alternative?). Address root causes. A 5% retention improvement often comes from faster support response or better onboarding—small investments, big impact.
Should I focus on retention or acquisition?
Both matter, but prioritize retention. Acquiring 100 customers at $1,000 CAC is expensive. Retaining 80 of them and acquiring 20 new ones costs less and grows faster. Retention is the profit lever.
How do I calculate retention?
Retention Rate = (Customers End - New Customers) / Customers Start. Example: Start 100, add 20, end 105 = (105-20)/100 = 85% retention. Calculate monthly, quarterly, and annual.
Can I predict which customers will churn?
Yes. Machine learning models identify churn risk based on engagement, support tickets, and usage patterns. Early identification lets you intervene before customers leave.