Customer Retention Rate

What is customer retention rate?

Customer retention rate measures the percentage of subscribers a business retains over a specific period. It shows how well a company is maintaining its existing customer base and building long-term relationships. Unlike churn rate, which focuses on loss, retention rate highlights stability and loyalty within the subscriber base.

Why customer retention rate matters

• Revenue stability: A strong retention rate ensures predictable recurring revenue and reduces reliance on constant acquisition.
• Cost efficiency: Retaining subscribers is more cost-effective than acquiring new ones, improving profitability over time.
• Growth signal: High retention is a leading indicator of strong product-market fit and sustainable business growth.

How to calculate customer retention rate

Retention Rate = [ (E−N) ​/ S ] ×100

Where:

• E = Subscribers at the end of the period
• N = New subscribers acquired during the period
• S = Subscribers at the start of the period

Inclusions and exclusions

• Include: Active paying subscribers, renewed contracts, and those continuing beyond trial.
• Exclude: Free users without conversion, dormant accounts that never activated, or one-time purchasers.

Customer retention rate in subscription businesses

In subscription models, customer retention rate is directly tied to lifetime value (LTV) and overall profitability. Even a small increase in retention can lead to significant revenue gains because subscribers continue generating recurring income over longer lifecycles. Subsets connects retention rate with behavioral signals like session frequency, visit breadth, and payment events, helping teams understand not just how many subscribers stay, but why they stay and how to scale that success across cohorts.