CUSTOMER RETENTION
Did the customers you started with stay?
New customers can grow the ending count while existing customers leave. Retention separates those two.
THE FORMULA
Remove new customers first.
Ending customers include everyone still active. Take away customers acquired during the period before comparing the count with the start.
EXAMPLE
1,000 customers at the start, 1,100 at the end, 200 new
Of the 1,000 starting customers, 900 remained. The business retained 90% and lost 100 customers, even though the total customer count grew.
- Starting customers
- 1,000
- Customers retained
- 900
- Retention
- 90%
COMPARE CLEANLY
Keep the period and customer definition the same.
Compare monthly with monthly, or quarterly with quarterly. Decide how to count paused, reactivated, and annual-plan customers before you start comparing.
Starting countCustomers active at the beginning of the period
Ending countCustomers active at the end, including new ones
New customersCustomers acquired during the same period
QUESTIONS
Customer retention questions
How do you calculate customer retention rate?
Subtract new customers from the ending customer count. Divide that number by the customer count at the start of the period, then multiply by 100.
Why are new customers subtracted?
The ending count includes customers who joined during the period. Subtracting them shows how many of the customers you started with actually remained.
What is the difference between retention and churn?
They describe the same starting group from opposite directions. If retention is 92%, churn is 8% for that period.
What counts as an active customer?
Use one consistent rule at both dates: for example, a paying subscriber, an account with a current contract, or a customer who ordered in a defined window.
Can I compare retention across periods?
Yes, when the periods are the same length and you use the same active-customer rule. The monthly equivalent is useful when a period covers more than one month.