Calculating Customer Retention Rate

How to Calculate Customer Retention Rate

Every business wants to grow by gaining new customers. Yet, customer retention needs to be part of your strategy as well. Are your customers leaving after only one purchase or are they returning over and over again? To find out, you’ll need to be able to measure your customer retention. Here is the step by step process to do just that.

The Foundation

To get an idea of your rate of customer retention, you will first need to determine the time period that repeat sales occur. Are they returning on a monthly basis (on average), quarterly, or more? The numbers involved in determining customer retention will depend on the sales cycle of your customers. The type of product or service you provide will greatly affect this number as well.

Acquiring the Figures

To find out your customer retention rate in a given period, you will need to know three numbers. First, how many customers did you have at the beginning of the period? We will call this number “B” for “beginning.” Second, how many customers did you gain in the period? This will be called “G” for “gain.” Last, you will need to know how many customers you had at the end of the cycle. This number will be called “E” for “end.” The goal is to find out many customers were retained throughout the entire cycle. We need to subtract the amount of new customers and then work out the percentage. Determining accurate numbers is key in understanding your customer retention rate.

Doing the Math

To find out your customer retention rate, first, subtract the amount of new customers you gained during the cycle (G) from the total amount of customers you had at the end of the cycle (E). This would be “E – G.” Now take that number and divide it by the total amount of customers you had at the beginning of the cycle (B). Finally, multiply that number by 100 to get your customer retention rate percentage.

Final Thoughts

The amount of time and money a business puts into gaining new customers makes up most marketing strategies. However, if some of these resources go into customer retention, money is saved and your service will improve. Customer retention costs less than gaining new customers. Keep track of your customer retention rate and use it to spend less on gaining new customers and to improve your overall performance as a company. For more information on customer retention, contact GoalGetters Inc today!