Customer Retention Rate Calculator

Created by Wei Bin Loo
Reviewed by Dominik Czernia, PhD and Adena Benn
Last updated: Jan 03, 2023

With this customer retention rate calculator, we aim to help you calculate the number of customers that stay with your business after a selected period of time.

We have written this article to help you understand what a good customer retention rate is and how to work out the customer retention rate formula. We will also demonstrate some calculation examples to help you understand the process used in the calculations.

What is customer retention rate?

Customer retention rate is one of the most critical metrics for any business. It tells you how many of your customers stay with your business after a certain period. For this calculation, you can use our time duration calculator. In other words, it measures how good your business is in keeping them from your competitors.

Think about it. If you can't keep your current customers from leaving, it doesn't matter how many customers you can acquire through your marketing. Customer retention rate is also an excellent metric to measure product market fit.

How to work out customer retention rate. Customer retention rate calculator

To understand the customer retention rate formula, let's take Company Alpha as an example:

  • Existing customers at the beginning of the period: 1000
  • New customers acquired during the period: 1500
  • Total customers at the end of the period: 2000

You need to take four steps to calculate the customer retention rate:

  1. Determine the existing customers

    The first step is to determine the number of existing customers at the beginning of the period. For Company Alpha, the existing customers is 1000.

  2. Determine the newly acquired customers

    Next, you need to determine the number of new customers the business acquired during the period. Company Alpha has acquired 1500 new customers during this period.

  3. Determine the total number of customers at the end of the period

    You will now need to calculate the total number of customers at the end of the period. At the end of the period, Company Alpha has a total customers of 2000.

  4. Apply the customer retention rate formula:

    The last step is to calculate the customer retention rate using the following formula:

    customer retention rate = (total customers - new customers) / existing customers

    Hence, the Company Alpha's customer retention rate is (2000 - 1500) / 1000 = 50%.

    This calculator also calculates the attrition rate, which can be calculated as 1 - customer retention rate for your reference.

You can also use the customer retention rate calculator to find the results much quicker without following the above steps!

What is a good customer retention rate?

Now that you understand how to calculate the customer retention rate let's talk about what a good customer retention rate is.

This is, in fact, a difficult question to answer. The answer is not straightforward because, in reality, the number is on a case-by-case basis. For a business-to-consumer (B2C) company, a customer retention rate of 70% may be excellent. However, this number is probably a bad performance for a business-to-business (B2B) company that provides a SaaS service. You can check out our SaaS lifetime value calculator and CLTV calculator to understand more about this topic.

Thus, the best way to measure a good customer retention rate is to compare it with your competitors or peers in the same industry and with a similar customer base and target market as your business.

FAQ

Can customer retention rate be negative?

No, customer retention rate cannot be negative. This is because a negative customer retention rate means you are losing customers that you have not even acquired.

How do I calculate the customer retention rate?

You can calculate the customer retention rate in four steps:

  1. Determine the existing customers.
  2. Determine the newly acquired customers.
  3. Determine the total customers at the end of the period.
  4. Apply the customer retention rate formula:

customer retention rate = (total customers - new customers) / existing customers.

What is the customer retention rate if the business lost 30% of its customers?

The customer retention rate for the business will be 70%. This is because 70% of the customer remained with the business.

What is the difference between customer acquisition and customer retention?

Customer acquisition focuses on getting new customers for the business, while customer retention focuses on retaining existing customers so that they can continue providing revenue for the business.

Wei Bin Loo
Existing customers
New customers
Total customers
Attrition rate
%
Customer retention rate
%
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