Customer Retention Rate
Customer retention rate is the percentage of customers a business keeps over a period, excluding new customers acquired. It is the inverse of churn rate: retention rate = 100% − churn rate.
Retention rate is churn’s optimistic twin: instead of measuring who you lost, it measures who you kept. For subscription businesses, small gains in retention compound into outsized revenue, because every retained customer keeps paying.
The customer retention rate formula
Retention rate measures the share of customers you kept over a period, ignoring anyone you newly acquired during it:
- Retention rate = ((customers at end − new customers acquired) ÷ customers at start) × 100
- Simpler relationship: retention rate = 100% − churn rate
- Example: start with 1,000, end with 1,050 including 100 new → (950 ÷ 1,000) × 100 = 95% retention (5% churn).
Why retention beats acquisition
Acquiring a new customer is far more expensive than keeping one, and retained subscribers compound: they keep paying and tend to spend more over time. A few points of improved retention can lift lifetime value and net revenue retention more than a comparable increase in new sales.
How to improve retention on Shopify
Retention improves when you remove both reasons customers leave:
- Recover failed payments with automated dunning (stops involuntary loss).
- Offer flexible pause, skip, swap, and frequency changes instead of cancellation.
- Reward loyalty with points, perks, and tiered discounts.
- Use cohort analysis to find and fix the moment customers drop off.
Frequently asked questions
How do you calculate customer retention rate?
Retention rate = ((customers at end of period − new customers acquired) ÷ customers at start) × 100. Equivalently, it is 100% minus your churn rate over the same period.
What is a good customer retention rate?
It varies by industry, but for consumer subscriptions a monthly retention rate of 93–95%+ (i.e. 5–7% churn or less) is healthy, and 97%+ is strong. Track the trend over time rather than chasing a single benchmark.
What is the difference between retention rate and churn rate?
They are mirror images: retention rate is the percentage of customers you keep, and churn rate is the percentage you lose. Retention rate = 100% − churn rate.
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