Customer retention rate: Meaning, formula, how to calculate

Customer retention rate is a vital metric for assessing a company's growth and profitability, as it reflects how many customers continue using a product or service over a specified period. It differs from churn rate, which measures the rate at which customers stop using the product. Retention is influenced by several factors beyond the quality of the product, including customer support and UX design. Understanding and improving retention rates can enhance customer loyalty, satisfaction, and product value, contributing to revenue growth. Retention analysis involves calculating the retention rate, examining other relevant metrics like cross-sell, upsell rates, and Net Promoter Score (NPS), and conducting cohort analysis. Strategies to improve retention include streamlining onboarding, enhancing the value proposition, and preemptively addressing customer attrition. A good retention rate varies by industry, with SaaS companies typically seeing higher rates than e-commerce businesses. Overall, maintaining a high retention rate is essential for sustainable business growth, and tools like LogRocket can help identify and address user experience issues to improve retention metrics.