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TADA Marketing & Customer Retention Blog

2 min read

How To Calculate Customer Retention Rate?

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Mentioned in our previous article What is customer retention and Why it is important. Customer retention is a really important factor in contributing to your end goal of increasing your business profits. But, how do you know if your customer retention rate is high or low? Well, this is what we are going to cover in our article, we will show you how to calculate customer retention rate and worked out examples to help you understand better.

What is customer retention rate?

It determines the percentage of customers that the company has retained over a given period.

Retention rate is the opposite of churn rate, which shows the percentage of customers that the company has lost during a given period.

How to calculate customer retention rate?

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Here are a few examples to help you understand better on how to calculate your retention rate

EXAMPLE 1

Imagine you are a manager of a restaurant, on January 2019, you had 200 customers initially, then when you end the year on December 2019, you had left with 100 customers, and you had 50 new first time customers during the year. calculate-2

This means you managed to retain 25% of your customers, which is slightly below the industry average of 28.3%. 

EXAMPLE 2 

Let's say you are an owner of a retail outlet store, at the start of the year, January 2020,  you calculated that you had 70 customers, now when you are re-calculating, you realized that you have 100 customers at the end. Whilst looking through your customer profiles, you find that 40 of them were new first time customers. 

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This means, you managed to retain 85.71% of your customers, which is significantly higher than your industry average of 32.7%. 

Average industry customer retention rates (Retail, F&B, Beauty Skincare)

  1. Retail - 32.7%
  2. F&B - 28.3%
  3. Beauty Skincare - 26.9%

Retrieved from, "2018 Industry benchmark reports, windsofcircle.com" 

Different industries have their own good and bad retention rates that are updated almost every year.

It is up to your business to gauge what is your standard retention rate that you want to set for your employees to work with. The higher the retention rate, the better.

Keeping track of retention rates is as important as tracking your growth in revenue at every quarter of the financial period. Customer retention is simple and effective. If you are still unsure on how to improve your customer retention strategy, head over to 9 customer retention strategies used by Top Companies to get some inspiration.

Still unsure, or have any burning questions? feel free to contact us! We are more than happy to help.

Kerenjni
By Kerenjni

Kerenjni is a writer from Singapore who writes articles...considering that you are reading this, it makes perfect sense, doesn't it? Other than writing, she is pretty much obsessed with bubble tea, just like any normal person would be...right?

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