How to Calculate Customer Retention

In this clip from our eLearning series, Allison shows viewers how to calculate customer retention. She also explains what a good customer retention rate looks like for brands.

What is the customer retention formula?

The formula to calculate customer retention rate (CRR) is customers who are still paying you at the end of a period (one year, one month, etc.) minus new customers acquired. That total is then divided by how many customers you had at the beginning of your period and multiplied by 100 to get your CRR. The customer retention formula is shown below.

Let's look at an example

If you had 100 customers at the beginning of Q1, and you ended the quarter with 120 customers after acquiring 30 new customers during the quarter, your CRR would be 90%.

example of customer retention rate

A 90% customer retention rate or above is considered excellent. It indicates a sticky customer based and a healthy company. It is particularly attraction for start up investors or for companies who want to be acquired because it is an indicator of minimal risk. 

One thing to consider is the time period that you're measuring CRR for. If you have a longer sales cycle or a more expensive purchase you should use a longer period than for smaller purchases or sales cycles.