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What is Retention Rate?
Retention Rate is the percentage of users who continue to use your product or service over a certain period of time. High retention means existing customers appreciate your products and stay engaged, which provides a sustainable revenue stream. User retention helps you understand the performance of your products, marketing, customer service, and pricing strategies. Customer retention is important because acquiring a new customer will cost you at least 5 times more than retaining an existing customer. It also increases ROI and customer loyalty.
How to calculate Retention Rate?
To determine retention, you first need to define a time period (monthly, quarterly, or yearly). Next, take the number of customers at the end of the period minus the number of new customers acquired during the period. Then, divide the result by the number of customers at the beginning of the period and multiply by 100 to express the percentage as a percentage. The formula for calculating retention rate looks like this: Retention Rate = [(Number of customers at the end of the period – Number of new customers acquired during the period) / Number of customers at the beginning of the period] * 100