Retention Rate

Retention rate measures the proportion of customers that remain active over a defined period. It is the complement of churn rate: if 5% of customers churn in a month, the monthly retention rate is 95%.

High retention is the foundation of sustainable growth. Acquiring new customers is typically 5–7x more expensive than retaining existing ones, so even modest improvements in retention deliver outsized returns. A 5% increase in retention can boost profits by 25–95% depending on the industry.

Retention should be tracked across multiple time horizons—daily, weekly, monthly, and annually—to reveal different types of problems. A strong weekly retention rate with poor monthly retention may indicate that customers engage initially but fail to build a habit.

Cohort-based retention analysis is especially valuable. By comparing retention curves for cohorts acquired in different months or through different channels, you can identify which acquisition strategies attract the most durable customers.