Customer Retention Rate: What Is It & How to Calculate

by The MNTN Team

Min Read

It may surprise you to learn that acquiring a new customer can cost five to seven times as much as retaining an existing client. While earning new business is great, you’ve got to prioritize customer retention to achieve long-term growth. That’s where your customer retention rate comes into play.

Here’s everything you need to know about one of the most important marketing metrics.

What Is Customer Retention Rate?

Your customer retention rate is the percentage of customers who stay loyal to your business over a specific period. It measures how many of your existing customers are continuing to make purchases or renew subscriptions.

A high retention rate indicates that customers are satisfied and loyal to your brand.

Importance of Customer Retention Rate

While you’ll need to acquire new clients to grow your business, you don’t want to be constantly replacing existing customers — it can get expensive! People who support your brand in the long run are cheaper to keep, and they’re likely to spend more over time.

How to Calculate Customer Retention Rate

Calculating your customer retention rate is relatively straightforward. You need to know how many customers you had at the start and end of a specific period, as well as how many new customers were acquired during that time.

Retention Rate Formula

Retention Rate (%) = [(Number of Customers at End of Period – Number of New Customers Acquired) / Number of Customers at Start of Period] x 100

An Example of How It’s Used

Suppose that you start your next quarter with 200 customers. You gain 50 new customers, but by the end of the period, you have 220 total customers. Using the formula, you’ll calculate your retention rate as follows:

[(220 – 50) / 200] x 100 = 85%

This means you have a retention rate of 85% for that quarter.

What Is a Good Customer Retention Rate?

What’s considered “good” varies depending on your industry. For most businesses, a retention rate between 70% and 80% is considered healthy. However, in highly competitive industries, even slight fluctuations in retention rates can significantly impact your bottom line.

Strategies to Improve Customer Retention Rate

Here are a few tips to help boost your retention rate:

Personalize the Customer Experience: Tailor your communication and offers based on customer behavior and preferences
Deliver Great Service: Perfect your customer support to show patrons you care
Offer Perks: Incentivize people to stick around with loyalty programs and exclusive offers

You’ll also need to keep customers informed about your latest offerings while reminding them of how you add value to their lives. MNTN Performance TV can be an invaluable tool for nurturing relationships with existing customers and reducing the risk of churn.

MNTN gives you the power to serve up personalized streaming ads at scale and demonstrate that you understand what customers want. When you speak to each audience niche’s unique needs with dynamic content, you can promote feelings of loyalty and boost retention.

Customer Retention Rate: Final Thoughts

Your customer retention rate is a crucial metric that provides you with insight into how well your business nurtures and retains its consumer base. By tracking and improving your retention, you can boost your revenue and build lasting relationships with your audience members. Focusing on retention through a multifaceted strategy that includes MNTN Performance TV will set you up for long-term success.

Learn more about CTV advertising and OTT advertising to see how MNTN can help you achieve your business goals.