Customer Retention Rate
Also known as: CRRRetention RateCustomer RetentionLogo RetentionGross Retention
💡The Concept
Customer Retention Rate measures the percentage of customers who remain with your business over a given period. A 90% annual retention rate means you lose 10% of your customers each year. For subscription businesses, improving retention from 90% to 95% can double your customer lifetime value because the average customer stays twice as long.
⚠️The Trap
Don't confuse customer retention rate with revenue retention — they measure different things. You can retain 95% of customers but lose 30% of revenue if your biggest accounts are the ones leaving. Also, looking at retention quarterly instead of monthly hides problems — a 95% quarterly retention rate is actually 83% annual retention.
🎯The Action
Calculate retention rate monthly: (Customers at End of Period − New Customers) ÷ Customers at Start × 100. Segment by cohort and plan: aim for 95%+ monthly customer retention for B2B SaaS and 85%+ for B2C. Set up automated alerts when retention dips below your target for two consecutive months.
🌍Real-World Example
Amazon Prime has a 93% first-year retention rate and 98% second-year retention rate. This near-zero attrition is why Prime members spend an average of $1,400/year vs $600 for non-members — making Prime the most valuable loyalty moat in retail.
⚡Pro Tips
Track retention by cohort, not aggregate. Your overall retention may look fine while recent cohorts are churning at 2x the rate of older ones — a sign your product or onboarding has degraded.
The first 30 days determine everything. 70% of churn happens before the customer experiences the 'aha moment.' Invest heavily in activation and onboarding.
Retention is cheaper than acquisition — it costs 5-7x more to acquire a new customer than to retain an existing one. A 5% increase in retention increases profits by 25-95%.
🚫Common Myths
✗Myth: “High retention means customers are happy”
✓Reality: Customers may stay due to high switching costs, long contracts, or lack of alternatives — not satisfaction. Track NPS alongside retention to know the difference.
✗Myth: “Retention rate is the same as renewal rate”
✓Reality: Renewal rate measures contract renewals, which happen at set intervals. Retention rate measures continuous active usage. A customer can renew their annual plan but stop using the product 3 months in — the retention rate catches this.
📈Industry Benchmarks
Monthly Customer Retention Rate
B2B SaaS (SMB segment)Elite
> 97%
Good
95-97%
Average
92-95%
Needs Work
88-92%
Critical
< 88%
Source: ChurnZero SaaS Retention Report, 2024
Monthly Customer Retention Rate
B2C SaaS / Consumer SubscriptionElite
> 92%
Good
88-92%
Average
83-88%
Needs Work
75-83%
Critical
< 75%
Knowledge Check
You start January with 1,000 customers. During January you acquire 150 new customers. You end January with 1,050 customers. What is your January customer retention rate?
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