Definition
Retention rate measures how many customers (or users) you keep over a period. A common customer retention definition accounts for new customers so you measure true retention rather than growth.
A practical formula
Retention rate = (customers at end - new customers) / customers at start.
Retention vs churn
- Churn focuses on who you lost; retention focuses on who stayed.
- Customer retention differs from revenue retention (NRR/GRR) when expansion is significant.
- Pick one definition and keep it consistent across reports.
Measure by cohort
- Cohorts show where the retention curve drops (activation and early lifecycle).
- Segment cohorts by plan, industry, and acquisition channel.
- Track leading indicators like usage, time-to-value, and support contacts.