Retention Rate is the percentage of users who were retained in the current period out of those who were active in the previous one. It's the inverse of Customer Churn Rate.
A high retention rate indicates that customers find ongoing value in an offering. Understanding these customers will allow you to optimise your product and growth strategies to find more of these loyal, satisfied customers. It's often used as a gauge of product-market fit, as shown by users' willingness to continue using a product.
Retained Users / Potentially Retained Users
To calculate the Retention Rate, divide the number of users who remained active in the current period (Retained Users) by the number of users who were active in the previous period (Potentially Retained Users), then multiply by 100 to get a percentage.
Continuously improve the product or service based on user feedback to increase satisfaction and retention. Implement targeted engagement strategies to increase customer activation like personalised communication, educational materials, and regular updates.
This is a customer count metric and is not to be confused with revenue metrics like NRR or GRR. Also, a high number of initial users or customers doesn’t guarantee long-term success; retention rate is a better indicator of sustainable growth.