{"id":9172,"date":"2025-01-08T07:19:00","date_gmt":"2025-01-08T12:19:00","guid":{"rendered":"https:\/\/canny.io\/blog\/?p=9172"},"modified":"2025-04-08T19:21:09","modified_gmt":"2025-04-08T23:21:09","slug":"what-is-retention-rate","status":"publish","type":"post","link":"https:\/\/canny.io\/blog\/what-is-retention-rate\/","title":{"rendered":"Retention rate: what it is and how to improve&nbsp;it"},"content":{"rendered":"\n<p>Let&#8217;s discuss something that can make or break your business: retention rate. It&#8217;s the best gauge of whether your customers keep coming back for more. Happy customers equal a thriving&nbsp;business.<\/p>\n\n\n\n<p>So, what exactly is retention rate? Simply put, it&#8217;s the percentage of customers who keep doing business with you over a specific&nbsp;period.&nbsp;<\/p>\n\n\n\n<p>Let&#8217;s look at it closer, along with ways you can improve&nbsp;it.<\/p>\n\n\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is retention rate?<\/strong><\/h2>\n\n\n\n<p>Retention rate is a critical metric, especially in SaaS. It measures the percentage of customers who stick with your product over time. In many ways, it&#8217;s the pulse of your&nbsp;business.<\/p>\n\n\n\n<p>A high retention rate means customers <strong>see value in what you\u2019re offering<\/strong>. They\u2019re engaged, loyal, and happy to keep paying for your product month after&nbsp;month.<\/p>\n\n\n\n<p>Why does this matter? Because retention <strong>directly impacts your bottom&nbsp;line<\/strong>.<\/p>\n\n\n\n<p>It costs<a href=\"https:\/\/www.paddle.com\/resources\/customer-acquisition-vs-retention\"> 5 times more<\/a> to acquire a new customer than it does to keep an existing one. Losing customers doesn\u2019t just hurt revenue\u2014it wastes the investment you made to acquire&nbsp;them.<\/p>\n\n\n\n<p>On the flip side, improving your retention rate can have a massive impact on your bottom line. A <a href=\"https:\/\/www.bain.com\/insights\/the-economics-of-loyalty\/\">5% increase in retention can boost profits by 25-95%<\/a>. That&#8217;s because retained customers tend to spend more over time, refer new business, and cost less to&nbsp;serve.<\/p>\n\n\n\n<p>Improving your retention rate also helps with your company\u2019s value.<a href=\"https:\/\/www.apptentive.com\/blog\/2015\/04\/07\/the-five-mobile-marketing-metrics-that-matter-most\"> Studies show<\/a> that just a 10% improvement in retention can boost the value of a company by&nbsp;30%.<\/p>\n\n\n\n<p>Retention is about <strong>keeping the customers you&#8217;ve worked hard to acquire<\/strong>. It\u2019s not just about preventing churn\u2014it\u2019s about delivering ongoing value, building loyalty, and fostering long-term&nbsp;relationships.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Benefits of customer retention<\/strong><\/h3>\n\n\n\n<p>The benefits of high customer retention are&nbsp;huge:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>More predictable revenue<\/strong> \u2013 A stable customer base makes forecasting&nbsp;easier.<\/li>\n\n\n\n<li><strong>Lower customer acquisition costs<\/strong> \u2013 Retaining customers is far cheaper than constantly acquiring new&nbsp;ones.<\/li>\n\n\n\n<li><strong>More referrals and word-of-mouth marketing<\/strong> \u2013 Happy customers bring in new&nbsp;ones.<\/li>\n\n\n\n<li><strong>More upsell and cross-sell opportunities<\/strong> \u2013 Existing customers are more likely to buy more over&nbsp;time.<\/li>\n\n\n\n<li><strong>Increased customer lifetime value<\/strong> \u2013 The longer customers stay, the more valuable they&nbsp;become.<\/li>\n<\/ul>\n\n\n\n<p>Retention isn\u2019t just a metric\u2014it\u2019s a <strong>growth strategy<\/strong>. The more you invest in keeping customers happy, the stronger and more sustainable your business will&nbsp;be.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How to calculate retention rate<\/strong><\/h2>\n\n\n\n<p>Calculating your retention rate is actually pretty simple. All you need is some basic data about your customers over a given&nbsp;period.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Retention rate formula<\/strong><\/h3>\n\n\n\n<p>Here&#8217;s the formula for calculating retention&nbsp;rate:&nbsp;<\/p>\n\n\n\n<p>Retention Rate = ((E-N)\/S) x&nbsp;100&nbsp;<\/p>\n\n\n\n<p>Where:&nbsp;<\/p>\n\n\n\n<p>E = number of customers at the end of a&nbsp;period&nbsp;<\/p>\n\n\n\n<p>N = number of new customers acquired during that&nbsp;period&nbsp;<\/p>\n\n\n\n<p>S = number of customers at the start of that&nbsp;period<\/p>\n\n\n\n<p>Here&#8217;s an&nbsp;example.<\/p>\n\n\n\n<p>Let&#8217;s say you start the quarter with 1,000 customers. Over the next 3 months, you gain 100 new customers but lose 50 of your existing&nbsp;ones.&nbsp;<\/p>\n\n\n\n<p>That means at the end of the period, you&nbsp;have:<\/p>\n\n\n\n<p>1,000 + 100 &#8211; 50 = 1,050&nbsp;customers<\/p>\n\n\n\n<p>Plugging those numbers into the formula, we&nbsp;get:&nbsp;<\/p>\n\n\n\n<p>Retention Rate = ((1,050-100)\/1,000) x 100 =&nbsp;95%&nbsp;<\/p>\n\n\n\n<p>In this case, the company has a quarterly retention rate of 95%, which is pretty darn&nbsp;good.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img decoding=\"async\" width=\"1024\" height=\"1024\" data-src=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/retention-rate-formula.png\" alt=\"A graphic showing the retention rate formula.\" class=\"wp-image-9173 lazyload\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/1024;width:603px\" data-srcset=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/retention-rate-formula.png 1024w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/retention-rate-formula-150x150.png 150w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/retention-rate-formula-768x768.png 768w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>High vs. low retention rates<\/strong><\/h2>\n\n\n\n<p>So what&#8217;s considered a &#8220;good&#8221; retention rate? It varies by industry, but in general, anything above 90% is world-class. It means your customers are sticking around for the long&nbsp;haul.&nbsp;<\/p>\n\n\n\n<p>But if your retention rate is below 50%, that&#8217;s a major red flag. It means you&#8217;re losing a significant portion of your customers. That makes it much harder to sustain long-term growth. Unless your acquisition rate is extremely high, you&#8217;re facing a leaky bucket problem. That could cripple your&nbsp;business.<\/p>\n\n\n\n<p>There are a couple other ways you can assess how well you&#8217;re&nbsp;doing:<\/p>\n\n\n\n<p>1. Look at your historical rates \u2014 lets you quickly see if you&#8217;ve improved. Or, you can quickly spot a problem and investigate if your rate&nbsp;drops.<\/p>\n\n\n\n<p>2. Look at industry rates \u2014 understanding where you stand relative to the industry lets you set realistic goals. <a href=\"https:\/\/www.statista.com\/statistics\/816735\/customer-retention-rate-by-industry\/\">Statista provides customer retention and churn rates by industry<\/a>. This can be a useful reference point for how well you&#8217;re doing compared to similar&nbsp;businesses.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img decoding=\"async\" width=\"2048\" height=\"1072\" data-src=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/image.png\" alt=\"\" class=\"wp-image-9174 lazyload\" style=\"--smush-placeholder-width: 2048px; --smush-placeholder-aspect-ratio: 2048\/1072;width:640px\" data-srcset=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/image.png 2048w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/image-768x402.png 768w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/image-1536x804.png 1536w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/image-209x110.png 209w\" data-sizes=\"(max-width: 2048px) 100vw, 2048px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><figcaption class=\"wp-element-caption\">Source: <a href=\"https:\/\/www.demandsage.com\/customer-retention-statistics\/\">DemandSage<\/a><\/figcaption><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Factors affecting retention rate calculation<\/strong><\/h2>\n\n\n\n<p>Keep in mind that several factors can impact your retention&nbsp;rate:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The length of the time period you&#8217;re measuring (monthly vs quarterly vs&nbsp;annually)&nbsp;<\/li>\n\n\n\n<li>The type of business and industry you&#8217;re&nbsp;in&nbsp;<\/li>\n\n\n\n<li>The maturity of your product and customer&nbsp;base&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>To get started, benchmark your retention rate against similar companies. Then, track it over time to spot trends and areas for improvement. Make sure to choose an appropriate period to measure based on your&nbsp;business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How to improve retention<\/strong><\/h2>\n\n\n\n<p>Boosting your product&#8217;s retention rate isn&#8217;t just about keeping your current customers happy. It&#8217;s a strategic move that can significantly impact your bottom line. Here are actionable strategies to ensure your users stick around&nbsp;longer.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img decoding=\"async\" width=\"1024\" height=\"1536\" data-src=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/ways-to-improve-retention-rate.png\" alt=\"\" class=\"wp-image-9175 lazyload\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/1536;width:640px\" data-srcset=\"https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/ways-to-improve-retention-rate.png 1024w, https:\/\/canny.io\/blog\/wp-content\/uploads\/2025\/03\/ways-to-improve-retention-rate-768x1152.png 768w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><\/figure>\n<\/div>\n\n\n<h3 class=\"wp-block-heading\"><strong>Identify at-risk customers<\/strong><\/h3>\n\n\n\n<p>It&#8217;s critical to identify customers who may leave. Look for warning signs like <strong>decreased usage, low NPS scores, or negative feedback<\/strong>. Tools like <strong>Gainsight and ChurnZero<\/strong> can track customer health and flag potential churn risks. Once you\u2019ve identified them, <strong>reach out directly<\/strong>\u2014a quick check-in can often turn things&nbsp;around.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Proactively communicate with customers and address issues quickly<\/strong><\/h3>\n\n\n\n<p>Maintaining open lines of communication is crucial for retention. Staying in touch helps keep your brand top of mind. You can do that&nbsp;through:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Newsletters<\/strong><\/li>\n\n\n\n<li><strong>Social media&nbsp;updates<\/strong><\/li>\n\n\n\n<li><strong>Personalized&nbsp;emails<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If you notice <strong>a drop in engagement<\/strong>, reach out proactively. When issues arise, <strong>quick resolution<\/strong> shows customers you care about their experience. Responsive support <strong>builds trust and prevents&nbsp;churn<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Personalize customer engagement<\/strong><\/h3>\n\n\n\n<p>Generic email blasts won\u2019t cut it. Customers expect <strong>tailored experiences<\/strong> based on their needs and behavior. Ways to personalize engagement&nbsp;include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Segmenting customers<\/strong> and creating targeted campaigns for each&nbsp;group<\/li>\n\n\n\n<li><strong>Using customer data<\/strong> to recommend relevant features or&nbsp;tips<\/li>\n\n\n\n<li><strong>Offering one-on-one training<\/strong> to help users get more value from your&nbsp;product<\/li>\n<\/ul>\n\n\n\n<p>When customers feel <strong>seen and supported<\/strong>, they\u2019re more likely to stick&nbsp;around.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Continuously gather customer feedback and act on it<\/strong><\/h3>\n\n\n\n<p>The first step in improving retention is understanding what keeps customers coming back. Or, what drives them away. Regularly soliciting customer feedback allows you to pinpoint areas for improvement. Try&nbsp;using:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>a public feedback&nbsp;board<\/li>\n\n\n\n<li>surveys<\/li>\n\n\n\n<li>suggestion&nbsp;boxes<\/li>\n\n\n\n<li>interviews<\/li>\n\n\n\n<li>monitoring customer support&nbsp;channels<\/li>\n<\/ul>\n\n\n\n<p>More importantly, acting on this feedback shows customers their opinions matter, fostering&nbsp;loyalty.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<div style=\"max-width: 650px; margin: 0 auto;\"> <!--HubSpot Call-to-Action Code --> <span class=\"hs-cta-wrapper\" id=\"hs-cta-wrapper-e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa\"> <span class=\"hs-cta-node hs-cta-e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa\" id=\"hs-cta-e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa\"> <!--[if lte IE 8]><div id=\"hs-cta-ie-element\"><\/div><![endif]--> <a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/5705808\/e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa\" target=\"_blank\" rel=\"noopener\"> <img decoding=\"async\" class=\"hs-cta-img lazyload\" id=\"hs-cta-img-e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa\" style=\"border-width:0px;\" data-src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/5705808\/e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa.png\" alt=\"New call-to-action\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/> <\/a> <\/span> <script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script> <script type=\"text\/javascript\"> hbspt.cta.load(5705808, 'e1d55d08-a2cf-44a3-a9a0-f3ca5ff21dfa', {\"useNewLoader\":\"true\",\"region\":\"na1\"}); <\/script> <\/span> <!-- end HubSpot Call-to-Action Code --> <\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Invest in onboarding and customer education<\/strong><\/h3>\n\n\n\n<p>Focus on building a well-structured <strong>onboarding process. <\/strong>It can make all the difference between a user who feels lost and one who quickly finds value in your product. Consider adding these to your onboarding&nbsp;process:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Educational email&nbsp;sequences<\/li>\n\n\n\n<li>In-app product&nbsp;tutorials<\/li>\n\n\n\n<li>FAQs<\/li>\n\n\n\n<li>Help&nbsp;pages<\/li>\n\n\n\n<li>Product&nbsp;webinars<\/li>\n<\/ul>\n\n\n\n<p>These not only help smooth out the learning curve but also empower users to get the most out of their&nbsp;purchase.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Reward loyalty with exclusive perks and discounts<\/strong><\/h3>\n\n\n\n<p>There are a lot of ways to reward&nbsp;loyalty:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Loyalty programs that offer tangible&nbsp;rewards<\/li>\n\n\n\n<li>VIP&nbsp;benefits<\/li>\n\n\n\n<li>Sneak peeks at new&nbsp;products<\/li>\n\n\n\n<li>Public&nbsp;recognition<\/li>\n<\/ul>\n\n\n\n<p>All these encourage repeat business by making loyal customers feel valued. Remember: Improving retention rates requires ongoing effort across multiple fronts. Don&#8217;t just focus on initial customer contact points. Follow through with post-purchase support &amp;&nbsp;beyond.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Continuously improve your product<\/strong><\/h3>\n\n\n\n<p>A great product keeps customers engaged. The best companies <strong>never stop iterating<\/strong> based on customer feedback. Keep your product valuable&nbsp;by:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Adding requested features<\/strong> that solve real customer&nbsp;problems<\/li>\n\n\n\n<li><strong>Streamlining workflows<\/strong> to improve&nbsp;usability<\/li>\n\n\n\n<li><strong>Pivoting strategies<\/strong> when necessary to stay&nbsp;competitive<\/li>\n<\/ul>\n\n\n\n<p>Retention comes down to <strong>delivering ongoing value<\/strong>. The more customers see your product evolving to meet their needs, the more likely they are to&nbsp;stay.<\/p>\n\n\n\n<p>The key is to always be thinking about how you can deliver more value to your customers. The more you can exceed their expectations, the more likely they are to stick&nbsp;around.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Retention rate and customer experience<\/strong><\/h2>\n\n\n\n<p>Customer experience is everything. It&#8217;s the make-or-break factor that determines whether your customers stick around. Companies that prioritize customer satisfaction and listen to their needs are the ones that&nbsp;thrive.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Impact of customer experience on retention<\/strong><\/h3>\n\n\n\n<p>Would you keep using a product that left you feeling frustrated, unheard, or&nbsp;unsatisfied?<\/p>\n\n\n\n<p>Probably&nbsp;not.<\/p>\n\n\n\n<p>But what about a company that provides exceptional service and values your&nbsp;feedback?<\/p>\n\n\n\n<p>That creates loyalty that&#8217;s hard to break. In fact, a <a href=\"https:\/\/www.pwc.com\/us\/en\/services\/consulting\/library\/consumer-intelligence-series\/future-of-customer-experience.html\"><em>PwC<\/em> study<\/a> found that <strong>73% of consumers<\/strong> say customer experience is a key factor in their purchasing decisions. Additionally, <strong>43%<\/strong> are willing to pay more for greater convenience, and <strong>42%<\/strong> would pay more for a friendly, welcoming&nbsp;experience.<\/p>\n\n\n\n<p>Focusing on customer experience doesn\u2019t just improve retention\u2014it also boosts your bottom&nbsp;line.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Measuring customer satisfaction<\/strong><\/h2>\n\n\n\n<p>How do you know if you&#8217;re hitting the mark on customer satisfaction? It all starts with listening. Regularly collect feedback through surveys, reviews, and one-on-one conversations. This helps you understand what\u2019s working and where there\u2019s room for&nbsp;improvement.<\/p>\n\n\n\n<p>Several key metrics can help you track customer&nbsp;satisfaction:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Net Promoter Score (NPS):<\/strong> Measures how likely customers are to recommend your product. A high NPS suggests strong loyalty, while a low score signals potential&nbsp;churn.<\/li>\n\n\n\n<li><strong>Customer Satisfaction Score&nbsp;(CSAT):<\/strong><\/li>\n\n\n\n<li>Gauges immediate satisfaction by asking customers to rate their experience. It&#8217;s often used after interactions like support chats or&nbsp;purchases.<\/li>\n\n\n\n<li><strong>Customer Effort Score&nbsp;(CES):<\/strong><\/li>\n\n\n\n<li>Measures how easy or difficult it is for customers to complete a task\u2014like signing up, using a feature, or getting help. The lower the effort, the higher the&nbsp;satisfaction.<\/li>\n<\/ul>\n\n\n\n<p>Each metric provides a different perspective on customer happiness. Tracking them together gives a well-rounded view of how satisfied and engaged your users&nbsp;are.<\/p>\n\n\n\n<p>Want a deeper dive into these metrics? Check out<a href=\"https:\/\/canny.io\/blog\/customer-satisfaction-metrics\/\"> this guide on customer satisfaction&nbsp;metrics<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Addressing customer pain points<\/strong><\/h2>\n\n\n\n<p>Once you have a pulse on your customers&#8217; needs and pain points, it&#8217;s time to take action. This might&nbsp;mean:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>investing in better training for your customer support&nbsp;team<\/li>\n\n\n\n<li>streamlining your onboarding&nbsp;process<\/li>\n\n\n\n<li>adding new features based on customer&nbsp;requests<\/li>\n<\/ul>\n\n\n\n<p>.The key is to continuously iterate and improve based on the feedback you receive. Show your customers that you value their input and are committed to providing the best possible&nbsp;experience.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Retention rate vs. churn rate<\/strong><\/h2>\n\n\n\n<p>Now, let&#8217;s talk about the flip side of retention rate &#8211; churn rate. Retention rate measures the percentage of customers who stick around. Churn rate looks at the percentage who&nbsp;leave.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Difference between retention rate and churn rate<\/strong><\/h3>\n\n\n\n<p>It&#8217;s important to track both metrics to get a full picture of your business&#8217;s health. Retention rate tells you how many <strong>existing<\/strong> customers stayed. Churn rate shows how many left. Since they\u2019re directly linked, if one is high, the other must be&nbsp;low.<\/p>\n\n\n\n<p>For example, if your <strong>monthly retention rate is 90%<\/strong>, then your <strong>churn rate is 10%. <\/strong>This means that for every 100 existing customers at the start of the month, 90 stayed, and 10 left. Losing customers at that rate might not seem like a big deal, but over time, churn can add up and slow your growth. Even if you&#8217;re acquiring new users, consistently losing existing ones makes it harder to&nbsp;scale.<\/p>\n\n\n\n<p>Existing users often spend more than new customers too. They&#8217;ve had more time to increase their usage, add users, or upgrade. Losing an existing customer often has a larger revenue impact than winning a new&nbsp;one.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Factors contributing to customer churn<\/strong><\/h3>\n\n\n\n<p>So what causes customers to churn? There are many factors at play. These include poor customer service, product issues, pricing changes, and competition. In my experience, the most common reasons customers leave&nbsp;are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Lack of value or&nbsp;ROI<\/li>\n\n\n\n<li>Poor user&nbsp;experience<\/li>\n\n\n\n<li>Better alternatives in the&nbsp;market<\/li>\n\n\n\n<li>Changes in their own needs or&nbsp;budget<\/li>\n<\/ul>\n\n\n\n<p>If you&#8217;re tracking why your customers leave, you can work to prevent future churn. Asking why they&#8217;re leaving when they cancel is a great first step. Consider asking your customer success team to reach out to find out why too. They might even prevent the customer from&nbsp;leaving.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Strategies for reducing churn rate<\/strong><\/h3>\n\n\n\n<p>Reducing churn starts with a strong retention strategy. Some of the most effective tactics&nbsp;include:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Improving onboarding and customer education<\/strong> \u2013 Help customers find value quickly with clear onboarding, tutorials, and&nbsp;support.<\/li>\n\n\n\n<li><strong>Providing proactive customer support<\/strong> \u2013 Solve issues before they escalate by reaching out before customers consider&nbsp;leaving.<\/li>\n\n\n\n<li><strong>Gathering and acting on customer feedback<\/strong> \u2013 Regularly ask for input and make meaningful changes based on what you&nbsp;hear.<\/li>\n\n\n\n<li><strong>Offering incentives and loyalty programs<\/strong> \u2013 Reward long-term customers with exclusive perks, discounts, or special&nbsp;access.<\/li>\n\n\n\n<li><strong>Continuously improving your product<\/strong> \u2013 Keep evolving based on customer needs to stay competitive and&nbsp;valuable.<\/li>\n<\/ol>\n\n\n\n<p>Make retention a top priority, and you&#8217;ll reduce churn while building a loyal customer base that sticks with&nbsp;you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Balancing customer acquisition and retention<\/strong><\/h2>\n\n\n\n<p><strong>Focusing on retention<\/strong> doesn\u2019t mean you should stop acquiring new customers. The key is <strong>finding the right balance<\/strong> between acquisition and retention based on your business model and growth&nbsp;stage.<\/p>\n\n\n\n<p>For <strong>early-stage startups<\/strong>, acquisition is the priority. You need to build a customer base. But as your company matures, <strong>retention becomes just as important<\/strong>. Keeping existing customers engaged and reducing churn fuels long-term&nbsp;growth.<\/p>\n\n\n\n<p>A helpful way to evaluate this balance is the <strong>LTV:CAC ratio. <\/strong>It compares <strong>lifetime value (LTV)<\/strong> to <strong>customer acquisition cost (CAC)<\/strong>. If your LTV:CAC ratio is <strong>too low<\/strong>, it may mean you&#8217;re overspending on acquisition without retaining customers long enough to justify the cost. A <strong>3:1 ratio or higher<\/strong> is considered healthy. This means customers generate <strong>at least three times more revenue<\/strong> than it costs to acquire them. This ensures your growth is both <strong>sustainable and&nbsp;profitable<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Retention: the key to sustainable growth<\/strong><\/h2>\n\n\n\n<p>Retention rate isn\u2019t just a number. It&#8217;s a <strong>powerful tool<\/strong> for keeping customers happy and driving long-term&nbsp;success.<\/p>\n\n\n\n<p>By understanding <strong>how to measure retention, what influences it, and how to improve it<\/strong>, you can build a loyal customer base that sticks with&nbsp;you.<\/p>\n\n\n\n<p>Happy customers are the <strong>lifeblood of any thriving business<\/strong>. Keep a close eye on your retention numbers, listen to your customers, and focus on delivering value. The more you invest in creating <strong>great experiences<\/strong>, the stronger your business will&nbsp;be.<\/p>\n\n\n\n<p>Your bottom line will thank&nbsp;you.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Improving your retention rate helps you keep customers happy and drive long-term success. See how to do that in this post.<\/p>\n","protected":false},"author":24,"featured_media":9209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[366],"tags":[65,15],"class_list":["post-9172","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-glossary","tag-customer-retention","tag-product-management"],"aioseo_notices":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Retention rate: what it is and how to improve it - Canny Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canny.io\/blog\/what-is-retention-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Retention rate: what it is and how to improve it - Canny Blog\" \/>\n<meta property=\"og:description\" content=\"Improving your retention rate helps you keep customers happy and drive long-term success. 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