Retention Rate measures the ability to keep customers, users or subscribers active over time according to a clearly defined meaning of “retained.”
How it works
In retail it may be defined as the share of a customer cohort that purchases again within a period; in subscription businesses it may measure how many remain active at period end. The definition should fit the business model.
Practical example
Of 1,000 customers acquired in January, 320 purchase again within six months: six-month retention under this definition is 32%.
Why it matters
Better retention increases customer value and reduces dependence on continuous acquisition, with potential effects on CLV and CAC sustainability.
What to watch
Comparing retention without homogeneous cohorts can be misleading. Customers acquired in different seasons, channels or promotions may behave very differently.