Acquiring new customers is the first step towards business growth. But the real challenge lies in retaining them. That’s why today, I’m sharing formulas for every customer retention metric so you can measure what matters and act on it.
I’ve listed the customer retention metric formulas in order of importance. The first few are key to the sustainable growth of most businesses.
Advanced metrics may be more relevant and refined for certain business models. Lastly, there are other formulas that may not be as important but are still relevant depending on your circumstances.
To help you find the right mix of metrics that align with your unique business goals and customer journey, I’ve explained how each one may work in various circumstances.
Understanding which metrics matter is crucial for successful customer retention and business growth. That starts with knowing the two key categories which retention metrics fall into: core and proxy.
Core retention metrics measure whether customers are sticking with your product or service over time. Customer churn is an example, which is why it’s a crucial metric.
Customer churn rate tells you the percentage of customers who’ve abandoned your brand within a given period. A high churn rate indicates that you need to act fast to plug further losses to your customer base.
Proxy metrics, on the other hand, offer insights into factors influencing retention. For that reason, they’re a bit more subtle than core metrics, though just as important.
Think of proxy retention metrics as indicators, hinting at how likely customers are to stick around, even if they don’t directly measure retention itself.
I’m talking metrics like the incredibly useful Net Promoter Score (NPS). NPS measures whether customers would recommend your brand.
In my experience, a high NPS is often a precursor to strong retention rates. After all, a customer willing to advocate for your brand most likely plans on sticking around.
Off-the-shelf solutions rarely suffice for retention metrics. My experience with enterprise clients has shown that a tailored approach is essential.
Building your own retention metrics system certainly includes data collection. But let’s not forget, it’s more important to create a framework that directly addresses your business goals and customer journey.
That system comes down to three things: choosing the right metrics, tracking them properly, and turning the results into action.
Metrics aren’t universally applicable. The challenge lies in identifying those most pertinent to your specific business model. Here’s how to do just that:
The goal is to select metrics that directly correlate with your bottom line and customer behaviour.
For example, monthly recurring revenue (MRR) plays a crucial role for most SaaS companies. This is because SaaS businesses typically operate on subscription-based models, making predictable, recurring revenue a key indicator of financial health and growth.
Whereas in e-commerce, the repeat purchase rate is a perfectly viable key indicator. It reflects the effectiveness of retention strategies in markets that typically involve individual transactions, although on a smaller but more frequent scale.
After identifying your key metrics, it’s time to implement robust data tracking. Invest in analytics tools tailored to your specific needs. Whether you’re focusing on customer satisfaction scores (CSAT) or time to value (TTV), ensure your system can efficiently track these.
At Propello Cloud, we’ve helped clients revamp their retention strategies with our in-depth tracking systems. Our goal always extends beyond just data collection. You have to make data accessible and actionable, too.
Data without action is ineffective. The real value emerges when you interpret your metrics and use them to drive decisions. Analyse trends and correlations. For instance:
Use insights like these to develop proactive retention strategies. Some that spring to mind include launching re-engagement campaigns or refining your onboarding process.
Data does more than simply measure your retention strategies. It’s your guide that reliably informs your retention strategy efforts.
Aligning metrics with specific goals is crucial for any business aiming to improve customer retention. Goals provide a clear direction to your desired outcomes. KPIs and metrics serve as tangible measures to assess how far you’ve progressed toward those outcomes.
When metrics are tied to specific goals, it becomes much easier to identify what’s working and what needs improvement. I’ll explain why:
The distinction between KPIs and metrics is crucial for effective goal alignment. Here’s how we differentiate them at Propello Cloud:
KPIs are holistic metrics that reflect team-wide responsibility. They offer an overall view of performance in your chosen strategies and inform you about the overall progress towards your business goals
Metrics, on the other hand, are more granular. They’re often centralised within specific departments or smaller teams, providing raw data on individual tactics and actions.
Here’s a quick breakdown:
| KPIs | Metrics |
| Always metrics | Not always KPIs |
| Offer an overall view of strategy performance | Offer a view of smaller, team-oriented tasks and actions |
| Inform about the overall business goal progress | Indicate how well specific tactics are performing |
Remember, all KPIs are metrics, but not all metrics are KPIs.
For instance, implementing a smooth onboarding process could be a KPI. A supporting metric for this KPI might be the number of support articles produced to assist customers during onboarding.
Understanding core and proxy metrics, building a tailored system, and aligning metrics with goals all lead to this. Choosing and implementing the right metrics for your business.
I’ve listed ten examples of basic and advanced retention metrics, followed by other retention metrics that aren’t as important but may still be useful.
As we dive in, remember: it’s not about tracking everything, but selecting metrics that truly reflect your business goals and customer journey.
Customer churn rate measures the percentage of customers who stop using your product or service over a specific period.
It’s a critical metric for identifying customer dissatisfaction and potential areas for improvement in your retention strategies.
Formula: Customer Churn Rate = ((Starting Customers – Ending Customers) / Starting Customers) * 100
Example:
Starting Customers: 1,000
Ending Customers: 900
Churn Rate: (1,000 – 900) / 1,000 * 100 = 10%
A high churn rate often signals underlying issues in your customer experience or product value. Regular analysis of churn patterns can help you proactively address potential problems before they lead to customer loss.
Net Promoter Score (NPS) measures customer loyalty and the likelihood of brand advocacy.
It’s a crucial metric for gauging overall customer satisfaction and predicting business growth through word-of-mouth marketing.
Formula: NPS = % of Promoters – % of Detractors
NPS is calculated based on responses to the question: “On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or family member?”
Example:
50% Promoters
30% Passives (don’t include in the formula).
20% Detractors
NPS = 50% – 20% = 30
A positive NPS indicates more promoters than detractors, suggesting overall positive brand sentiment. However, NPS benchmarks vary by industry, so compare your score against competitors for an accurate performance assessment.
Customer Lifetime Value estimates the total revenue a customer is expected to generate throughout their relationship with your business.
This metric gives invaluable insight into shaping customer acquisition and retention strategies, ultimately driving long-term business growth.
Formula: CLV = Average Purchase Value x Purchase Frequency x Customer Lifespan x Customer Retention Rate
Example:
Average Purchase Value (APV): £100
Purchase Frequency (PF): 10 per year
Customer Lifespan (CL): 36 months
Customer Retention Rate (CRR): 0.8
CLV = £100 x 10 x 36 x 0.8 = £28,800
Despite its importance, only 42% of companies know how to accurately measure CLV. Regular calculation and analysis of this metric can provide valuable insights into the effectiveness of your customer retention efforts and the overall health of your business relationships.
Customer Satisfaction Score directly measures how satisfied customers are with your product, service, or specific interactions with your business.
By capturing immediate feedback, CSAT enables swift identification and resolution of issues that could impact customer retention.
Formula: CSAT = (Number of satisfied customers / Total number of survey responses) × 100
CSAT is typically measured by asking customers, “How satisfied were you with your experience?” on a scale of 1-5, with 4 and 5 considered “satisfied”.
Example:
200 customers respond to a survey
150 rate their satisfaction as 4 or 5
CSAT = (150 / 200) x 100 = 75%
High CSAT scores often correlate with increased customer loyalty and positive word-of-mouth. For a comprehensive view of your customer experience, track CSAT over time and across different touch points, identifying areas for continuous improvement.
Bear in mind, the average CSAT score across sectors is 78%, though the figure varies by sector.
Revenue churn rate measures the percentage of revenue lost due to customers leaving over a specific period.
Unlike customer churn rate, this metric focuses on the financial impact of lost customers, providing crucial insights into your business’s economic health.
Formula: Revenue Churn Rate = (Lost Revenue from Churned Customers / Total Revenue at the Start) * 100
Example:
Starting monthly revenue: £100,000
Revenue lost due to customer churn: £10,000
Revenue Churn Rate = (£10,000 / £100,000) * 100 = 10%
A 10% revenue churn rate indicates a significant financial impact from customer losses. This metric helps assess recurring revenue loss and guides efforts to mitigate revenue leakage.
By tracking revenue churn alongside customer churn, you can identify whether you’re losing high-value customers and adjust your retention strategies accordingly.
Repeat Purchase Rate (RPR) measures the percentage of customers who make multiple purchases within a specific time period.
This metric offers useful information about customer loyalty, satisfaction, and the effectiveness of your retention strategies.
Formula: RPR = (Number of Customers with Repeat Purchases / Total Number of Unique Customers) * 100
Example:
Total unique customers: 1,000
Customers who made repeat purchases: 400
RPR = (400 / 1,000) * 100 = 40%
A high RPR indicates strong customer loyalty and satisfaction, suggesting your products or services meet or exceed customer expectations. It also reflects the success of your retention strategies, such as personalised marketing campaigns and loyalty programmes.
Identifying and analysing repeat customers paves the way for optimising your marketing resources, nurturing valuable relationships for long-term retention, and increased customer lifetime value.
Monthly Recurring Revenue measures the predictable and recurring revenue generated by your business each month.
It’s particularly crucial for subscription-based businesses, providing a clear picture of your company’s financial health and growth trajectory.
Formula: MRR = Number of Paying Customers x Average Revenue per User
Example:
500 paying customers
Average Revenue per User: £100
MRR = 500 x £100 = £50,000
Tracking MRR helps forecast future revenue, evaluate the success of your pricing strategies, and gauge the overall stability of your business model. An increasing MRR often indicates effective customer retention and successful upselling or cross-selling efforts.
Customer Effort Score measures the ease with which customers can interact with your company, product, or service.
By quantifying the smoothness of customer experiences, CES reveals potential friction points that could impact satisfaction and loyalty.
Formula: CES = Sum of all Customer Effort Scores / Number of Customers Surveyed
CES is typically measured by asking customers to rate their agreement with the statement: “The company made it easy for me to handle my issue” on a scale from 1 (strongly disagree) to 7 (strongly agree).
Example:
100 customers surveyed
Sum of all scores: 550
CES = 550 / 100 = 5.5
A high CES indicates that customers find it easy to do business with you, which often leads to increased satisfaction and retention.
Time to Value measures how quickly new customers realise the benefits of your product or service.
For SaaS and subscription-based businesses, rapid value delivery can make or break customer retention.
Formula: TTV = Date Customer Achieves Value – Date of Purchase or Sign-up
TTV varies by industry and product complexity. Track the time between a customer’s initial engagement and their achievement of a predefined value milestone.
Example:
Customer signs up: January 1st
Customer achieves first major goal: January 15th
TTV = 14 days
Shorter TTV often boosts satisfaction and retention. Optimise onboarding, provide targeted support, and showcase quick wins to improve this metric. Remember, satisfied customers often become brand advocates.
The product return rate reveals the percentage of sold items that customers send back. It’s a powerful indicator of product quality and how well you’re meeting customer expectations.
Formula: Product Return Rate = (Number of Product Returns / Total Number of Products Sold) * 100
Example:
1,000 products sold
50 products returned
Product Return Rate = (50 / 1,000) * 100 = 5%
Aim for a return rate below 10%. Higher rates often signal issues with quality, marketing accuracy, or customer expectations. While you can’t eliminate all returns, monitoring this metric helps you identify areas for improvement.
These advanced metrics provide a more nuanced view of customer behaviour and the long-term health of your business, going beyond the fundamentals we’ve discussed above.
The customer retention rate measures the percentage of customers you retain over a specific period. It indicates loyalty and the effectiveness of your retention strategies.
Formula: CRR = ((Ending Customers – New Customers) / Starting Customers) * 100
Example:
Starting Customers: 500
New Customers acquired: 100
Ending Customers: 450
CRR = ((450 – 100) / 500) * 100 = 70%
A 70% CRR means you’ve retained 70% of your existing customer base over the year. Use this metric to evaluate the impact of your retention strategies and identify trends in customer loyalty over time.
Time Between Purchases measures the average interval between customer transactions. This metric gives insight into purchasing patterns and overall brand engagement.
Formula: Average Time Between Purchases = Total Time Between All Purchases / Number of Intervals
Example:
Purchase 1: 2023-05-01 10:00:00
Purchase 2: 2023-05-05 14:30:00
Time Between = 4 days, 4 hours, 30 minutes
Shorter intervals often indicate higher engagement, while longer gaps may suggest declining interest. Use this metric to time re-engagement campaigns in your marketing strategy.
‘Share of wallet’ represents the percentage of a customer’s total spending in your product or service category that goes to your business. While primarily a measure of customer value, SOW also provides essential information on retention potential.
Formula: SOW = (Customer’s Spending with Your Company / Customer’s Total Spending in the Category) × 100
Example:
The customer spends $1,000 with your company
Customer’s total category spending: $5,000
SOW = (1,000 / 5,000) × 100 = 20%
A higher SOW often correlates with stronger customer loyalty and increased retention likelihood. Customers who allocate a larger share of their spending to your brand typically have a deeper relationship and are less likely to churn.
Customer retention cost measures the total amount spent on retention efforts divided by the number of customers retained, which shows the efficiency of your retention strategies.
Formula: Customer Retention Cost = Total Retention Expenses / Number of Customers Retained
Example:
Total Retention Expenses: $100,000
Customers Retained: 1,000
Customer Retention Cost = 100,000 / 1,000 = $100 per customer
Compare this cost against the customer lifetime value to ensure your retention efforts are cost-effective. This metric is also essential for responsibly budgeting your retention strategies, as it identifies the activities that deliver the best ROI.
‘Renewal Rate’ measures the percentage of customers who choose to continue their subscription or service after their initial term. Needless to say, if yours is a subscription-based business, this metric will come in handy.
Formula: Renewal Rate = (Number of Customers Who Renewed / Total Number of Customers Up for Renewal) × 100
Example:
100 customers are up for renewal
80 customers renew
Renewal Rate = (80 / 100) × 100 = 80%
A high renewal rate indicates strong customer satisfaction and effective retention strategies. Monitor this metric closely to take proactive measures to further increase renewals.
This metric measures how actively customers engage with your product or service. It’s a leading indicator of customer satisfaction and also retention.
Formula: Engagement Rate = (Number of Engaged Customers / Total Number of Customers) × 100
The definition of an “engaged customer” varies by business but could include factors like login frequency, feature usage, or interaction with support.
Example:
1,000 total customers
800 customers meet your engagement criteria
Engagement Rate = (800 / 1,000) × 100 = 80%
Higher engagement rates often correlate with better retention. Use this metric to identify at-risk customers (those with low engagement) and to guide product development and customer success initiatives.
Your customer growth rate measures the rate at which your customer base is expanding. While not strictly a retention metric, it provides context for your retention efforts.
Formula: Customer Growth Rate = ((End Customers – Start Customers) / Start Customers) × 100
Example:
Start of period: 1,000 customers
End of period: 1,200 customers
Customer Growth Rate = ((1,200 – 1,000) / 1,000) × 100 = 20%
A positive growth rate indicates your acquisition efforts are outpacing churn. Use this alongside retention metrics to get a full picture of your customer base’s health.
‘Profitability per order’ measures the average profit generated from each customer transaction. It helps you to understand the value of retaining customers.
Formula: Profitability per Order = (Total Revenue – Total Costs) / Number of Orders
Example:
Total Revenue: $100,000
Total Costs: $70,000
Number of Orders: 1,000
Profitability per Order = (100,000 – 70,000) / 1,000 = $30
Higher profitability per order can justify more intensive retention efforts. Use this metric to tailor your retention strategies based on customer profitability.
Cumulative cohort revenue tracks the total revenue generated by a specific group of customers (cohort) over time, helping you to identify long-term customer value via retention patterns.
Formula: CCR = Sum of Revenue Generated by a Cohort Over a Specific Period
Example:
Cohort: Customers acquired in January 2023
Revenue generated by this cohort:
Year 1: $100,000
Year 2: $150,000
Year 3: $200,000
CCR after 3 years = $100,000 + $150,000 + $200,000 = $450,000
CCR helps identify which customer cohorts are most valuable over time. Use this information to refine acquisition strategies and tailor retention efforts to high-value cohorts.
These metrics aren’t as universally applied as the core ones covered above, but they still help you better understand customer behaviour and nurture loyalty. Use them to spot gaps your primary metrics might miss.
These metrics measure the number of unique users engaging with your product or service over a given time. They’re crucial indicators of ongoing customer engagement and retention.
Formula: Active Users = Number of Unique Users in a Given Time Period
Example:
1,000 unique users logged in this week
WAU = 1,000
High and consistent active user numbers often correlate with strong retention. Monitor these metrics to spot engagement trends and potential churn risks.
While primarily an acquisition metric, CAC is relevant to retention when compared to Customer Lifetime Value (CLV). It helps ensure that retention efforts are economically viable.
Formula: CAC = Total Acquisition Expenses / Number of New Customers Acquired
Example:
$100,000 spent on acquisition
100 new customers acquired
CAC = $100,000 / 100 = $1,000 per customer
Compare CAC to CLV to ensure you’re retaining customers long enough to recoup acquisition costs and generate profit.
This metric measures the percentage of customers who demonstrate loyalty through repeat purchases or long-term relationships.
Formula: Loyal Customer Rate = (Number of Loyal Customers / Total Number of Customers) × 100
Example:
500 loyal customers (e.g., made 3+ purchases in the last year)
1,000 total customers
Loyal Customer Rate = (500 / 1,000) × 100 = 50%
A high loyal customer rate indicates strong retention. Use this metric to identify and nurture your most valuable customer segments.
‘Feature adoption rate’ measures the percentage of users who have adopted a specific feature of your product or service. It’s a key indicator of product engagement and value perception.
Formula: Feature Adoption Rate = (Number of Users Who Adopted Feature / Total Number of Users) × 100
Example:
500 users adopted a new feature
1,000 total users
Feature Adoption Rate = (500 / 1,000) × 100 = 50%
Higher feature adoption often correlates with better retention. Use this metric to guide product development and user education efforts.
Existing Customer Revenue Growth Rate (ECGR) measures the increase in revenue from your existing customer base, excluding new customer acquisitions. This metric reflects your ability to retain and expand relationships with current customers.
Formula: ECGR = ((Ending Existing Customer Revenue – Starting Existing Customer Revenue) / Starting Existing Customer Revenue) × 100
Example:
Starting Existing Customer Revenue: $1,000,000
Ending Existing Customer Revenue: $1,200,000
ECGR = ((1,200,000 – 1,000,000) / 1,000,000) × 100 = 20%
A positive ECGR indicates successful upselling, cross-selling, or increased usage among existing customers. It’s a strong indicator of customer satisfaction and loyalty.
Customer Health Score is a predictive metric that assesses the likelihood of a customer continuing their relationship with your company.
It typically combines various factors such as product usage, support interactions, and customer feedback.
While there’s no universal formula, a simple version might look like:
Formula: Customer Health Score = (Usage Score + Support Score + Feedback Score) / 3
Example:
Usage Score: 8/10
Support Score: 7/10
Feedback Score: 9/10
Customer Health Score = (8 + 7 + 9) / 3 = 8/10
Use this score to identify at-risk customers and prioritise retention efforts.
The reactivation rate measures the success of efforts to re-engage churned customers. It’s a crucial metric for understanding the effectiveness of your win-back campaigns.
Formula: Reactivation Rate = (Number of Reactivated Customers / Total Number of Churned Customers Targeted) × 100
Example:
50 customers reactivated
500 churned customers targeted
Reactivation Rate = (50 / 500) × 100 = 10%
A high reactivation rate can significantly boost overall retention. Analyse successful reactivations to improve your win-back strategy.
Expansion Monthly Recurring Revenue (MRR) measures the additional recurring revenue generated from existing customers through upsells, cross-sells, or plan upgrades.
Formula: Expansion MRR = New MRR from Existing Customers – Churned MRR from Existing Customers
Example:
New MRR from existing customers: $10,000
Churned MRR from existing customers: $2,000
Expansion MRR = $10,000 – $2,000 = $8,000
Positive Expansion MRR indicates growing customer relationships and effective retention strategies.
Average Order Value calculates the average amount spent each time a customer places an order. While not a direct retention metric, increasing AOV from existing customers can indicate stronger relationships.
Formula: AOV = Total Revenue / Number of Orders
Example:
Total Revenue: $100,000
Number of Orders: 1,000
AOV = $100,000 / 1,000 = $100
Track AOV over time for repeat customers. An increasing AOV often correlates with customer satisfaction and loyalty.
These 28 formulas give you a practical toolkit for measuring customer loyalty, satisfaction, and long-term business health. Use them to identify which metrics genuinely reflect your business goals and customer journey, whether that’s churn rate, Net Promoter Score, Customer Lifetime Value, or a combination of several.
Tracking the right metrics turns customer data into clear, actionable decisions. Rather than guessing what’s working, you’ll know exactly where to focus your retention efforts.
Want help picking the right metrics for your business? Book a free demo and we’ll talk through your loyalty and retention challenges.
Customer Churn Rate, Monthly Recurring Revenue (MRR), Customer Lifetime Value (CLV), and Net Promoter Score (NPS) provide insights into customer satisfaction, revenue stability, and long-term business health. However, the most important metrics may vary based on your specific business model and goals.
The frequency of tracking metrics depends on your business cycle and customer behaviour. Generally, it’s advisable to track core metrics like churn rate and MRR monthly. For metrics like NPS or CSAT, quarterly measurements might suffice. The key is consistency in tracking to identify trends and act on insights promptly.
Improving customer retention rate involves multiple strategies: enhance onboarding processes to shorten Time to Value, regularly collect and act on customer feedback, provide excellent customer support, and continuously add value through product improvements or additional services.
CAC is an acquisition metric, but it’s closely tied to retention. The longer a customer stays, the more value they provide relative to their acquisition cost. Comparing CAC to Customer Lifetime Value helps ensure that you’re not just acquiring customers, but retaining them profitably over time.
Core retention metrics, like Customer Retention Rate, directly measure how well you’re keeping customers. Proxy metrics, such as Net Promoter Score or Customer Satisfaction Score, don’t directly measure retention but indicate factors that influence it. Both types are valuable for a comprehensive retention strategy.
While high CSAT scores often correlate with good retention, they don’t guarantee it. Satisfaction is just one factor in retention. Other elements like product value, switching costs, or market competition also play roles. It’s best to use CSAT with other metrics for a complete picture of customer loyalty.
Time to Value significantly impacts retention by influencing early customer experience. A shorter TTV means customers realise benefits quickly, increasing satisfaction and reducing early churn risk. Focus on optimising onboarding processes and providing clear guidance to improve TTV and, consequently, retention rates.
Expansion MRR is crucial as it indicates growing customer relationships. It shows that existing customers are finding more value in your product or service over time. High Expansion MRR often correlates with strong retention, as customers who increase their investment are less likely to churn.
Customer Health Score helps predict potential churn by aggregating various customer data points. Use it to identify at-risk customers early and trigger proactive retention measures. For low-scoring customers, consider personalised outreach, additional training, or special offers to re-engage them and prevent churn.
Feature Adoption Rate often correlates positively with retention. Higher adoption suggests customers are finding value in your product’s capabilities. To improve retention, focus on increasing Feature Adoption Rate through user education, in-app guidance, and feature usability improvements based on user feedback.
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