Retention

Retention in Practice

Calculating Retention Rate

Retention rate = ((Customers end - New customers) / Customers start) × 100%

Example: 480 customers at the end of the quarter, 20 new customers acquired, 500 customers at start: Retention rate = ((480 - 20) / 500) × 100% = 92%

However, most organisations spend too much on new customer acquisition and too little on retention. The arithmetic is simple: acquiring a new customer costs 5-7x more than retaining an existing one.

Retention and CLV

Retention has an exponential effect on Customer Lifetime Value. For example, a customer who stays 3 years instead of 2 typically generates more than 50% more CLV, because onboarding costs are sunk and long-term customers increase their spend over time.

Retention Drivers Across the Customer Journey

Net Revenue Retention (NRR)

NRR is an extended retention metric that includes expansion (upsell/cross-sell) and contraction (downgrading). NRR above 100% means the company is growing its existing customer base, even without new customers. An NRR above 120% is exceptional for B2B SaaS.