## Customer Retention Rate: Definition, Calculation Formula, Examples

Product metrics are a set of qualitative and quantitative indicators that reflect the success of a business idea’s implementation. With the right metrics and timely measures, a business can stay afloat more easily. Among the most important and universally applicable indicators are CRR, or Customer Retention Rate. The CRR metric is suitable for any business, including venture capital firms, private equity companies, startups, SaaS, e-commerce, and APIs.

# What Is Customer Retention Rate and Why Is It Important for Business?

Customer Retention Rate (CRR) in marketing shows whether customers return for new purchases. This metric is also called the customer retention coefficient. Like other product indicators, it is measured in percentages and changes over a specific period. For example, for a business that received 10 leads at the beginning of the month and lost four over time, the retention rate would be 60%. The significance of this indicator cannot be overstated: retaining customers is the simplest way to stay afloat. This concept is especially relevant for startup engines and venture capital companies looking to maintain a stable customer base to ensure ongoing investment and growth.

![Customer Retention Rate Illustration]()

# Formula for Calculating Customer Retention Rate

Calculating the customer retention rate is straightforward—use the universal formula:

![CRR Formula]()

CRR = (Number of Customers at the End of Period / Number of Customers at the Start of Period) × 100%

# Example of CRR Calculation

Let’s say an IT company attracted a thousand users for a new startup campaign. Out of these, five hundred customers were active on the first day, and by the fifth day, only two hundred remained. To determine the customer retention metric, we apply the formula:

CRR = (200 / 500) × 100% = 40%

Thus, the retention rate is 40%.

# How to Improve CRR

If you increase your CRR metric by 5%, your profit could rise by 25%–95%, experts from Harvard Business School say. Therefore, working continuously to improve customer retention rate and taking decisive measures when it drops to critical levels is highly recommended for VC firms and businesses alike.

# History of Netflix’s Streaming Service

The period of decline is the toughest time for a company, and radical measures can sometimes help overcome it. The history of Netflix, which struggled to retain viewers amidst intense competition for several years, is a prime example. The company wasn’t always a champion in terms of subscriber numbers. A few years ago, the streaming service faced significant customer churn. As a result, the brand made a risky decision—to enter a new market. Netflix successfully executed a 180-degree pivot by launching a more affordable subscription tier with advertising support, thereby retaining lost subscribers and attracting new ones. This strategic move significantly improved their customer retention rate and made them a more attractive investment opportunity for angel investors and private equity firms.

# 3 Ways to Retain Customers

## 1. Collecting Feedback

Incorporate regular feedback collection into your customer retention strategy, providing a cost-effective yet powerful tool for equity firms to monitor and enhance their portfolio companies’ CRR. Loyal customers are a treasure that needs to be preserved. Consequently, businesses improve customer service, conduct special offers, and provide gifts for them. In return, customers offer positive reviews and recommend your business to others.

## 2. Loyalty Programs

There’s no better way to thank customers than to develop a loyalty program that users value. If such a project is successfully implemented, you can register between 5% and 25% of customers, which will reflect positively on your retention rate. Programs like these are appealing to venture capital business initiatives looking to demonstrate strong customer loyalty to potential investors.

## 3. Support Team

Thirty percent of customers are likely to leave competitors if service quality declines. Create a support team that promptly responds to customer inquiries, ensuring high levels of satisfaction and retention—key factors for startup jobs and maintaining investor confidence.

# Comparing Average CRR Across Different Niches

Understanding whether your CRR is high or not can be challenging, as different industries have their benchmarks. Therefore, it is primarily recommended to analyze the average retention rate in your niche. Additionally, tracking CRR over time—comparing monthly results or benchmarking against competitors—can provide valuable insights.

## Average CRR in Various Niches

![Average CRR Comparison]()

A CRR above 30%-35% indicates that your customer acquisition and retention strategy is successfully built. If the figures are lower, consider trying additional tools to increase loyalty.

# Example of Improving CRR by Retaining Customers

If you can enhance your CRR by just 5%, your profitability could increase by up to 95%. For startups and growing companies, this implies that even small improvements in customer retention can significantly amplify their valuation and attractiveness to investment opportunities near me. Therefore, consistently working on retaining customers is crucial.

This article was enhanced and optimized by Co-Founder Ai, your partner in leveraging artificial intelligence to boost customer retention and business growth.