How to Calculate and Increase Retention Rate

Retention is a company's ability to retain its customers and encourage them to continue using its products or services.

Why customer retention is important

Saving marketing budgets. Acquiring a new customer costs significantly more than retaining an existing one. According to estimates, acquisition costs can be 5-10 times higher than maintaining an already loyal audience, with repeat customers spending approximately 60-70% more than new customers.
Product value indicator. If customers return regularly, this means the company is successfully solving their problems and meeting their expectations.
Marketing and service evaluation. Low retention rates are a warning sign: customers may be leaving due to poor service, irrelevant communications, or dissatisfaction with product quality.
Increased profits and loyalty. Loyal customers not only make repeat purchases themselves but also recommend the company to others. Even a small increase in retention rates can significantly impact financial results.

What is retention rate (RR)

To assess customer loyalty more accurately, marketers use the retention rate — the share of customers who stay active over a given period. In reports, this rate may be referred to as the RR metric.

For example, in the mobile app and online service industry, high retention is crucial: users must regularly return to the app, otherwise, the product quickly loses its audience. In e-commerce and retail, the retention rate is also important, although return cycles may be longer. Typically, the retention rate is calculated over various intervals (day, week, month, quarter, year) depending on the business specifics and the product.

How to calculate the retention rate using a formula

To calculate the retention rate, three values are required:

A — the number of customers at the beginning of the selected period.
B — the number of new customers acquired during this period.
C — the number of customers at the end of the period (after churn and new arrivals).

Retention formula:

Retention Rate (RR) = ((C - B) / A) × 100%

The number of new customers acquired is subtracted from the total number of customers at the end of the period, and the result is divided by the number of customers at the beginning of the period. The result is multiplied by 100 to express it as a percentage.

Example of calculating the retention metric: suppose a company had 1,000 customers at the beginning of the month (A = 1,000). During the month, 200 new customers were acquired (B = 200), and at the end of the month, the total number of active customers was 800 (C = 800). Therefore, according to the formula: RR = ((800 - 200) / 1,000) × 100% = 60%

The retention rate for the month is 60%. This means that of the initial 1,000 customers, 60% continue using the product by the end of the period. The remaining 40% represent the churn rate for the same period.

What is churn rate? What can be done to reduce it? Read here.

Retention marketing: how to keep customers on board

Retention marketing focuses on existing customers. The main goal is to maintain interest, build trust, and ensure they return again. Retention marketing strategies include email newsletters, loyalty programs, personalized discounts, special offers, and other methods for stimulating repeat sales. The main goal of retention marketing is to retain customers and motivate them to perform a target action (purchase, subscription renewal, repeat service request, etc.).

Regular customers generate a huge share of sales at significantly lower communication costs. The likelihood that an existing customer will make a repeat purchase is much higher: some studies report up to a 60–70% chance of repeat purchase, while for a new customer, the chance is only 5-20%.

Strategies to increase retention:

Improving products and services. The foundation of retention is the product itself. If a product or service doesn't meet customer expectations, no marketing efforts will prevent churn. Therefore, the first step is to regularly improve the product's value: add useful features, update the product range, fix defects, and improve service quality. This also includes customer service: fast and courteous support, user training, and delivering on promises.

Personalized marketing communications. Effective retention is impossible without constant engagement with your audience through convenient marketing channels. Set up regular marketing campaigns for existing customers: send newsletters with useful content and special offers, SMS about important updates, in-app push notifications, and messages in popular messaging apps. Personalization is crucial in these marketing communications: segment your database and tailor offers based on each individual's interests, purchases, and behavior.

Loyalty programs and bonuses. Reward customers for their choice and activity. Loyalty is reinforced through cumulative bonus programs, discounts for regular customers, exclusive promo codes, or gifts for regular orders.

Reactivating "dormant" customers. Even if the product is good, some of your audience may become inactive over time. Retention marketing involves dedicated campaigns to bring them back. For example, you can set up triggered emails reminding customers about abandoned carts or prolonged absences, offer a personalized discount for return visits, or reach out to VIP customers who have stopped placing orders.

Feedback. Collect feedback regularly: conduct surveys, request reviews of purchases and service quality, and analyze complaints and suggestions.

How to improve retention using personalization and automation

When implementing these retention strategies, it's important to leverage modern technologies to improve their effectiveness. Maintaining personalized communications with thousands of customers manually is a nearly impossible task.

To maintain quality at scale, companies use marketing automation and data management systems. Personalization is closely linked to retention: the more precisely a brand communicates with each customer, the stronger the response and loyalty. Modern customers expect a personalized approach: they want to receive relevant offers at the right time and through their preferred channel. Without personalization, marketing communications turn into noise that fails to hold customer attention, and audiences lose interest and move on to competitors.

To implement a personalized approach across a large customer base, companies use specialized platforms. One key tool is a CDP (Customer Data Platform).

Here we explain how the Altcraft CDP platform works and how it can help you improve repeat purchase rates.

A CDP collects user information from all sources and channels (website, CRM, online orders, apps, email newsletters, social media, etc.) and combines this data into a single profile for each customer. This gives marketers a clear understanding of how each customer interacts with the brand: what they purchased, which pages they viewed, which emails they responded to. With this data, it's easier to segment the audience and create truly precise, engaging offers for each customer.

For example, a CDP can help identify that a customer hasn't used the app in a while but was previously interested in a certain product category. In this case, they can automatically receive a personalized promo code for that specific category.

Automation platforms allow you to pre-define interaction scenarios that will be triggered when certain conditions are met. For example, immediately after a new user registers, the system sends a welcome email (onboarding); if a customer hasn't used the service for 30 days, a triggered email is sent inviting them to return and offering a small discount; if the cart has been abandoned, a reminder is instantly sent about the unfinished purchase. Such automated sequences significantly improve retention: customers receive timely attention and additional motivation to return, and the marketing team saves time on routine tasks.

Conclusion

Retention is a company's ability not only to attract customers but also to ensure they stay, return, and continue engaging with a product or service. In modern marketing, it's not just one metric but an entire area that directly impacts profits, audience loyalty, and business sustainability.

Companies that build long-term relationships with customers win the competition. And to build strong relationships, they need to speak to each customer in their language, through their preferred channel, and at the right time. This is where personalization and automation play a key role. The Altcraft marketing automation platform helps you do just that: collect data, segment your audience, and launch personalized campaigns that retain customers.