The customer retention rate formula takes 10 seconds to find. Using it correctly takes longer.
Here's the gap most merchants hit: you pull your numbers, plug them into [(E-N)/S] × 100, and get... 67%. Now what? Is that good? Should you panic? Double down on retention spend?
The formula itself is simple. The variables — defining who counts as a customer, choosing the right time frame, interpreting the result — that's where it gets real. This guide walks through the calculation of customer retention with actual examples, shows you industry benchmarks that matter, and helps you interpret what your number actually means.
1. What is the formula for customer retention rate?
Customer retention rate (CRR) measures the percentage of your existing customers who stay active over a given period. It's calculated using three inputs: customers at the start, customers at the end, and new customers acquired during that period.
The result tells you how well you're keeping buyers — not just attracting new ones. A declining CRR signals problems in product experience, pricing, or customer satisfaction before they hit revenue.
Here's the exact formula:
The basic formula for calculating the customer retention rate
In which:
E: Number of users at the end of the period
N: Number of new users acquired during the period, counted in the end-of-period total
S: Number of users at the start of the period
Why subtract new customers? Without this step, you're counting first-time buyers who weren't part of your original base — that inflates your retention number and hides churn.
Quick example:
Start of month: 1,200 customers
New customers gained: 100
End of the month: 900 customers
CRR = [(900−100) / 1,200] × 100 = 66.7%
When to measure: Monthly for fast-moving products or SaaS, quarterly for most eCommerce and B2B, annually for long purchase cycles. Pick the interval that matches how often customers naturally return.
2. How to calculate customer retention rate: Step-by-step guide with examples
The formula is simple. The confusion starts when you define "active customer" or decide which accounts actually count. Here's how to get each variable right.
Step 1: Decide on the time frame
Four variables drive the calculation: time frame, starting customers (S), ending customers (E), and new customers (N). The time frame determines how the other three are defined and measured.
Too short? You'll catch noise instead of real retention patterns. Too long? You'll delay action and let churn build before you notice.
How you determine the right time frame to track CRR depends largely on:
Business model: Affects customers' interaction rhythms. Subscription or SaaS models tend to have frequent, ongoing interactions. B2B, eCommerce, or one-off purchase models, on the other hand, usually have less frequent touchpoints.
Customer lifecycle: Match the interval to how often customers naturally return or renew.
Measurement goal: Short periods for quick action, longer periods for trend analysis.
Here's a common CRR time frames for quick reference:
Monthly: Businesses' recurring user activity, rapid changes, and requiring quick adjustments, such as subscription or SaaS models.
Quarterly basis (Q1, Q2, etc.): A good middle ground for ecommerce and B2B businesses, revealing more stable retention trends over time.
Yearly basis: Useful for monitoring long-term retention performance and strategic planning, especially for businesses with long purchase cycles or annual contracts.
Sometimes, CRR is even measured daily or weekly. This is common in high-growth SaaS or highly competitive markets where fast churn signals matter.
Example for a weekly tracking of customer retention rate (Image: courtneyjordan)
💡 Pro tips: In short, you should measure CRR monthly or shorter for high-churn, fast-moving businesses. Stable businesses can track it quarterly or annually.
Step 2: Count starting customers (S)
You should only count the active ones - those who have interacted with your shop through a purchase, service use, or meaningful engagement within a specific timeframe.
Example: You're measuring Q1 (January 1 – March 31) for your eCommerce store. On January 1, your database shows 1,200 accounts that have placed at least one order. S = 1,200.
Step 3: Count ending customers (E)
Apply the same logic as Step 2, but count active customers on the last day of the period.
Example: On March 31, your database shows 900 accounts with at least one order. E = 900.
Step 4: Count new customers acquired during the period (N)
These are customers who made their first-ever purchase within the measurement period — not just accounts created.
Example: Between January 1 and March 31, 120 accounts were created, but only 100 completed a first purchase. N = 100.
The distinction matters: if you defined "active" as a completed purchase in Steps 2–3, apply the same rule here.
Shopify allows merchants to view first-time and returning customers in its dashboard
💡 Pro tips: You can use CRM or analytics tools to identify active customers. Google Analytics (GA4) has built-in dimensions that automatically identify and label users as new or returning in its standard reports. Shopify merchants can also use the built-in New vs. Returning customers report on how many customers were already in their customer base at a given time.
Step 5: Apply the CRR formula and interpret the result
The calculation:
Subtract new customers from ending customers (E − N) — this isolates how many of your original customers stayed.
Divide by starting customers (S) - this gives you the retention proportion.
Multiply by 100 to get the percentage.
Example:
S = 1,200 | E = 900 | N = 100
CRR = [(900 − 100) / 1,200] × 100 = 66.7%
Interpretation: Of your 1,200 starting customers, 800 remained active. You lost 400 customers or a 33.3% churn rate.
Why trends matter: If your Q4 CRR was 75% (600 retained from 800) and Q1 dropped to 66.7%, that signals declining retention efficiency — even though your customer base grew.
💡 Pro tips: Automate it in Excel or Google Sheets
Set up columns for S, E, N, and CRR. Use the formula =(E−N)/S in the CRR cell (e.g., =(F7-F5)/F4), then copy across rows to track trends over time. Add churn rate or growth rate columns alongside CRR for a fuller picture.
Example of using Excel to automate CRR (Image: Wall Street Prep)
3. What is a good customer retention rate?
In theory, a good retention rate is often 75% or above. 50–75% is healthy with room to improve. Below 50% is a red flag. Below 15% is critical.
3.1. Benchmarks across industries
Retention varies widely by industry (data by Statistia):
| Industry | Average CRR |
|---|---|
| Retail | 63% |
| Banking | 75% |
| Telecom | 78% |
| IT services | 81% |
| Insurance | 83% |
| Professional service | 84% |
| Media | 84% |
| eCommerce | 31% |
3.2. Average eCommerce customer retention rate
What is a good customer retention rate for eCommerce? It also varies by sectors. Average eCommerce CRR sits around 30–38%. High performers push above 50%.
By sector:
Fashion & apparel: 22–27%
Health & beauty: 25–30%
Food & beverage: 35–45%
Subscription boxes: 60–70%
3.3. Setting retention KPIs
How do you set KPIs for customer retention rate? Benchmarks are just reference points. Your own trend matters more.
Healthy signal: 3–5% CRR increase period-over-period
Red flag: >5% drop signals critical retention issues (according to HubSpot)
Example: If Q1 CRR is 20% (240 retained from 1,200), a 3% improvement target means retaining 276 customers in Q2. Set 240 as your floor — if you drop below it, investigate immediately.
Bottom line: Don't chase industry averages. Track your own performance and aim for steady, consistent improvement.
4. Other key customer retention metrics to track
Customer retention rate is just one part of the overall customer retention picture. While CRR tells you how many customers you keep, it doesn't explain how often they return, how much revenue they generate, or why they leave.
4.1. Customer churn rate
Customer churn rate is the percentage of customers who stop doing business with your company during a specific time frame. It shows how many customers you lose. In simple words, churn rate is the inverse metric of customer retention rate.
Formula:
The formula for customer churn rate
You can also calculate churn rate as: Churn rate = 100% - CRR
In which:
Number of customers lost: The total of customers who are no longer active by the end of the period, calculated as customers at start minus customers retained. The customer retained is determined by subtracting newly acquired customers from the total customers at the end of the period.
Number of customers at start: The total number of customers you have on the first day of the measurement period.
Example:
You want to calculate the churn rate for Q1. On the first day of the quarter, your business has 1,200 customers.
Number of customers at start: 1,200
Number of customers gained: 100
Number of customers at the end of the quarter: 900
=> Number of customers retained: 900 - 100 = 800 (existing customers from the original cohort)
=> Number of customers lost: 1200 - 800 = 400
Churn rate: (Number of customers lost/Number of customers at start) x 100% = (400/1,200) x 100% = 33%
In practice, businesses often track CRR and churn rate together. Because churn signals poor performance, your goal is to reduce churn as much as possible. Even a small reduction in churn can be meaningful to customer retention marketing efforts, customer acquisition costs (CAC), customer lifetime value (CLV), and revenue growth.
4.2. Other metrics worth knowing
Beyond CRR and churn rate, these metrics give you a fuller picture of retention performance:
Repeat Purchase Rate (RPR) measures how many customers buy more than once within a period. Unlike CRR, RPR includes new customers — it tracks buying frequency, not just whether original customers stayed.
Revenue Retention (NRR/GRR) measures how much revenue you keep from existing customers, factoring in upsells, downgrades, and churn. A Net Revenue Retention above 100% means your existing customers are spending more over time — even without new acquisitions.
Customer Lifetime Value (CLV) estimates total revenue from an average customer across the entire relationship. Low CLV often points to short retention periods or weak repeat purchase behavior — both connected to CRR.
Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT) measure sentiment rather than behavior, but they help predict churn risk before it shows up in your retention numbers.
Each metric answers a different question. CRR tells you how many customers stay. These tell you how often they buy, how much they spend, and how likely they are to leave.
5. Final thoughts
So, there you have it, the ultimate customer retention rate formula and a practical, step-by-step guide on how to calculate it with detailed examples. You now understand what CRR means, how to measure it correctly, and which supporting metrics help you interpret retention performance. We believe that you can approach retention analysis with confidence.
Keep in mind that CRR improvement does not happen overnight. It's about consistency and incremental, period-over-period progress. Focus on your own growth and trust the process, and it will all pay off.
Ready to improve your retention? Start with proven tactics like loyalty programs or cashback rewards to give customers a reason to come back. Tools like Koin Cashback & Store Credit can help automate these incentives on your Shopify store.
FAQs
1. What is the KPI for customer retention?
Key Performance Indicators (KPIs) for customer retention are metrics that measure how well a business keeps its existing customers over time. They include 4 core metrics: Customer Retention Rate (CRR), churn rate, customer lifetime value (CLV), and Net Promoter Scores.
2. Is 80% a good retention rate?
Yes, a customer retention rate of 80% is good for most businesses. It is higher than the common 75% benchmark and close to the higher end of industry benchmarks (around 84%). In eCommerce, 80% CRR means your business is doing exceptionally well.
3. What is the formula for customer retention rate in Excel?
The customer retention rate formula is:
[(Ending customers - New customers) / Starting customers)] × 100
In Excel, you just have to assign the variables to the respective cells. If your starting customers are in cell A1, ending customers in A2, and new customers in A3, the formula is = ((A2-A3)/A1)*100.
4. What is CRR in CRM?
In Customer Relationship Management (CRM), CRR is short for Customer Retention Rate. CRR in CRM shows how many existing customers remain active over a given period. High CRR means strong customer loyalty, satisfaction, and long-term relationships.
5. What are the 3 R's of customer retention?
The 3 R's of customer retention are Retention (keeping customers), Related Sales (expanding revenue from existing customers), and Referrals (customers bringing in new customers). It can sometimes refer to Rewards, Relevance, and Recognition. This framework helps businesses strengthen customer loyalty.
6. What are the 5 C's of retention?
The 5 C's are more commonly used for customer loyalty and experience than for general retention. This framework includes:
Connection (building relationships)
Convenience (making engagement easy)
Customer Experience (seamless interactions)
Community (sense of belonging)
Compensation (rewarding repeat business)
7. How often should I calculate the customer retention rate?
It depends. Most companies track CRR monthly or quarterly. A rule of thumb is that the shorter your purchase cycle, the more frequently you should measure it. Contract-based businesses with yearly renewals should calculate retention annually.
