Retention Rates

The term “retention rate” is used in a variety of fields, including marketing, investing, education, in the workplace and in clinical trials. Maintaining retention in each of these fields often results in a positive outcome for the overall organization or school, or pharmacological study.

In marketing, retention rate is used to count customers and track customer activity, irrespective of the number of transactions (or dollar value of those transactions) made by each customer. “Retention rate is the ratio of the number of retained customers to the number at risk. In contractual situations, it makes sense to discuss the number of customers currently under contract and the percentage retained when the contract period runs out.” This term should not be confused with growth (decline) in customer count.

Retention refers only to existing customers in contractual situations. “In non-contractual situations (such as catalog sales), it makes less sense to talk about the current number of customers, but instead to count the number of customers of a specified recency.” In a survey of nearly 200 senior marketing managers, 63 percent responded that they found the “retention rate” metric very useful.