What is Retention Rate?
Definition
The percentage of subscribers who continue their subscription over a given period, calculated as the inverse of churn rate.
Understanding Retention Rate
Retention rate is the flip side of churn rate — if monthly churn is 5%, retention is 95%. High retention indicates customer satisfaction and product-market fit. For subscription businesses, improving retention by even 1-2% can dramatically impact revenue over time due to the compounding effect.
Retention strategies include excellent onboarding, regular feature updates, personalized experiences, and proactive customer success outreach. For consumers, services with high retention rates tend to be higher quality because they earn loyalty rather than relying on lock-in.
Related Terms
Churn Rate
The percentage of subscribers who cancel their subscription during a given time period, typically measured monthly or annually.
Lifetime Value
The total revenue a business expects to earn from a single customer account over the entire duration of their subscription relationship.
Engagement
The frequency and depth of a subscriber's interaction with a service, used as a key predictor of retention and expansion.