How to measure and improve customer retention with 7 core metrics and KPIs

Tracking customer retention helps you grow your business by keeping customers happy and loyal. But without the right metrics and data, you won’t know how well you’re doing or see where improvements should be made to drive more success.

This guide shows you how to calculate seven popular retention metrics and key performance indicators (KPIs), plus why these metrics are important. 

With this valuable information, you can benchmark your performance and use data to make optimizations that increase retention—and improve ROI and new customer conversions in the process.

What are customer retention metrics?

Customer retention metrics measure how well your business retains customers and how satisfied those customers are throughout the entire customer journey. 

Quantitative metrics, like churn rate and Net Promoter Score® (NPS), give you numerical KPIs to track customer retention over time. 

Pairing them with qualitative data, like Contentsquare’s survey feedback and individual session replays, gives you deeper insight into why you are (or aren’t) retaining customers. 

7 customer retention metrics and KPIs to track for business growth

These seven customer retention metrics help you measure how well your company currently retains and satisfies customers. Pick two or three that align with your business goals and include a mix of sales data (e.g. how much customers spend) and feedback (e.g. customer comments) to make sure you’re both tracking retention and trying to improve it.

1. Customer retention rate (CRR)

Customer retention rate (CRR) is the percentage of customers who stick with a company over time. CRR is often used by subscription and service businesses like SaaS, banking, and telecom companies—the ecommerce equivalent is repeat purchase rate (see below!).

How to calculate customer retention rate: choose a timeframe (usually a month or year), subtract the number of new customers gained during that period from the total number at the end, divide the result by the number of customers at the start, and multiply by 100:

Customer retention rate = ((End number of customers - New customers gained) / Starting number of customers) x 100

For example, if you had 1,000 customers on Jan. 1 and 1,200 customers on Dec. 31, and gained 400 new customers throughout the year, your annual customer retention rate would be:

((1200 - 400) /1000) x 100 = 80%

What is a good customer retention rate?

Kit’s customer retention rate by cohort displayed in customer retention tool, Baremetrics

For SaaS companies, a monthly retention rate of 95% (representing 5% churn) is generally considered good. For reference, creator marketing platform Kit has a monthly retention rate of around 96%, and social media toolkit Buffer has a retention rate of around 95%.

A low retention rate could mean your customers have problems when purchasing from you or using your product. To find out what the specific issues are—and avoid losing revenue and reputation to churn—review qualitative customer insights from session replays, surveys, and voice of customer tools.

💡Pro tip: increase customer retention rate through personalization

Zoopla, a residential property app, used Contentsquare’s Journey Analysis to understand where personalization would have the biggest impact within their user portal.

An example of Contentsquare’s Journey Analysis tool

Zoopla’s head of analytics, Veronica, notes that personalization improves user experiences, which impacts retention:

2. Repeat purchase rate (RPR)

Repeat purchase rate (RPR), also known as repeat customer rate (RCR), is the percentage of existing customers who make an additional purchase during a specific period.

How to calculate repeat purchase rate: choose a timeframe, and divide the number of customers who purchased more than once by the total number of customers, then multiply by 100:

Repeat purchase rate = (Number of customers who made more than one purchase / Total number of customers) x 100

If you’re using an ecommerce platform like Shopify, you can usually view repeat customer rates in your sales dashboard.

The repeat customer rate chart in Shopify

What is a good repeat purchase rate?

According to customer data collected by ecommerce analytics platform Metrilo, the average repeat purchase rate across industries is 28.2%. Expect lower repeat purchase rates in industries with a lot of seasonality and higher rates for regular-use items like pet products or health supplements.

If your store, comparatively, gets significantly fewer repeat purchases, you need to uncover why to get things on the right track. Try adding a sitewide feedback widget with Contentsquare’s Voice of Customer tool to capture customers’ thoughts wherever they want to share them. 

Contentsquare’s feedback button lets users provide in-the-moment feedback while on your site

Remember: increasing repeat purchase rate increases the revenue you generate from every new customer you attract, too.

3. Customer churn rate

Customer churn rate, also known as user churn rate, is the percentage of customers who leave during a certain time period (usually one month or one year). Churn is typically used by SaaS and subscription businesses that have monthly or annual contracts with customers. 

How to calculate customer churn rate: specify a timeframe and divide the number of customers who left during the period by the total number of customers at the start, then multiply by 100:

Customer churn rate = (Number of customers who left / Total number of customers at start of period) x 100

For example, if you had 1,000 customers on Jan. 1, but 500 left before Dec. 31, your annual user churn rate is:

(500/1000) x 100 = 50%

What is a good customer churn rate?

For SaaS companies, a monthly customer churn rate of between 3% and 8% is considered good. For reference, Buffer has a monthly customer churn rate of around 5%.

Buffer’s monthly customer churn rate

💡Pro tip: reduce churn by learning why customers leave. 

The team at Hussle, a gym pass platform, sent a survey to users who canceled their subscriptions, simply asking: “why did you decide to cancel?”.

Luke Calton, Hussle’s Product Lead, grouped similar responses into themes and found that 26% of churning users were buying memberships from local gyms instead. The team then prioritized a new product feature and allowed users to purchase gym memberships directly through Hussle, leading to a reduction in churn and an increase in customer retention.

The survey question that increased customer retention for Hussle

4. Customer lifetime value (LTV)

Customer lifetime value (LTV or CLTV) is an estimate of the total value of a customer during their relationship with a company.

How to calculate customer lifetime value: for ecommerce, multiply the average order value by the average number of purchases and the average estimated customer lifespan (how long customers typically keep purchasing from you, not how long they might live!):

Customer lifetime value = Average order value x Average number of purchases x Average customer lifespan

For SaaS companies: divide the monthly average revenue per account (ARPA) by your user churn rate (see below). ARPA is monthly recurring revenue (MRR) divided by the total number of customer accounts.

What is a good customer lifetime value?

The higher your LTV, the better. If you’re working to improve retention, you should see LTV increasing over time. In SaaS, LTV is expected to be at least three times more than customer acquisition cost (CAC); i.e. your LTV:CAC ratio should ideally be 3:1 to ensure profitability.

Kit’s LTV over time

5. Customer satisfaction score (CSAT)

Customer satisfaction score (CSAT) is a measure of how satisfied a customer is with a product or service. CSAT surveys usually contain a simple 5-point scale or binary happy face/sad face option and are sent after a customer has received a product or used a service.

How to calculate customer satisfaction score: add up all the positive responses you receive (those with ‘satisfied’ or ‘very satisfied’ selected), divide by the number of survey respondents, and multiply by 100:

Customer satisfaction score = (Total positive scores / Number of respondents) x 100

What is a good customer satisfaction score?

If you ask a yes/no CSAT survey question, scores can reach 90% and above, and lower scores may mean you have urgent issues to fix (that’s why you always need to ask follow-up questions!). 

A 5-point survey will generate lower scores as you’ll also capture neutral responses. Survey your customers to create your own benchmark, and you’ll be able to track if satisfaction is increasing or decreasing over time and measure the impact of your optimizations.

6. Net Promoter Score® (NPS)

Net Promoter Score (NPS) is a numerical measurement of customer loyalty, satisfaction, and enthusiasm based on responses to the question: “On a scale from 0 to 10, how likely are you to recommend this product/company to a friend or colleague?”.

An example of a Contentsquare’s NPS survey

How to calculate Net Promoter Score: subtract the percentage of customers who answer with a 6 or lower (known as ‘detractors’) from the percentage of customers who score you a 9 or 10 (known as ‘promoters’).

Net Promoter Score = % promoters - % detractors

If you’re using Contentsquare Surveys to send out NPS surveys, it will automatically calculate your score so you can track it over time.

💡Pro tip: customers selecting 7 or 8 on the NPS survey are known as ‘passives’ and don’t count toward the score—but don’t ignore them! They are so close to becoming ‘promoters’ it’s worth reading their feedback and watch session replays to understand what you could do better/differently to win them over.

Use Contentsquare’s Session Replay to watch anonymized user recordings and understand what prevents passives from turning to promoters.

What is a good Net Promoter Score?

A Net Promoter Score can range from -100 to +100. But Fred Reichheld, the inventor of NPS, believes a good Net Promoter Score is 60 or more.

💡Pro tip: add an open-ended follow-up question to your NPS survey to find out the why behind customer ratings. 

Use survey logic to ask customers who give a score of 8 or below (your NPS detractors and passives) to tell you what went wrong. Group responses by theme and you’ll have a list of actionable ideas to work on to improve customer loyalty and retention.

7. Customer effort score (CES)

Customer effort score (CES) is a measure of how much effort a customer thinks it took to make a purchase or use a product or service. CES is typically collected on a scale of 1 to 5 or 1 to 7, with 1 being the most effort and 5 (or 7) being the least.

How to calculate customer effort score: total all the scores you receive and divide by the number of survey responses. 

Customer effort score = (Sum of responses / Number of responses) 

For example, the customer effort survey results below have a total score of 272 ((23 x 5) + (23 x 4) + (18 x 3) + (3 x 2) + (5 x 1)) from 72 respondents. So the CES is:

(272 / 72) = 3.78

Results from a customer effort survey

What is a good customer effort score?

Since CES scales differ between 1 to 5 or 1 to 7, there is no universal benchmark. However, the higher your CES is, the better. We suggest tracking your CES over time to see how it fluctuates.

Increase customer retention with data

The quantitative retention metrics above will help you benchmark and track how well you’re retaining customers. But to actually improve retention, you need to see (and hear) what’s really causing people to leave.

Start with Session Replay to see what customers see as they browse and Surveys to collect customer feedback, and you’ll soon have a list of optimizations to make to drive repeat purchases and turn casual shoppers into long-term fans of your brand.

Customer retention metrics FAQs

Net Promoter®, NPS®, NPS Prism®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., NICE Systems, Inc., and Fred Reichheld. Net Promoter ScoreSM and Net Promoter SystemSM are service marks of Bain & Company, Inc., NICE Systems, Inc., and Fred Reichheld.