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Formula
Customer Retention Rate = (Number of Customers at End - Number of New Customers) / Number of Customers at Start * 100
Know your metric
Importance of
Customer Retention Rate
Satisfaction and Loyalty Indicator
Indicates how well the company retains customer interest and satisfaction.
Revenue Planning
Essential for forecasting and managing long-term revenue.
Growth Predictor
Can be a strong indicator of potential for future company growth.
Drawbacks of
Customer Retention Rate
Not Reflective of New Business
While important, high retention rates might distract from the need to attract new customers, potentially stunting growth.
Difficult to Improve
Improving customer retention can be challenging, requiring significant investments in customer service, quality, and experience.
Sensitive to Product Changes
Customer retention can be highly sensitive to changes in product offerings, pricing, or market conditions.
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