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Customer retention rate

Customer retention rate is the share of a store's customers at the start of a period who are still active customers at the end of it.

How it works

A subscriber leaves by cancelling. A store’s customer cancels nothing: they stop ordering. So the store first decides who counts as active, for example anyone who has ordered in the last 12 months.

The window sets the figure. The same customers give a different rate with a six-month window than with a twelve-month one. A window shorter than a year can mix seasonality with real loss. There is no single benchmark: it depends on the category, how often people buy it and the window.

The calculation needs the store’s own orders with a customer identifier, such as an email address. Customer retention rate for stores without subscriptions explains how to choose the window and how retention and churn move together. Customer retention for online stores covers what to do with the result.

Formula

(Customers at the end of the period − new customers won during it) ÷ customers at the start × 100

Example

Example store, not client data.

On 1 January the tableware shop has 2,000 customers who ordered last year. During the year, 2,300 customers order: 1,400 for the first time and 900 from last year’s 2,000. Retention rate = (2,300 − 1,400) ÷ 2,000 × 100 = 45%.

Not to be confused with

TermHow it differs
Repeat purchase rateThe share of a period’s customers who ordered more than once in it. If 460 of the 2,300 ordered twice or more, it is 20%, counted on this year’s customers, not last year’s.
Churn rateThe other side of the same customers: 1,100 of the 2,000 did not order again, which is 55%. The two add up to 100% only with the same starting customers and window.
Customer retention goalA Google Ads lifecycle goal that gives purchases by lapsed customers extra conversion value. It steers bidding and measures nothing.

Right and wrong readings

  • Wrong: “GA4 shows 35% returning users, so our retention is 35%.” Right: in GA4 a returning user has had at least one previous session. That is a visit, not an order.
  • Wrong: “Retention fell from last year, so customers are leaving faster.” Right: first check that both years use the same window and period length. A different window changes the rate with no change in behaviour.

Sources