Customer Retention Vs Churn Rate – What to Measure?

Every company wants to keep its customers loyal and satisfied. But have you ever thought about how to measure success and track their loyalty?

Well, customer retention vs churn rate are the two most important metrics that tell you how well you’re taking care of your customers.

Customer retention is all about building long-term relationships and ensuring repeat business, whereas churn rate tracks the rate at which customers are leaving and where improvement is needed.

Balancing both is essential to expand your eCommerce business. And after all, retaining existing customers is as crucial as getting new ones to increase customer lifetime value.

But how do you know when to utilize which strategy? Worry not; we have got you covered!

Here in this blog, we will discuss:

• What customer retention and churn rate mean
• How to calculate them
• The key differences between them
• Why both are crucial for your business growth
• Tips for balancing both strategies effectively

By the end, you’ll know exactly how these metrics impact your success and how to utilize them to drive your growth to the next level.

But first, let’s start with a basic understanding of both metrics.

What is the Customer Retention Rate?

Customer retention rate (CRR) is a metric that measures the percentage of existing customers who continue to do business with you over a specific period. It indicates how successfully your company maintains relationships with customers after they make their initial purchase.

Customer satisfaction and loyalty are two of the most important indicators of how well an organization builds and maintains strong customer relationships.

A high Customer Retention Rate (CRR) suggests that your customers are not only satisfied with your products or services but are also loyal to your brand. This loyalty often translates into a higher Customer Lifetime Value (CLV), meaning each customer generates more revenue for your business over time.

To improve your CRR, it’s important to implement proven customer retention strategies for eCommerce growth that encourage repeat purchases and foster long-term loyalty.

What is the Churn Rate?

Churn rate is a metric that measures the percentage of customers who stop doing business with your company over a specific period. It gives you an idea of how well your business is keeping customers around. If your churn rate is high, it means you’re losing more customers.

A high churn rate is often a warning sign that something’s not working right. Whether it’s your service quality, the products you offer, the overall customer experience, or even your pricing—it could be anything that’s causing customers to walk away.

On the other hand, if your churn rate is low, it means you’re doing a great job at keeping your customers happy. This is key for long-term growth. Lower churn means more stable income, stronger customer loyalty, and more chances to grow, since your loyal customers will keep bringing in revenue over time.

Calculating Customer Retention & Churn Rate

You must calculate the churn and retention rates to measure how well you keep your customers. Here is the formula to calculate both with an example of how you can calculate:

# Calculating Customer Retention

The retention rate shows the percentage of customers who stayed with your business over a specific period.

Formula:

What Each Value Means:

• Customers at the End of the Period: Count how many customers you have at the end of the period.
• New Customers: Count how many new customers joined during that time (to avoid counting them twice).
• Customers at the Start of the Period: The total number of customers you had initially.

For Example:

• Customers at the End of the Quarter: 550
• New Customers: 100
• Customers at the Start of the Quarter: 500

Retention Rate = [(550−100 ÷ 500)]x100 = 90%

This means you kept 90% of your customers during that quarter.

What is a Good Customer Retention Rate?

A higher retention rate typically indicates that the customers are happy and returning. What would count as a “good” retention rate will vary depending on the industry.

It is also essential to track Customer Lifetime Value (CLTV) and retention to observe how loyal customers impact your business.

Here are some Industry-specific retention rate benchmarks:

• SaaS (SMB): 93%-97% monthly retention
• SaaS (Enterprise): 98% or higher monthly retention
• Digital Media/Entertainment: 93% or higher monthly retention
• Telecommunications: Around 70% retention
• Ecommerce: 20%-30% retention

A company with high retention but low CLTV may not be worth as much as one with lower retention but higher CLTV.

Also, track retention for different periods (monthly, quarterly, or yearly) to see how loyalty shifts.

# Calculating Churn Rate

The customer churn formula shows the percentage of customers you lost during a specific period.

Formula:

What Each Value Means:

• Customers Lost During the Period: Count how many customers cancelled or stopped buying from you.
• Customers at the Start of the Period: The total number of customers you had initially.

For Example:

• Customers at the Start of the Month: 1,000
• Customers Lost in the Month: 50

Churn Rate = (50÷1000) x 100 = 5%

So, 5% of your customers left during that month.

What is a Good Churn Rate?

A lower churn rate is better because more customers are sticking around. But what a “good” churn rate is depends on your industry and business.

To determine if yours is good, compare it to past results, competitors and industry averages. Combine it with metrics like revenue churn and Customer Lifetime Value tracking for a clearer picture. Explore proven ways to increase CLTV for eCommerce for long-term growth.

Here are some Industry-specific churn rate benchmarks:

• SaaS: 3%-7% monthly churn for small businesses, around 1% for larger ones.
• Telecom: About 31% churn.
• Digital Media: 6%-7% monthly churn.
• Ecommerce: Instead of churn, ecommerce tracks repeat customer rates. A good range is 20%-30%.

Some key factors that affect churn rate:

• Industry: Different industries have different expectations. For example, subscription services tend to have higher churn than software companies.
• Business Model: Subscription-based businesses usually face higher churn than companies selling one-time products.
• Customer Type: Churn can vary depending on whether you serve small or large enterprises.
• Growth Stage: New businesses often experience higher churn while figuring things out.

Now that we understand how you calculate both of these metrics and what makes a good customer retention vs churn rate. It is time to understand the key difference between them.

Customer Retention Vs Churn Rate: What are the Key Differences?

People often confuse over customer churn and retention rates as they are closely linked. Still, they measure different aspects of customer behaviour. Here, we’ve added a table that presents the key difference between them:

Aspect	Customer Retention	Churn Rate
Definition	Measures the percentage of customers who keep using your product or service over time.	Measures the percentage of customers who stop using your product or service over time.
Focus Area	Focus on keeping your existing customers happy and loyal.	Focus on how many customers leave and why they leave.
Calculation	[(Customers at End – New Customers) ÷ Customers at Start] × 100	(Customers Lost ÷ Customers at Start of Period) × 100
Interpretation	High retention means happy, loyal customers who keep coming back.	High churn means more customers are leaving, possibly due to dissatisfaction or better offers elsewhere.
Impact	High retention leads to more loyal customers, higher lifetime value (CLV), and steady growth.	High churn causes revenue loss and increases customer acquisition costs.
Goal	To increase the percentage of customers who stay loyal.	To decrease the percentage of customers who leave.
Relationship	High retention rate means a low churn rate, and vice versa.	High churn rate usually means a low retention rate.
Time Period	Typically measured monthly, quarterly, or annually.	Typically measured monthly or quarterly.
Example	If you start with 500 customers and end with 450, your retention rate is 90%.	If you lose 50 customers out of 1,000 in a month, your churn rate is 5%.

So, we have covered the key differences between customer retention vs churn rate. But which one should you focus on?

The truth is, both are important! Retention rate is about keeping your current customers happy. However, the churn rate helps you understand how many customers are leaving and why.

When you track both, you get a complete picture of your customer base, giving you the insights to create more innovative growth strategies.

Now, let us examine how these both metrics are connected to each other.

How Are Customer Retention and Churn Rate Connected?

Customer retention vs churn rate are two closely linked metrics. Together, they tell you a lot about your customers’ loyalty and satisfaction. Understanding how they connect is key to improving your business.

# High Retention = Low Churn

When your retention rate is high, it means customers are coming back to your business time and time again. As a result, your churn rate—how many customers leave—is low. This usually means your customers are happy and find value in what you’re offering.

• For Ex: Imagine you own a local gym. If members of your gym keep renewing, the gym subscription shows your retention is high and churn is low, as fewer people are quitting. It means customers are happy and getting value from your service.

# High Churn = Low Retention

On the other hand, a high churn rate means a lot of customers are leaving, which usually means your retention rate is low. This indicates something isn’t working—whether it’s your product, service, or customer experience.

• For Ex:  Suppose you own an online clothing store. If customers buy once from your online store but never return, it could be due to a frustrating return process. This leads to high churn and low retention.

By tracking both retention and churn together, you can understand your customer base much better. Your main aim should be high retention and low churn. Which means your customers are happy, loyal, and sticking with you.

Now that you understand how retention and churn work together, let’s understand why both metrics matter for businesses.

Customer Retention Vs Churn Rate: Why Both Metrics Matter?

Below are some main reasons why businesses focus on both customer retention vs churn rate:

1. Gives a Clear Picture of Your Customer’s Health

First of all, customer health refers to how satisfied and engaged your customers are with your product or service, and whether they are likely to stay or leave.

When measured and considered together, retention rate and churn rate will help you figure out your customers’ health.

See, the retention rate shows the percentage of customers who continue purchasing from you over a specific period. And, a high retention rate generally indicates that your customers are finding value in what you offer, are satisfied with their experience, and see a reason to return. It’s a sign that your customer relationships are strong and that your business is meeting expectations.

On the other hand, the churn rate measures the percentage of customers who stop using your product or service during a given time frame. A high churn rate can be a warning sign that something isn’t working, whether it’s product performance, customer service, pricing, or competition.

It highlights potential dissatisfaction or unmet needs.

When you analyze both metrics together, you get a much clearer picture of how your business is performing in terms of customer experience.

• If the retention rate is higher & churn rate is lower, it suggests a healthy customer base.
• & If the retention rate is lower & churn rate is higher, you need to work on improvements.

2. Helps You Spot Problems Early

Identifying potential issues early is essential for the long-term success of your business.

Both customer retention vs churn rate are key metrics that can help you identify and address issues before they grow into major problems.

See, the customer retention shows how well your business is holding onto customers over time. A drop in retention signals that fewer customers are coming back, which indicates something is going wrong and needs to be fixed before it worsens. This could be due to a variety of reasons:

• Product issues
• Customer service problems
• Change in customer preferences
• Lack of Personalization

Churn rate, on the other hand, measures how fast customers are leaving your business. An increase in churn is a direct indicator that customers are leaving faster than you’re able to retain them. This could be due to a variety of factors, including:

• Failure to Deliver Promised Value
• Competitive Offerings
• Poor user experience
• Lack of engagement

The sooner you notice a rise in churn, the quicker you can take steps to fix the issues.

When you track both retention rate and churn rate, you gain valuable insights into where your business is struggling. A drop in retention combined with a rise in churn is a clear signal that improvements are needed. 

By addressing these early warning signs, you can prevent bigger problems from developing and keep your customer base strong.

3. Improves Your Customer Acquisition Strategy

A strong customer acquisition strategy begins with understanding what keeps your existing customers loyal and what makes them leave your brand.

Customer retention vs churn rate provides essential insights you need to make a strong acquisition strategy.

Where, customer retention helps you understand what’s working for your customers. Whether it’s your excellent customer support, high-quality products, or a seamless experience. Once you know what keeps them coming back, you can add these qualities in your acquisition strategies to attract new customers who value the same things.

Churn rate, on the other hand, shows you where things might be going wrong. If more customers are leaving, it’s a sign that something isn’t working, which you can fix to ensure a better experience while acquiring new customers.

4. Boost Customer Lifetime Value

Customer Lifetime Value (CLV) is a key metric that reflects the total revenue a customer is expected to generate during their relationship with your business.

By analyzing both customer retention vs churn rate,  you can get a clearer understanding of how to maximize CLV.

Retention rate shows how well your business is keeping customers. A high retention rate means customers are happy with your product or service and keep coming back for more. This creates more chances for repeat sales and leads to a higher Customer Lifetime Value (CLV).

On the other hand, churn rate helps you see if something is affecting your customer relationships. If your churn rate is high, it means customers are leaving faster than you’re able to keep them. This reduces their overall CLV. 

High churn is usually a sign that something isn’t working well—like poor customer service, a product that no longer meets customer needs, or unmet expectations.

• If your business has high retention, you’re already on track to increase CLV; focus on maintaining and strengthening customer relationships.
• If retention is low, identify and fix the issues, then work on acquiring and retaining new customers to improve overall CLV.

5. Data-Driven Decisions

Making data-driven decisions is key to staying competitive.

Both customer retention vs churn rate provide valuable insights that help improve customer experiences and boost overall business success.

Where, customer retention shows you what’s working well. A high retention rate means customers are happy and loyal, indicating that your product, service, or experience is meeting their needs. This gives you a clear signal to keep doing more of what’s working and build on it.

Churn rate, on the other hand, highlights areas needing improvement. A high churn rate means customers are leaving, often because something isn’t quite right—whether it’s with your product, customer service, or experience. Once you know where the problems are, you can take action to make things better and keep customers from leaving.

By combining insights from both retention and churn, you get a clearer picture of your business. This data lets you make smarter, more informed decisions to enhance the customer experience and stand out from the competition.

6. Drives Long-term Growth

For any business, long-term growth relies on a stable, loyal customer base.

Customer retention vs churn rate are both essential for understanding how well your business can achieve sustained growth.

Customer retention is a direct contributor to long-term success. When customers keep coming back, your business enjoys steady, repeat revenue. The longer customers stay, the more likely they are to make additional purchases, which increases their lifetime value to your business.

On the other hand, churn rate can hold back growth. A high churn rate means you’re losing customers faster. If customers are leaving quickly, you’ll have to keep spending on new customer acquisition instead of focusing on growing your existing customer base. 

Reducing churn is key to stabilizing your customer base and making growth more predictable. Without addressing churn, there will always be a gap where customers leave, no matter how strong your churn reduction strategies and acquisition strategies are.

By improving retention and lowering churn, you can build a solid foundation for long-term success. This leads to more consistent revenue, better planning, and a more sustainable growth path.

7. Optimize Marketing and Sales Efforts

To improve your marketing and sales results, you need to understand what is working and what’s not. So that you can optimize your efforts and get max out of it.

Both customer retention and churn rate metrics provide valuable insights into how well you’re connecting with customers and where you can improve.

Customer retention shows you what works. When customers stick around, it means they value what you offer, whether it’s your product, service, or overall experience. This insight helps you shape your marketing and sales efforts to emphasize the things that keep customers happy. 

Churn rate, on the other hand, shows where things may need improvement. If churn is high, it’s a sign that customers are leaving, and you need to understand why. Whether it’s due to product issues, marketing campaigns, poor service, or unmet expectations, this data helps you identify areas to refine. By addressing these issues, you can improve your sales approach and retain more customers in the long run.

By tracking both retention and churn, you can fine-tune your marketing and sales efforts to better target the right customers and keep them engaged.

8. Better Financial Planning

Having solid financial planning helps businesses ensure a stable and predictable revenue stream. 

But how can you build it? Well, customer retention and churn rate are critical factors in achieving that.

Customer retention helps create a predictable revenue stream. When customers stay loyal and continue purchasing, your income becomes more consistent, allowing for clearer revenue forecasting. High ecommerce retention metrics means you’re likely to have repeat sales, which gives you a strong foundation for planning growth, investments, and resources.

Churn Rate, on the other hand, creates uncertainty. A high churn rate means customers are leaving faster than you’re bringing in new ones, which leads to unstable revenue. If you lose too many customers, you’ll need to spend more on marketing and sales to replace them, which makes your income harder to predict and complicates your financial planning.

With a solid focus on retention and churn, your business will have the predictable income it needs to thrive and scale, making financial planning a lot easier.

So, we’ve looked at why both retention and churn matter, let’s explore challenges that come with both metrics.

Challenges with Customer Retention

Here are some common challenges with customer retention:

1. Customer Expectations

Today’s eCommerce customers expect personalized shopping experiences, same-day shipping options, and seamless omnichannel interactions. When merchants fail to meet these expectations, customers quickly switch to competitors who can deliver these experiences.

Solution: Listen to what the customer tells you and adapt to suit their needs. Catch up with your customers regularly to ensure they are happy and getting what they require.

2. Market Competition

In today’s competitive market, customers have endless options to choose from, and they won’t hesitate to switch if they find something better, cheaper, or more convenient elsewhere. The rapid growth of online businesses has made it essential to differentiate yourself from the competition.

Solution: Stand out by providing something unique. You need to retain loyal customers with rewards, good service, or special deals your competition is not offering.

3. Accurate Measurement

Data accuracy matters the most. Without accurate data on customer behavior, you won’t be able to measure the success of your efforts, identify trends or opportunities to enhance their experience.

Solution: Monitor your progress using tools like surveys or retention levels. It makes you aware of where to make changes to keep customers happy.

4. Poor Customer Service

Bad customer service is one of the quickest ways to lose loyal customers. If your customers consistently have poor service experiences. Whether through long wait times, unhelpful staff, or unresolved issues—they’ll likely look elsewhere.

Solution: Provide quick, respectful, and attentive customer service. Train your employees to resolve problems quickly and be polite. Excellent customer service will keep customers around.

5. Lack of Personalization

Customers want to feel like they matter. If your business isn’t offering personalized experiences—whether that’s recommending products they actually want or sending them offers that match their interests—they’re more likely to leave for a competitor who makes them feel valued.

Solution: Use customer data to tailor your services. Tailor emails, promotions, and recommendations so customers feel valued and more engaged.

Challenges with Churn Rate

Here are some common challenges with customer churn:

1. Market Dynamics and Changing Trends

Customer preferences change over time. What worked for them last year may not be what they want today. If your business doesn’t keep up with new trends, customers might leave for a competitor who offers something more in line with what they need.

Solution: Stay updated on market trends and adapt frequently. Ask for customer feedback to see what they like and adjust your offerings to their shifting needs.

2. Failure to Address Customer Pain Points

When customers face issues with your product, service, or experience and these issues aren’t resolved, they’ll likely leave. If their problems go unheard or unresolved,  customers will seek out alternatives if they feel their concerns aren’t being heard or resolved.

Solution: Know your customers’ most significant issues and do your best to resolve them. Stay in touch with customers to learn about their problems and offer solutions that make them smile.

3. Competition

The marketplace is full of options, and customers are always looking for better deals, better service, or more value. If your competitors offer better prices, features, or a better experience, customers might switch to them, increasing your churn rate.

Solution: Provide something your competition can’t. Whether it’s exceptional customer service, proprietary technology, or customized experiences, ensure your company is different.

4. Inadequate Data Analysis

If you don’t have clear, accurate data on why customers are leaving, it’s impossible to fix the root causes of churn. Without the right data and clear insights, it’s hard to figure out why customers are leaving leading to ineffective solutions. It’s crucial to track and analyze key metrics like customer behavior, satisfaction levels, and churn rate.

Solution: Use data tools to monitor churn rate and look for patterns. Study customer behaviour, feedback, and other metrics to know why customers leave. So that you can repair things before they get worse.

5. Weak Onboarding Process

First impressions matter, and a bad onboarding experience can cost you a lot of customers. If the first experience customers have with your product is difficult or unclear, they may give up and leave early. A confusing onboarding process can make customers lose confidence before they even see the full value of your product.

Solution: Create a simple, welcoming onboarding process. Provide step-by-step directions, training, or support on the first interactions to give customers the most value from your product or service.

Top 5 Ways to Improve Customer Retention Rate

These are the top five ways to improve retention rate:

1. Personalized Experiences

People enjoy being special. By making your customer interactions personal, you are letting them know that you care about them as an individual. It is as easy as calling them by name, remembering what they bought or offering products they would be interested in based on their interest.

Personalized experiences make the consumers feel understood and valued, which builds loyalty and trust. The more you show that you care, the more they will return.

2. Reward Loyalty

Loyal customers should feel recognized and appreciated. Offering rewards, like discounts, special offers, or points for future purchases, is a great way to show gratitude. Providing incentives for loyalty encourages customers to return because they recognize they are receiving something extra for staying with your brand.

It is about offering discounts and making them feel part of something special.

3. Prioritize Quick Turnarounds

Nobody wishes to wait in today’s crowded world. It is crucial to answer customer queries or complaints to keep them satisfied quickly. Even though the issue may not be solved immediately, acknowledging their concern and giving them an estimated time frame can make a big difference.

The quick response indicates that you value their time and are serious about fixing problems. Customers will value the quickness and be more likely to be loyal to your company.

4. Create a strong community

Customers like to be part of a group or community. Having a strong community for your brand gives a sense of belonging. You can begin this by encouraging involvement on social media, hosting events (both online and offline), or creating forums through which customers can engage.

When you make your customers feel they belong to your company and fellow customers, they will stick to you because they are part of something bigger than a business deal.

5. Empower Your Customer Support Team

Your customer service representatives are your brand face when things go wrong. You must equip them with the tools, training, and power to resolve problems quickly and efficiently. When your team is confident in their ability to help customers, it leads to enhanced service and better relations.

Loyal customers will be those who are treated well by customer service. Ensure your staff can do more than the call of duty to deliver what the customer wants.

Top 5 Ways to Reduce Churn Rate

These are the top five ways to reduce your churn rate:

1. Improve Customer Onboarding

First impressions matter, especially when bringing on new customers. You want them to be comfortable and confident right away. A smooth onboarding experience with clear guides, tutorials, and personal support sets relations on the right course.

If customers know how to utilize your product and realize it is worth it from the beginning, they will likely use it in the long term.

2. Analyze Why Churn Occurs

When customers leave, you need to understand why they leave. Don’t let them go without asking a question. A quick call, email, or survey can give valuable feedback on what did not go right—a product failure, poor service, or unmet expectations.

This is valuable feedback since it lets you fix things that may push people away and prevent future churn.

3. Proactive Customer Engagement

Customer engagement is responding to problems when they occur and continuously connecting to your clients. Scheduled check-ins, feature updates, or tips on using your product most effectively keep them interested and respected.

Customers who trust you care and are willing to assist are unlikely to look elsewhere.

4. Pay Attention to Complaints and Resolve

Complaints are a natural part of any business, but how you handle them can make or break a relationship. When a customer calls you with an issue, take it seriously and resolve it immediately. An immediate, thoughtful response shows that you care and can turn a negative into a positive.

Most customers will remain loyal if they are heard and cared for, even if initially something goes wrong.

5. Offer Long-Term Contracts

Offering extended contracts can retain customers with your product in the long term. It gives them more time to enjoy its benefits, and they will likely stick around. You also respect their loyalty by rewarding them with incentives like discounts or treating them, especially for long-term participation, so they will not defect to a competitor.

By implementing these strategies, you can take significant steps toward reducing churn and increasing retention.

Now, let’s look at the key metrics that help track and support your retention and churn efforts.

Supporting Metrics That Complement Retention and Churn Analysis

These are some key metrics that businesses use to track customer retention and churn rate:

1. Revenue Churn Rate

The revenue churn rate tells you how much money you lose when customers leave. It is essential because it shows the financial impact of losing customers. If your high-paying clients are leaving, you need to focus on keeping them to protect your company’s revenues.

How does it support calculation of retention and churn?

Revenue churn shows how much money you lose when customers, especially high-paying ones, leave. Tracking it helps you spot when valuable customers are leaving, allowing you to take action to keep them. Reducing revenue churn helps protect your income and build customer loyalty, while also minimizing the impact of churn.

2. Customer Lifetime Value (CLTV)

Customer Lifetime Value (CLTV) indicates the amount a customer will spend at your company in the long term. It makes you realize the long-term worth of each customer. Tracking this metric lets you know if spending money on keeping existing customers is better than continuously acquiring new ones.

How does it support calculation of retention and churn?

CLTV tells you how much a customer is worth over time. A higher CLTV means customers are sticking around longer and spending more. Monitoring CLTV helps you see when customers are leaving early, allowing you to improve retention strategies and reduce churn by boosting long-term customer value.

3. Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the cost of gaining a new customer, including all marketing and sales expenses. It is essential to compare CLTV and CAC to avoid overpaying to get customers. When your CAC is excessively high, it will eat your profits in the long run.

How does it support calculation of retention and churn?

CAC shows how much it costs to acquire a new customer. If you’re spending a lot to acquire customers but they leave quickly, it hurts your profits. By focusing on retention, you can make your acquisition efforts more worthwhile, reduce churn, lower costs, and build a more loyal customer base.

CAC shows how much it costs to acquire a new customer. If you’re spending a lot to acquire customers but they leave quickly, it hurts your profits. By focusing on retention, you can lower your customer acquisition cost, make your acquisition efforts more worthwhile, reduce churn, and build a more loyal customer base.

4. Net Promoter Score (NPS)

Net Promoter Score (NPS) measures customers’ satisfaction and whether they would recommend your business to others. High NPS means loyal customers, which means repeat business and low churn. It will tell you what customers think about your company and where you can improve.

How does it support calculation of retention and churn?

NPS measures how likely customers are to recommend your business. A high NPS means strong loyalty and lower churn risk. Regularly tracking NPS helps you identify any issues early, so you can improve retention and reduce churn by addressing customer concerns.

5. Engagement Metrics

Engagement metrics track how often users use your product, for how long, and which features are used most. The longer they interact, the more they are likely to remain loyal. Tracking these numbers lets you know what aspects of your product are popular and what areas need fixing.

How does it support calculation of retention and churn?

Engagement metrics track how often customers use your product or service. High engagement usually means customers are likely to stay loyal, while low engagement suggests they may leave soon. By watching engagement, you can find at-risk customers and take steps to prevent churn and improve retention.

6. Customer Support Tickets

Customer support tickets can show whether your product or service is creating issues for customers or not. If many customers complain about the same issue, then it is a red flag that you may need to improve. Resolving these issues quickly helps prevent churn.

How does it support calculation of retention and churn?

Support tickets show the problems customers are facing. A high number of recurring issues can lead to frustration and churn. Addressing these problems quickly improves satisfaction, reduces churn, and boosts retention by keeping customers happy.

7. Product Return Rate

Monitoring return product rates is crucial for those companies that sell physical products. It usually indicates customers are not satisfied with their purchase. You should understand why products are being returned so you can fix issues, increase customer satisfaction, and decrease the chances of losing customers.

How does it support calculation of retention and churn?

A high return rate often signals that customers are dissatisfied with your product. By analyzing why customers are returning items, you can resolve issues early and improve the customer experience. Fewer returns lead to happier customers and better retention, while reducing the risk of churn.

8. Retention Over Time 

This metric shows how long your customers continue to buy from your business. It helps you see if they remain loyal or leave in a rush. The more time customers spend around, the more they will pay. Keeping an eye on this lets you see if you are making customers happy and your business is growing steadily.

How does it support calculation of retention and churn?

Retention over time tracks how long customers stay with you. Strong retention means your efforts are working, and customers are loyal, which results in lower churn. Monitoring this helps you see if your strategies are reducing churn and building a more stable customer base.

Conclusion

Both Customer Retention Vs Churn Rate are the two sides of the same coin.

No matter how many new customers you acquire, your business could struggle if you can not retain them and reduce the churn rate.

So, you do not have to choose between focusing on retention or churn, you need to balance both based on where your business is at. A good mix of both will lead to long-term success.

We hope this blog helps you understand how retention and churn impact your business and how to keep the right balance to grow and succeed.

Moreover, if you’re also struggling with a poor conversion rate and want to generate better revenue, our CRO experts can guide you the best. Book Your Free Consultation Call today!

Customer Retention Vs Churn Rate – FAQs

1. What is the difference between churn rate and retention rate?

Churn rate is the percentage of customers you lose over a specific period, while retention rate is the percentage of customers you keep.

2. Why is it essential to monitor churn and retention rates?

Tracking both helps you get a complete picture of customer behaviour. You can see where you are doing well and where to improve to keep customers happy and grow your business.

3. What impact do churn rate and retention rate have on revenue?

A high churn rate means losing customers, which can hurt your revenue. On the other hand, a high retention rate leads to steady income, as loyal customers keep coming back.

4. How often should companies monitor their churn and retention rates?

Monitoring these rates regularly, monthly or quarterly, is a good idea. This way, you can spot trends early and take action before things get out of hand.

5. What are the common causes of a high churn rate?

Poor customer service, lack of engagement, unmet expectations, or intense competition often lead to high churn rates.

6. Is the customer retention rate the same as the churn rate?

No, they are opposites. Retention rate measures how many customers stay with you, while churn rate measures how many customers leave.

7. What is another name for churn rate?

The churn rate is also known as the attrition rate.

8. How can the churn rate be calculated from the retention rate?

Churn rate = 100% – retention rate. So, if your retention rate is 80%, your churn rate is 20%.