Loyalty Register glossary
Retention rate
The share of customers or members from a starting group who are still active at the end of a period, leaving out anyone who joined later.
Customer retention rate is the share of customers or members from a defined starting group who are still active at the end of a period. It shows whether a business or loyalty program keeps the people it already has, separately from how many new ones it signs up. A retention rate of 80% means that 8 in 10 of the starting group were still active at the end, and 2 in 10 were lost.
Updated · By Loyalty Register Editorial TeamRelated terms
What is the retention rate formula?
The common formula is: retention rate = ((E minus N) divided by S) x 100, where S is the number of customers at the start of the period, E the number at the end, and N the new customers gained during the period. In a hypothetical program with 10,000 active members on January 1, 11,500 on December 31 and 3,000 who joined during the year, retention is (11,500 minus 3,000) divided by 10,000, or 85%.
Subtracting N is the point: new members are left out, because including them hides losses. Tracking the starting cohort directly gives the same answer and is easier to audit.
What counts as “active”?
The formula only works with a fixed definition of active, such as at least one purchase in the last 90 days. Subscription businesses can count paying accounts, but most loyalty members never cancel; they simply stop buying, so activity is the only honest test. Starbucks, for example, reports its Rewards membership in 90-day active members, which makes the activity window explicit. Change the window and the rate changes, so keep it constant across reports.
Why does the period matter?
Retention compounds. In a hypothetical program that keeps 95% of its active members each month, about 54% of a starting cohort is still active after 12 months (0.95 multiplied by itself 12 times). At 90% a month, only about 28% remains. A monthly figure and an annual figure are not comparable, and a program that quotes only the more flattering one is not giving you the full picture.
What is a good customer retention rate?
There is no single benchmark. A grocery chain or coffee shop sees customers weekly and should expect higher retention than a furniture store or an airline program with occasional travelers. Compare your rate with your own past cohorts and with a control group of similar non-members, not with a cross-industry average.
How is it related to churn and what should you watch?
Churn is the other side of the same count: a 75% annual retention rate means 25% churn over the same window and definition. Retention connects directly to customer lifetime value, and members who leave tend to leave points behind, which later shows up as breakage. Report retention as a cohort table, not one headline number, because it usually differs by tenure, tier, channel and enrollment source. Watch for growth masking losses, and for late-year activity to keep a tier being counted as lasting retention.