Retention Rate is the percentage of users, customers, or employees who continue using a product, service, or remain engaged with a company over a specific period. It is a key metric in SaaS, mobile apps, e-commerce, and HR to measure loyalty and long-term engagement.

How Retention Rate Is Calculated

$$ Retention\ Rate = \left( \frac{\text{Number of Users at End of Period} - \text{New Users Acquired}}{\text{Users at Start of Period}} \right) \times 100 $$

For example, if a company starts with 1,000 users, gains 300 new users, and ends with 900 users, the retention rate is:

$$ Retention\ Rate = \left( \frac{900 - 300}{1000} \right) \times 100 = 60\% $$

So, the retention rate is 60%.

Common Use Cases

1. Customer Retention Rate (CRR)
   • Measures how many customers continue using a product/service over time.
   • Used in SaaS, subscription services, and e-commerce.
2. User Retention Rate (Mobile Apps & Websites)
   • Tracks how many users return after first use.
   • Often measured as Day 1, Day 7, and Day 30 Retention.
3. Employee Retention Rate
   • Measures how many employees stay in a company over a period.
   • Important for HR and organizational health.

Why Retention Rate Matters

• Predicts business stability & growth – High retention means a loyal customer base.
• Lowers acquisition costs – Retaining customers is cheaper than acquiring new ones.
• Indicates product satisfaction – If retention is low, users may not find value.
• Affects revenue – Especially in SaaS and subscription businesses.