You can't fix churn if you don't measure it. Many subscription businesses focus on growth, but overlook that it costs five to 25 times more to acquire a customer than it does to retain one. 

This guide breaks down how to measure customer retention with the right data, tools, and benchmarks. Discover what to track, the best methods to track it, and how to leverage those insights to your advantage.

What is customer retention?

Customer retention is the ability to keep customers engaged over time by measuring how many continue using a product or service rather than canceling or leaving. 

  • Retention vs. acquisition

Customer acquisition focuses on bringing in new users, but retention is often more cost-effective and more valuable in the long term. 

  • Retention signals

You can measure retention by tracking customer actions. If customers renew their subscriptions on time, log in often, continue paying for their plans, and make additional purchases within a billing cycle, they are likely to stay. If any of these behaviors decline, it signals a risk of churn, and you should take immediate action to address it.

  • Key retention touchpoints

Retention hinges on effectively managing critical moments throughout the customer journey. It begins with onboarding, where demonstrating value early is essential. From there, success relies on delivering a product that is reliable, meets expectations, and consistently enhances the customer experience. When billing or account issues come up, fast and accurate resolution helps prevent cancellations. Targeted offers and direct communication keep subscribers active and reduce the risk of churn.

Explore even more retention trends in Recurly’s State of Subscriptions report.

Why measuring customer retention is important

When retention is low, revenue becomes unstable, acquisition costs rise, and growth slows. Measuring retention shows which customers stay, why they stay, and how to keep them longer, leading to higher renewal rates, and more recurring revenue.

  • Reduces customer churn

Retention metrics show why customers leave. This insight helps businesses address common causes of churn and prevent similar losses in the future.

  • Makes revenue more predictable

Higher retention leads to a more reliable revenue stream. In subscription models, consistent renewals make it easier to forecast and plan.

  • Improves customer lifetime value (LTV)

Long-term customers have more opportunities to upgrade, add services, and make repeat purchases. Measuring retention helps identify which customer segments and behaviors contribute most to lifetime value.

  • Informs marketing and sales strategies

Knowing which customer segments renew more often, stay longer, and spend more helps marketing and sales teams refine targeting, adjust messaging, and prioritize channels that attract similar high-value customers.

  • Helps improve customer experience (CX)

Retention data helps teams pinpoint where users drop off during onboarding, so teams can simplify core tasks in the product, and fix friction points that cause churn.

  • Identifies customer pain points

Retention analysis shows where users run into problems, like failed payments, confusing account settings, or poor mobile performance. These insights help teams fix specific issues that lead to cancellations.

  • Increases profitability

A Harvard Business Review study found that increasing retention by just 5% can grow profits up to 95%. Keeping customers longer directly impacts the bottom line.

Important customer retention metrics

Customer retention metrics track how long subscribers stay, how often they cancel, and how much revenue they generate over time. These data points help teams reduce churn and increase recurring revenue. As highlighted in Recurly’s 11 key subscription business metrics, knowing what to measure is critical for making fast, informed decisions. 

Customer retention rate (CRR)

The percentage of customers a company retains over a given period.

  • Formula: CRR = ((E−N​)/S) × 100 

  • Where:

    • E = Number of customers at the end of the period

    • N = Number of new customers acquired

    • S = Number of customers at the start of the period

  • Or, consider a better way to calculate customer churn.

  • Industry benchmarks: Retention benchmarks vary, but enterprise SaaS companies often target retention rates above 85%, while smaller SaaS businesses may range between 70% and 80%

  • How to improve CRR: Improve onboarding, customer support, and engagement strategies

Customer churn rate

The percentage of customers lost during a period.

  • Example calculation: If 50 out of 1,000 customers leave, churn rate = 5%.

    • Common causes of churn: Poor customer experience, lack of engagement, and pricing issues

    • How to reduce churn: Proactive customer service, personalized outreach, and incentive programs

    • For a deeper breakdown, see how to calculate churn rate and see real-world examples

Customer lifetime value (CLV)

The total revenue expected from a customer over their lifetime with a business.

  • Formula: CLV = (Average Purchase Value × Purchase Frequency) × Customer Lifespan

  • Why CLV matters: Helps businesses allocate marketing spend and prioritize high-value customers.

  • Ways to increase CLV: Upselling, cross-selling, loyalty programs, and excellent customer service.

Repeat purchase rate (RPR)

The percentage of customers who make more than one purchase.

  • Importance: Measures customer loyalty and brand strength.

  • Improvement strategies: Personalized recommendations, email marketing, and retargeting.

Net promoter score (NPS)

A survey-based metric that measures customer satisfaction and the likelihood of a customer recommending your business.

  • Scale: Ranges from -100 to 100 based on responses to: “How likely are you to recommend us?”

  • Categories:

    • Promoters (9-10): Highly satisfied, likely to refer others.

    • Passives (7-8): Neutral customers.

    • Detractors (0-6): Unhappy customers.

  • How to improve NPS: Address customer concerns, improve service, and engage with detractors.

The process of measuring customer retention

You can measure customer retention by tracking active users over time, calculating some of the important metrics discussed above, such as churn and retention rate, and analyzing behavior patterns at each stage of the subscription lifecycle. This helps pinpoint when cancellations happen and what drives customers to stay subscribed longer.

  • Define the measurement period

Choose a time frame that matches your billing cycle and customer behavior. Most subscription businesses measure retention monthly to monitor short-term performance and spot early trends.

  • Collect customer data

Track how many customers joined, stayed, or canceled during the selected period. Use CRM platforms, product analytics tools, and cancellation surveys to collect accurate, actionable data.

  • Calculate retention metrics

Apply formulas to calculate customer retention rate, churn rate, customer lifetime value (CLV), repeat purchase rate (RPR), and net promoter score (NPS).

  • Analyze and compare results

Compare your metrics over time and against industry benchmarks. Look for patterns in when cancellations occur, how long customers stay, and what behaviors are linked to higher retention.

  • Apply data to retention strategies

Use the insights to improve onboarding, address product friction, and deliver relevant messaging based on customer behavior. Focus on changes that reduce churn and extend subscription length.

  • Using machine learning to improve retention timing

Machine learning helps identify when customers are most at risk of canceling. It analyzes real-time behavior to pinpoint the best times to send offers, trigger support outreach, or recover payments. Using machine learning makes retention efforts faster, more targeted, and more effective.

Choose Recurly for improved subscriber retention

Tracking and acting on retention metrics is essential for subscription growth. By measuring churn, customer lifetime value, and repeat purchase behavior, businesses can identify when and why customers leave. These insights allow teams to fix gaps, extend subscription length, and increase recurring revenue.

Recurly gives subscription businesses the tools to manage retention with precision. From recovery workflows to real-time analytics, everything is built to keep more customers active longer.

  • Automated retention workflows: Minimize churn through automated processes like dunning campaigns, payment retries, and cancellation recovery, all operating without manual intervention.​

  • Advanced analytics and insights: Monitor retention trends by plans, customer segments, and regions. Quickly identify patterns and take proactive measures to prevent churn.​

  • Personalized subscription experiences: Provide flexible pricing, customized billing options, and targeted promotions that align with individual customer behaviors and preferences.​

  • Seamless payment recovery: Recover failed payments using intelligent retry logic, real-time card updates, and optimized routing strategies to maintain transaction success.​

  • Global subscription management: Support international customers with localized billing, tax compliance, and multi-currency options to sustain retention across diverse markets.​

Discover how Recurly helps businesses optimize customer retention. Book a demo today.