How to calculate customer retention rate and why is it crucial?

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The second, more important indicator for measuring customer loyalty is the customer retention rate. What is it? The customer retention rate, also known as the customer loyalty rate, is a key performance indicator (KPI) that shows how effectively a company builds lasting relationships with customers and secures their loyalty.

Customer loyalty measures the percentage of customers who stay with a compan architect database y for a given period of time, relative to the total number of active customers at the beginning of that period. This is a metric that not only reflects customer satisfaction and loyalty, but also has a direct impact on the profitability of the company. Studies show that increasing customer retention by 5% can increase profits by anywhere from 25% to as much as 95%.