Customer retention rate measures the percentage of customers who make repeat purchases over a specific time period. It's calculated as: ((Customers at End - New Customers) / Customers at Start) × 100. A 90% annual retention rate means 90% of last year's customers purchased again this year.
Retention is often more valuable than acquisition. Studies show acquiring a new customer costs 5-7x more than retaining an existing one, and increasing retention by just 5% can boost profits by 25-95%. Loyal customers also spend more per order and refer new customers.
Different categories have vastly different retention expectations. Consumables (skincare, supplements) naturally have high repeat rates, while durable goods (furniture, luggage) see lower frequency. Comparing retention to category benchmarks reveals brand strength and customer satisfaction.