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What is Retention Rate? Definition & How to Calculate It

Last updated: Aug 16, 2023

What is Retention Rate? Definition & How to Calculate It
Illustration of Retention Rate

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Have you ever heard of the term retention rate? It is often used to maintain the continuity of a business.

It becomes important for a business to increase its revenue. As a key performance indicator of online marketing, this metric represents a key figure for the success of your business and website.

The calculation of retention is based on the tracking data. It's based on the number of users who remain active compared to the total number of users who have just started using the product in the same time period.

The retention rate has a counterpart, namely the churn rate. In the world of marketing, these two indicators are very influential in gaining insight into consumer loyalty, consumer experience, and similar areas that can continue to be developed in the future.

So that you can get more detailed information about retention rates, you can listen to the following article!

What is Retention Rate?

retention rate illustration
Figure 1: Illustration of retention, which is a metric in business activity

Retention rate, or what is known in Indonesian as user retention, is a term for users who continue to use services or products from a business for a certain period of time.

This percentage is usually used to promote and grow the product or service being marketed. User retention is calculated based on data tracking calculations.

User retention is a metric to measure the number of users who continue to use products and services within a certain period.

This matrix is important because it shows the effectiveness of your business efforts in maintaining the customer base and provides insight into the value of the products and services offered.

To determine the correct calculation, a specific time frame is needed, such as weekly, monthly, or even yearly.

For example, if there were 5,000 people who visited the website in January but only 2,500 returned to visit the following month, it is said that the website's retention is at 50%.

Tracking user retention on a regular basis can help you see which areas need further development, which content needs to be produced better, or which designs need additions.

That way, you can craft a plan to increase customer satisfaction rates and get even higher conversion rates.

So understanding user retention will be important when you want to further develop SEO performance and the user experience.

The counterpart is the churn rate, which is the percentage of customers who no longer use the products and services of a business.

By monitoring this matrix regularly, you will be able to identify data points that can provide information on your future business marketing strategy. 

The Importance of Retention Rate for SEO

Search engines like Google use metrics such as retention rate as ranking signals.

If a website has a high retention percentage, it indicates to Google that users have found the right website, which can help increase the visibility of the website in search results.

By continuously tracking and improving their retention, the website can improve its SEO performance as well. Which can lead to better visibility, more engagement, and increased conversions.

So, this will make the retention measurement a very useful matrix for providing content ideas and decision forms that can improve the user experience in the future.

Factors Affecting Retention Rate

There are various factors that can affect the retention of a business, such as:

  • Quality of content: Users will not come back if the quality of the content displayed is poor or does not fulfill what the user needs
  • Site speed and performance: If your site takes too long to load or crashes frequently, visitors will not be interested in revisiting your site.
  • Navigation and usability: If your website's navigation is complicated and unclear, it will be difficult for users to find the information they need. This makes them reluctant to return to your website.
  • Mobile responsiveness: With increasing numbers of website visitors via mobile devices, a website that is not optimized for mobile viewing will discourage users from revisiting.

How to Calculate Retention Rate

The simplest way to calculate user retention is to divide the number of active users in the current period by the number of active users in the previous period.

As in the example previously mentioned, if you currently have 1000 active users and had 1500 active users in the previous period, it can be concluded that the percentage of retention for your business is 66.6%. 

When you are calculating user retention, consider factors such as time frames. Here's how you can calculate retention the correct way:

Retention Rate = (( E - N ) / S ) x 100

Information:

E = customers at the end of a period

N = new customers acquisition in a certain period

S = customers at the start of a period

  • Differentiation of time periods, for example, can allow you to link user retention to specific marketing campaigns.
  • The determination of active customers is not limited to purchases. But also use various other criteria, such as contact with users, newspaper readers, and visitors to your business website.

How to Check Retention in Google Analytics 4

Reports about retention are viewable in Google Analytics 4, which can be personalized based on your business needs. Here are the steps:

  1. Sign in to Google Analytics 4 with a business website account.
  2. In the menu on the left, click Reports.
  3. Select Retention on the left side.

If you can't see the report in the left navigation, you can add it if you gain access as an Editor or Administrator.

How to Increase Retention Rate

Here are some ways to increase user retention that you need to know about:

1. Improve Product Quality

By ensuring the products or services you offer are of high quality, you can help maintain consumer satisfaction. This requires regular updating and development of the production.

2. Get Consumer Support

Timely and helpful supplies can help keep users happy and satisfied. This can lead to dedicated consumers who continue to support the product or service.

Additionally, your business should also be available to be contacted by users, whether it be via email, telephone number, or social media.

3. Avoid Driving Consumers Away

If there are problems that can make customers leave and stop using products or services, it is very important to solve them immediately. This is also useful for increasing user retention.

4. Offer Benefits for Users

Offering various benefits to users, such as discounts, rewards, bonuses, etc., can help keep users continuing to use products or services.

5. Regular Communication with Users

Establishing close communication with loyal users can form strong relationships and ensure these users have a feeling of value in the eyes of the company.

That concludes the explanation of why retention rate is so important as a benchmark for your business. When the rate starts to fluctuate, you can start to find out what caused it and design the right strategy to overcome it.

Such a strategy can be started by developing consumer services that prioritize personalized communication and digital marketing optimization in this modern era.

You can also use SEO services from cmlabs to assist you in defining a marketing strategy that can support the performance of your website.

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