Term	Retention Rate	Churn Rate
Definition	Retention rate measures the percentage of users or customers who continue to use a product or service over a specific period.	Churn rate measures the percentage of users or customers who discontinue or stop using a product or service over a specific period.
Calculation	Retention rate is calculated by dividing the number of retained users or customers at the end of a period by the total number of users or customers at the beginning of that period.	Churn rate is calculated by dividing the number of users or customers lost during a period by the total number of users or customers at the beginning of that period.
Interpretation	A higher retention rate signifies a healthier product, indicating that a significant proportion of users are sticking with the product over time.	A higher churn rate indicates a higher level of user attrition, suggesting that a notable percentage of users are discontinuing their use of the product.

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Conclusion: Retention rate Vs Churn rate in Product Management

In the world of creating and managing products, keeping customers happy and sticking around is super important. Think of retention rate (how many customers stay) and churn rate (how many leave) as your product’s health indicators. Paying attention to these numbers helps product managers figure out what’s working and what needs fixing. By understanding the connection between retention and churn rates, product managers can make smart decisions to make their products better and keep customers happy for the long haul. As things change and people want new stuff, keeping an eye on these rates is like having a roadmap to make sure your product stays successful and loved by users.

Retention rate Vs Churn rate: FAQs

What does 5% churn mean?

A 5% churn rate means that, on average, 5% of customers or subscribers stop using or cancel their service within a given period, typically monthly or annually. It indicates the rate of customer attrition or turnover in a business.

What is a good retention rate?

A good retention rate varies by industry but generally, retaining 75% or more of customers annually is considered favorable. Higher retention rates indicate strong customer satisfaction and loyalty, contributing to business stability and growth.

How do you calculate 5% retention?

To calculate a 5% retention rate, subtract the churn rate (5%) from 100%. Therefore, the retention rate would be 95%.

How to calculate retention rate in Excel?

To calculate retention rate in Excel:

• Subtract the number of customers lost (churned) from the initial number of customers.
• Divide the result by the initial number of customers and multiply by 100 to get the retention rate percentage.

Is retention rate a KPI?

Yes, retention rate is a key performance indicator (KPI) used to measure the percentage of customers or users who continue to use a company’s product or service over a specific period. It reflects customer loyalty and satisfaction, directly impacting business growth and revenue.