Retention Ratio

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Definition of 'Retention Ratio'

The retention ratio is a measure of how well a company retains its customers. It is calculated by dividing the number of customers at the end of the period by the number of customers at the beginning of the period. A high retention ratio indicates that a company is doing a good job of keeping its customers, while a low retention ratio suggests that the company is losing customers.

There are a number of factors that can affect a company's retention ratio, including the quality of its products or services, the level of customer service, and the price of its products or services. Companies with high-quality products or services, excellent customer service, and competitive prices are more likely to have a high retention ratio.

The retention ratio is an important metric for companies to track because it can help them identify areas where they need to improve in order to retain more customers. Companies with a low retention ratio may want to consider investing in customer service training, improving their products or services, or lowering their prices in order to improve their retention ratio.

The retention ratio is also a useful metric for investors to consider when evaluating a company. A company with a high retention ratio is more likely to be profitable and sustainable in the long term, as it will have a steady stream of revenue from its existing customers.

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