The term "retention rate" is used in a variety of fields, including marketing, investing, education, in the workplace and in
clinical trials
Clinical trials are prospective biomedical or behavioral research studies on human participants designed to answer specific questions about biomedical or behavioral interventions, including new treatments (such as novel vaccines, drugs, dietar ...
. Maintaining retention in each of these fields often results in a positive outcome for the overall organization or school, or pharmacological study.
In
marketing
Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
, retention rate is used to count
customers
In sales, commerce, and economics, a customer (sometimes known as a client, buyer, or purchaser) is the recipient of a good, service, product or an idea - obtained from a seller, vendor, or supplier via a financial transaction or exchange for m ...
and track customer activity irrespective of the number of
transactions (or dollar value of those transactions) made by each customer.
"''Retention rate is the ratio of the number of retained customers to the number at risk".'' In
contractual
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to t ...
situations, it makes sense to talk about the number of customers currently under contract and the percentage retained when the contract period runs out." This term should not be confused with growth (decline) in customer counts. Retention refers only to existing customers in contractual situations. "In non-contractual situations (such as catalog sales), it makes less sense to talk about the ''current'' number of customers, but instead to count the number of customers of a specified recency." In a survey of nearly 200 senior marketing managers, 63 percent responded that they found the "retention rate" metric very useful.
[Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). ''Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.'' Upper Saddle River, New Jersey: Pearson Education, Inc. . Content from this book used in this article has been licensed under Creative Commons Attribution Share Alike 3.0 and Gnu Free Documentation License and be modified and reused. The ]Marketing Accountability Standards Board (MASB)
The Marketing Accountability Standards Board (MASB), authorized by the Marketing Accountability Foundation,MASB''Marketing Accountability Foundation (MAF)''. ited 8 December 2010/ref> is an independent, private sector, self-governing group of acad ...
endorses the definitions, purposes, and constructs of classes of measures that appear in ''Marketing Metrics'' as part of its ongoin
Common Language in Marketing Project
Purpose
The purpose of the "retention rate" metric in a marketing atmosphere is to monitor firm performance in attracting and retaining customers. "Only recently have most marketers worried about developing metrics that focus on individual customers. In order to begin to think about managing individual customer relationships, the firm must first be able to count its customers. Although consistency in counting customers is probably more important than formulating a precise definition, a definition is needed nonetheless. In particular, we think the definition of and the counting of customers will be different in contractual versus non-contractual situations."
Since there are multiple definitions of retention rates this could cause issues with interpreting retention rates in practice.
In the workplace arena, the purpose of the retention rate is to assist organizations with deciding when to take action in order to keep employees happy and motivated. According to a survey by CNN Money, the top 100 best companies to work for had less than a 3% turnover rate during a 12-month period.
Retention rate may also refer to ''
college
A college (Latin: ''collegium'') is an educational institution or a constituent part of one. A college may be a degree-awarding tertiary educational institution, a part of a collegiate or federal university, an institution offering ...
s''. According to the
FAFSA
The Free Application for Federal Student Aid (FAFSA) is a form completed by current and prospective college students (undergraduate and graduate) in the United States to determine their eligibility for student financial aid.
The FAFSA is differe ...
, the retention rate is the percentage of a school’s first-time, first-year
undergraduate
Undergraduate education is education conducted after secondary education and before postgraduate education. It typically includes all postsecondary programs up to the level of a bachelor's degree. For example, in the United States, an entry-lev ...
students who continue at that school the next year. For example, a student who studies full-time in the fall semester and keeps on studying in the program in the next fall semester is counted in this rate.
Construction
"Retention applies to contractual situations in which customers are either retained or not. Customers either renew their magazine subscriptions or let them run out. Customers maintain a current account with a bank until they close it. Renters pay rent until they move out. These are examples of pure
customer retention
Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defe ...
situations where customers are either retained or considered lost for good. In these situations, firms pay close attention to retention rates."
:''Retention Rate:'' The ratio of the number of customers retained to the number at risk.
Workplace
Retention in the workplace refers to “the percentage of employees who were employed at the beginning of a period, and remain with the company at the end of the period”.
For example, in January 2010, Company A had 500 employees. After one year, 200 of the 500 employees were still working for the company. The retention rate is 200/500 = 40%.
See also
*Employee retention Employee retention is the ability of an organization to retain its employees and make sure the sustainability of employees. Employee retention can be represented by a simple statistic (for example, a retention rate of 80% usually indicates that an o ...
*Turnover (employment)
In human resources, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees may consist of termination, retirement, death, interagency transfers, and resignations.Trip, R. (n.d.). Turnover-S ...
*University student retention
University student retention, sometimes referred to as persistence, is a process to try to improve graduation rates and decrease a loss of tuition revenue via programs such via peer pressure, student academic programs, counselor and faculty monitor ...
Methodologies
No retention rate methodologies have been independently audited by the Marketing Accountability Standards Board (MASB)
The Marketing Accountability Standards Board (MASB), authorized by the Marketing Accountability Foundation,MASB''Marketing Accountability Foundation (MAF)''. ited 8 December 2010/ref> is an independent, private sector, self-governing group of acad ...
according to MMAP (Marketing Metric Audit Protocol) * Marketing Metric Audit Protocol (MMAP)
* Memory map
* mmap
In computing, mmap(2) is a POSIX-compliant Unix system call that maps files or devices into memory. It is a method of memory-mapped file I/O. It implements demand paging because file con ...
.[MASB]
''Marketing Metric Audit Protocol (MMAP)''.
February 2009. ited 8 July 2011/ref>
References
{{Reflist
Rates
Customer relationship management