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The Retention Rate Model

This approach is a simple but effective model to calculate customer retention rates. The significance of this approach is that loyalty is referenced against repeat purchase behaviour to a supplier and not the absolute level of the supplier customer base.

The model is based upon:

• The number of customers at the start of the year (s)
• The number of those retained at the end of the year (r)
• The number of customers lost during the year (s-r)
• The number of customers acquired during the year (a)

The retention rate is then expressed as a percentage: (r / s) x 100%