What Is the Average Customer Retention Rate for Your Business?

Introduction

Did you know that increasing your customer retention by just 5% can boost your profitability by anywhere from 25% to 95%? In an era where customer acquisition costs are climbing higher every month, the ability to keep the customers you already have isn't just a "nice-to-have" metric—it is the primary engine of sustainable growth. At Growave, we believe that turning retention into a growth engine is the most effective way for Shopify merchants to build long-term stability without falling into the trap of platform fatigue. Before you can improve your numbers, you must understand where you stand, which starts by looking at your current data and being able to explore current plans and trials that help you capture this value.

The purpose of this article is to provide a detailed look at what is the average customer retention rate across various industries, how to calculate your own metrics accurately, and what strategies actually work to move the needle. We will look at benchmarks for sectors ranging from retail and SaaS to professional services and hospitality. By the end of this discussion, you will have a clear framework for measuring loyalty and a set of actionable strategies to build a cohesive retention system that reduces "one-and-done" purchases. Our main message is simple: growth is not just about finding new people; it is about creating a connected ecosystem where your existing customers feel valued and motivated to return.

Understanding Customer Retention Rate

Customer Retention Rate (CRR) is a percentage that shows how many customers remain loyal to a business over a specific period. It is the inverse of your churn rate. While acquisition focuses on the top of the funnel, retention focuses on the middle and bottom, ensuring that the "leaky bucket" of your business is sealed. For Shopify merchants, high retention means that your marketing spend on platforms like Instagram or Google goes much further because you are not constantly paying to replace lost customers.

At Growave, we have seen that merchants who prioritize retention often find it much easier to scale. When you focus on the people who have already bought from you, you are dealing with a group that already trusts your brand. This trust is a foundation that makes every other part of your business—from product launches to seasonal sales—more effective. By moving away from a transactional mindset and toward a retention-focused mindset, you can build a stable, long-term growth partner out of your own customer base.

How to Calculate Your Customer Retention Rate

Calculating your retention rate is simpler than most people think, but the accuracy of the result depends on choosing the right time frame. You need three key pieces of data for a specific period (such as a month, a quarter, or a year):

• The number of customers you have at the end of the period (E).
• The number of new customers you gained during the period (N).
• The number of customers you had at the start of the period (S).

Once you have these numbers, you use the following formula:

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

For example, if you start the quarter with 500 customers (S), end with 550 (E), and added 100 new customers (N), your calculation would look like this: ((550 - 100) / 500) x 100. This results in a 90% retention rate.

Choosing the right time period is vital. A luxury furniture store might look at retention over a year, while a coffee subscription brand or a beauty merchant should look at it monthly or quarterly. Tracking this over time allows you to see how product updates, marketing campaigns, or new loyalty initiatives are affecting customer behavior.

What Is the Average Customer Retention Rate by Industry?

The question of what is the average customer retention rate is best answered by looking at your specific sector. What counts as "good" for a travel agency would be catastrophic for a media company. Across the ten major industries usually reviewed, the overall average retention rate sits around 75%, but the range is quite wide.

Media and Entertainment

This industry enjoys some of the highest retention rates, often reaching 84%. Companies in this space, such as streaming services, benefit from a recurring subscription model and the constant delivery of new, engaging content. When customers have a steady stream of value (like a new series to watch every week), the incentive to cancel is very low.

Professional Services

Tied with media at 84%, professional services—including legal, accounting, and consulting firms—thrive on long-term relationships. These businesses often provide highly personalized, one-on-one services that are difficult to replace. The high cost of switching to a new provider and the deep trust built over time keep these rates stable.

Insurance

Commercial insurance companies see an average retention rate of 83%. The competitive nature of the market is balanced by the complexity of insurance products. Once a customer has a policy that fits their needs and has gone through an introductory period, they are less likely to deal with the friction of switching providers unless there is a significant price hike or service failure.

IT and Managed Services

IT services have an average retention rate of 81%. This high rate is driven by the fact that these companies become integral parts of their clients' operations. When a business relies on a specific IT provider for their infrastructure and security, the "difficulty to leave" factor is high. As long as the service is positive, clients tend to stay for years.

Telecommunications

The telecom industry sits at approximately 78%. While competition is fierce, telecom companies often use long-term contracts and bundled services to keep churn low. However, this is an industry where younger consumers are increasingly willing to switch for better digital experiences or lower prices, putting pressure on traditional providers to innovate their loyalty strategies.

Healthcare

With a retention rate of 77%, healthcare businesses—such as specialized clinics or pharmacies—maintain above-average loyalty. This is often due to the personal nature of the service and the geographical convenience of healthcare providers. Trust is a major factor here; once a patient finds a provider they trust, they are unlikely to look elsewhere.

Banking and Finance

The banking industry has an average retention rate of 75%. On average, a person stays with the same primary checking account for about 16 years. Most people only switch banks when they relocate or experience a major life change. Banks excel at making their services effortless, which contributes to this long-term success.

Manufacturing

Manufacturing sits at a 67% retention rate. Many relationships in this sector are project-based or sporadic, leading to more one-time transactions compared to service-based industries. To improve these numbers, many manufacturers are looking at ways to provide ongoing value through maintenance contracts or digital service add-ons.

SaaS (Software as a Service)

The average SaaS retention rate is around 68%, though this fluctuates based on the size of the company. Small businesses with lower revenue often see rates around 55%, while enterprise-level SaaS companies can exceed 85%. For software companies, the key is "customer success"—ensuring the user actually achieves their goals with the tool.

Retail and E-commerce

Retail generally has one of the lower retention rates at 63%. In the Shopify world, this can be even lower depending on the niche. Choice overload and intense price competition make it very easy for a customer to switch brands. This is why it is so critical for e-commerce brands to use a unified retention system to build a barrier against competitors.

Hospitality, Travel, and Restaurants

This sector typically sees the lowest retention rates, averaging around 55%. These industries are highly sensitive to price and seasonal trends. Customers often prioritize the best deal for their next trip or meal rather than sticking with a single brand. Building loyalty here requires exceptional service and very strong, relevant rewards.

Why Measuring Retention Is Vital for Growth

Measuring your retention rate is about more than just knowing a percentage; it is about financial health. When you have a firm handle on these metrics, you can achieve three major things:

• Establish Stable Revenue Streams: High retention means you can predict your future income with more accuracy. Instead of starting every month at zero, you have a foundation of returning customers who provide consistent value through repeat purchases or subscriptions.
• Build Brand Advocacy: Your retained customers are your best marketing team. They are the ones who write reviews, share your products on social media, and refer their friends. This organic word-of-mouth is far more trusted than any paid advertisement.
• Gain a Competitive Advantage: In a crowded market, a loyal customer base is a moat. If your customers are happy and rewarded for their loyalty, they are much less likely to even look at what your competitors are offering.

Measuring retention also allows you to calculate Customer Lifetime Value (CLV). By knowing how long a customer stays and how much they spend on average, you can determine exactly how much you can afford to spend on acquiring a new customer while still remaining profitable.

Factors That Influence Your Retention Rate

Many things can cause a customer to stay or leave, but we can categorize the most impactful factors into a few key areas. Understanding these will help you identify which parts of your system need the most attention.

Quality and Success

At the core of everything is the quality of your product or service. If your product does not solve the customer's problem or meet their expectations, no amount of loyalty points will keep them around. Beyond quality, you must look at "customer success." Are your customers actually getting the results they wanted? If they bought a skincare product, is their skin improving? If they bought a software tool, is it saving them time?

Convenience and Friction

In our current world, convenience is often more important than price. If your website is hard to navigate, your checkout process is slow, or your customer support is difficult to reach, customers will churn. Reducing friction at every touchpoint—from browsing to post-purchase support—is a fundamental part of retention.

Difficulty to Leave

This isn't about "trapping" customers with bad contracts, but about creating such a connected experience that leaving feels like a loss. For example, if a customer has accumulated significant points in your loyalty and rewards programs, they have a tangible reason to stay with you rather than starting from scratch with a competitor.

Personalized Experiences

Customers today expect you to know who they are. Generic emails and one-size-fits-all promotions are often ignored. Retention improves when you use data to personalize the experience. This could mean sending a birthday discount, recommending products based on past purchases, or acknowledging their "anniversary" with your brand.

How to Increase Your Retention Rate with a Unified Strategy

Improving your retention rate requires a move away from "platform fatigue." Many merchants try to fix retention by stitching together five or seven different tools—one for reviews, one for loyalty, another for wishlists, and so on. This often results in a disjointed customer experience and a messy backend for your team.

At Growave, we champion the "More Growth, Less Stack" philosophy. By using a unified system, you can ensure that your reviews, loyalty programs, and wishlists all talk to each other. This creates a more powerful and connected retention system. Here is how you can use specific pillars to boost your numbers.

Leverage Social Proof and Trust

One of the biggest reasons for "one-and-done" purchases is a lack of trust. If a customer isn't sure about the quality of their first purchase, they won't come back. You can combat this by systematically collecting social reviews and photo widgets to display on your product pages. When new visitors see real photos from other customers, their purchase anxiety drops, and they are more likely to start a long-term relationship with your brand.

Incentivize the Second Purchase

The jump from the first purchase to the second is the hardest. To bridge this gap, you can implement a loyalty system that rewards customers not just for buying, but for creating an account, following you on social media, or leaving a review. By giving them points immediately, you give them a reason to return to your store to spend those points.

Capture Intent with Wishlists

Many visitors browse but aren't ready to buy right now. Instead of letting them leave and forget about you, give them the option to save items for later. Wishlists are a powerful retention tool because they allow you to send personalized "back in stock" or "price drop" emails. This keeps your brand top-of-mind and brings customers back when they are actually ready to convert.

Turn Customers into Advocates

Referral programs are a key part of the retention ecosystem. When a customer refers a friend, they are publicly vouching for your brand. This reinforces their own loyalty while bringing you high-quality new customers who are more likely to be loyal themselves. It’s a virtuous cycle that lowers your acquisition costs and increases your overall CRR.

Real-World Scenarios and Practical Actions

To help you visualize how to implement these strategies, let's look at some common challenges merchants face and the steps you can take to solve them.

• If your second purchase rate drops after the first order: This is a common sign of a "one-and-done" problem. Consider offering "Account Creation" points. If a customer earns points just for signing up during their first checkout, they are much more likely to return to use those points on a second order.
• If visitors browse but hesitate to buy: This often indicates a lack of trust or social proof. Focus on your UGC (User-Generated Content). Bringing in shoppable Instagram galleries or photo reviews can provide the visual confirmation customers need to feel confident in their purchase.
• If you get traffic but low conversion on key product pages: Check your social proof. If your high-traffic pages don't have recent, high-quality reviews, visitors may feel like they are taking a risk. Automating review requests can help you build a library of trust that converts browsers into buyers.
• If your "loyal" customers haven't bought in 90 days: It might be time to offer a VIP tier. By segmenting your top customers and giving them exclusive perks—like early access to new products or free shipping—you remind them why they loved your brand in the first place.

For those looking for more creative ways to implement these ideas, we recommend checking out our customer inspiration library to see how other successful brands have built their retention systems.

The Power of a Connected Retention Ecosystem

At Growave, we are a merchant-first company. We build for your long-term success, not for investors. This is why we focus on a unified platform that replaces the need for a fragmented tech stack. When your retention tools are disconnected, you miss out on valuable data.

"A unified retention system allows you to see the full journey of a customer. You can see that they left a review, added an item to their wishlist, and then used their loyalty points to buy that item. This level of connection is what turns a one-time buyer into a lifelong fan."

By bringing these elements together, you solve "platform fatigue" and create a smoother experience for your customers. They don't have to deal with multiple logins or conflicting rewards programs. Everything is in one place, branded to your store, and easy to manage. This is how you build a system that your team can actually maintain and scale over time.

Advanced Strategies for High-Volume Brands

For established brands and those on Shopify Plus, retention needs become more complex. You might need custom workflows, advanced API integrations, or specific checkout extensions. High-volume merchants often find that as they grow, the cost of managing 7+ different apps becomes a major bottleneck.

A unified suite is particularly beneficial here because it simplifies your operations. Instead of managing seven different billing cycles and support teams, you have one point of contact. This allows your team to focus on high-level strategy rather than technical troubleshooting. If you are managing a high-growth brand and need to see how these tools work at scale, you can confirm plan details on our pricing page to find the right fit for your volume.

Building Trust and Lowering Purchase Anxiety

Trust is the currency of the internet. In the e-commerce world, where a customer cannot touch or feel the product before buying, trust is built through the experiences of others. This is why reviews and user-generated content are not just about showing stars; they are about storytelling.

When a customer sees a photo of someone like them wearing your apparel or using your home goods, they can visualize themselves with the product. This visual social proof is one of the fastest ways to reduce the "bounce" rate of new visitors and set the stage for a repeat purchase. Integrating these reviews into your loyalty program—by rewarding customers for adding photos or videos—is a smart way to keep your content fresh and your customers engaged.

Creating a Sustainable Growth Engine

Sustainable growth is not about a sudden spike in traffic that disappears a week later. It is about the slow, steady build of a loyal community. When you focus on retention, you are playing the long game. You are building a brand that can survive changes in social media algorithms or rising ad costs.

To see how these principles look in practice, you can browse through real-world brand inspiration from our community of over 15,000 brands. These examples show that whether you are a small startup or an established leader, the fundamentals of retention remain the same: provide value, build trust, and reward loyalty.

Conclusion

Understanding what is the average customer retention rate for your industry is the first step toward building a more profitable and stable business. While benchmarks like 63% for retail or 75% for banking give you a starting point, your goal should always be to improve your own numbers month over month. By focusing on the quality of your customer experience, reducing friction, and rewarding loyal behavior, you can turn your store into a retention powerhouse.

We have explored how a unified retention suite can help you move away from a fragmented tech stack and toward a more powerful, connected system. From leveraging social proof with reviews to incentivizing repeat purchases with loyalty points, the tools you need are within reach. Retention is not a one-time project; it is a consistent commitment to your customers that pays off in higher lifetime value and reduced marketing costs.

Install Growave from the Shopify marketplace to start building a unified retention system that scales with your business.

FAQ

What is a good customer retention rate?

A "good" rate varies heavily by industry. Generally, a rate between 35% and 84% is considered healthy. For most e-commerce businesses, staying above 60% is a strong indicator of success, while subscription-based models or professional services should aim for 80% or higher.

How do I calculate my customer retention rate?

Use the formula: ((E - N) / S) x 100. Subtract your new customers (N) from your total customers at the end of the period (E), then divide that number by the customers you had at the start of the period (S). Multiply by 100 to get your percentage.

Why is my retention rate lower than the industry average?

Low retention is often caused by high competition, lack of social proof, or a disjointed customer experience. If you are seeing a lot of "one-and-done" buyers, it may be time to implement a loyalty program or improve your post-purchase communication to encourage a second visit.

How can I improve my store's retention quickly?

One of the fastest ways to improve retention is to implement a points-based loyalty program that rewards account creation. This gives new customers an immediate reason to return. Additionally, displaying photo reviews can build the trust necessary to convert first-time buyers into repeat customers. To get started, get started through the Shopify marketplace and begin exploring our retention tools.