Customer retention calculation metrics
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In environments where users purchase a subscription, the calculation is easier, and can be represented as:
Number of subscribers who cancelled or did not renew during the period divided by the total number of subscribe
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rs for the period
The difficult part in this equation is determining the right total number of subscribers to use: the ones at beginning of period, the ones at the end, a peak, or an average over the period.
When customers are not subscribers, the calculation is harder to determine. In this case a customer is one who continues to make purchases, and a lost customer is one who has made purchases, but does not repeat these purchases for some time. The key is to analyze the repeats over a long enough horizon. Here the calculation is:
(Total number of customers - number of repeat customers) divided by total number of customers
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