Average Customer Retention Rate by Industry (And Advice for Boosting Retention)

Key Takeaways

• The average customer retention rate across the 10 industries we reviewed is 75%, but varies by industry from 55% to 84%.
• Customer retention rate (CRR) is your customer count at the end of a specific period minus the new customers you gained over that period, divided by your starting customer count for the same period.
• Measuring customer retention is key for businesses’ financial planning and reporting because it helps companies establish stable revenue, build brand advocacy, enhance customer value and grow their competitive advantage.

Customer retention is a badge of pride for any good business, as an army of loyal customers can be the key to helping businesses scale.

However, some businesses have higher customer retention rates (CRR), while others see higher churn rates instead.

In general, CRR can vary by industry—what’s “normal” for one type of business will differ from another. To understand how effective your business is at retaining customers, it’s most helpful to look at benchmarks for your industry.

For companies whose business model relies on a subscription or membership model, keeping a close eye on customer retention rate becomes even more important. 

Use this guide to get an overall picture of customer retention and loyalty for your industry, plus find insights on measuring and improving your customer retention rate for better financial planning. 

Customer Retention: Industry Averages

The average customer retention rate of the 10 industries we reviewed is 75%. By industry, rates vary from a high of 84% in the media industry to a low of 55% in the hospitality industry.

These customer retention statistics show industry averages versus the overall average rate.

Sources: ChartMogul (2023), Statista (2018)

While comparing your business’s customer retention to your industry average is useful, it’s not the end-all-be-all when it comes to customer loyalty metrics.

Perhaps most crucially, customer retention depends on what type of customers you sell to. Enterprise businesses typically churn less often due to the complexity of their purchase agreements, while individual customers can churn much more quickly with fewer negative consequences in most cases.

SaaS

The average SaaS customer retention rate is approximately 68%. Values are between 55% (for businesses with <$300k annual recurring revenue, or ARR) and 72% (businesses with $15-30M ARR). A good CRR for SaaS companies is generally 70% or higher, while those above 85% are top performers.

Another notable SaaS metric, net revenue retention (NRR), can help highlight the level of consistent revenue you’re seeing from your customer base. It shows the revenue you retain from the customers you retain over a specific period. NRR was 102% for private SaaS companies in 2023 (NRR can exceed 100% if customer spending increases, while CRR can’t ever exceed 100%).

Banking

The banking industry has an average CRR of 75%, tying with the overall average.

As both a service and a trust-oriented industry, banks can hold onto customers for longer after initially earning their loyalty. Customers typically hold onto their checking and savings accounts for around 17 years, making churn relatively low.

Commercial Insurance

The average CRR for commercial insurance businesses is 83%. The market is extremely competitive, but customers here are less likely to churn than in most other industries. This could be due to the intricate nature of insurance policies and the tendency for some policies to kick in after an introductory period.

Healthcare

Complexities and competition in the healthcare industry make it difficult for businesses (like assisted living companies, independent retail pharmacies or medical waste handling services) to stand out. However, the average retention rate is still above average at 77%.

Hospitality and Lodging

The hospitality and lodging industry has the lowest average CRR of all the industries we reviewed, at 55%. Customers in this industry prioritize price, and discounts and promotions can strongly influence their choices, perhaps more than most other industries. This focus on pricing makes it challenging to build loyalty long-term.

IT Services

The average CRR for IT service companies is a high 81%. Like banking and financial services, IT companies provide a service-based model that effectively builds customer loyalty as long as the experience is positive.

Manufacturing

Among manufacturing companies, a 67% CRR is average. Many manufacturing relationships are transaction-focused and can be one-time or sporadic, with customers purchasing based on specific needs or projects. This leads to less frequent interactions and a lower likelihood of building long-term relationships, hence lowering CRR.

Media and Entertainment

Media companies (like streaming services) tie for the highest average retention rate at 84%. These companies often achieve high CRRs with diverse, quality content, convenient subscription models, personalized recommendations and continuous innovation.

Professional Services

Tied with media companies for the highest average CRR of 84% is professional services.

These companies focus on strong, enduring client relationships and prioritize customer satisfaction over all else. They leverage specialized expertise with a highly personalized (often one-on-one) service approach. Trust and reliability combine to lead the charge when it comes to customer retention.

Telecom

The telecom industry sits near the middle of the pack as far as average retention rates, at 78%.

While many customers might stick with their telecom provider thanks to internal upgrades, frequent cross-selling and perceived service quality, others will avoid churn due to the vast competitor pool and the complications of changing providers.

How To Calculate Customer Retention Rate

To calculate your business’s customer retention rate, take your customer count at the end of a specific period and subtract the new customers you gained over that period. 

Then, divide that number by your starting customer count for the same period and multiply by 100 to find the percentage of customers you retained.

While the base customer retention formula is consistent across industries, the nuances in its application can vary. Different industries face distinct challenges and operate under diverse business models, influencing how they interpret and utilize CRR.

• Subscription-based industries (like SaaS) focus on minimizing churn, considering factors like subscription or contract renewals and cancellations.
• Service-oriented industries (like financial services or IT) might emphasize client satisfaction and project longevity, incorporating feedback and project completion into CRR assessments.
• Product-centric industries (like manufacturing) may assess CRR by tracking repeat purchases, warranty renewals, or customer feedback on product enhancements.
• Trust-centric industries (like insurance) can track metrics like policy renewals and customer trust indicators, such as testimonials or reviews.

Despite these industry-specific considerations, the core goal of CRR remains universal: measure customer loyalty and satisfaction.

Tailoring how you measure CRR to your industry’s dynamics allows you to gain more relevant insights into your customer relationships and adjust your retention strategy accordingly. If you regularly reassess the formula in the context of industry-specific factors, you’ll get a more accurate picture of your retention efforts.

Why Customer Retention Is Important To Measure

Customer retention is the lifeblood of any successful business, influencing growth, profitability and long-term sustainability.

When customers continue to choose you over time, it goes beyond mere transactions — it builds a foundation for a robust and enduring business ecosystem.

Here are three reasons why customer retention is a critical metric for businesses to measure and monitor:

• Establish stable revenue streams: Companies with higher retention rates have a more stable customer base and therefore might be able to grow faster. Loyal and satisfied customers add consistent value to your revenue with repeat purchases, service subscriptions, or upgrading to premium offerings.
• Build brand advocacy and referrals: Happy customers become brand advocates, actively promoting you to their networks. Potential customers tend to trust recommendations from peers, which serve as a testament to your reliability and quality.
• Gain competitive advantage: Businesses prioritizing customer satisfaction and loyalty create a barrier for competitors where customers are less likely to explore alternatives.

What Is a Good Customer Retention Rate?

A good customer retention rate across all industries isn’t a reliable benchmark. “Good” depends on the nature of your business.

Subscription-based services like SaaS might expect higher retention rates due to the recurring nature of said subscriptions (although as we saw in the data earlier, these rates can vary widely between the type and size of SaaS companies). Industries with longer cycles, like manufacturing, may have lower (but still reasonable) retention rates.

Factors Affecting Customer Retention

The nuances of customer relationships mean there’s an extensive list of factors that can contribute to retention and churn.

When looking at the bigger picture, we’ve identified five overarching factors that can impact CRR:

• Quality: If your product or service effectively satisfies needs or solves problems, and you can communicate that to your potential customers, the likelihood of a repeat transaction increases.
• Convenience: Facing shorter attention spans and tougher expectations, businesses need to pull out all the stops to lower their barriers to access. The more difficult it is for a customer to use (or even to purchase) your product or service, the less likely they are to repeat the effort.
• Price: You don’t need to aim to be the bargain alternative, but competitive pricing (and the occasional attractive discount) sways customers to pay more attention to your offerings. Look for customer feedback about cost and make pricing adjustments as necessary to increase your competitive edge.
• Support: Dedicated support is important for all businesses, but particularly for complex industries like SaaS or IT. The less time a customer has to spend troubleshooting, the more time they can spend using your product or service — and all the more chance for you to create a positive and memorable interaction.
• Perks: Loyalty programs are the carrot on a stick to increase customer engagement with your business. They’re a key part of cultivating a customer-centric mindset that prioritizes customer needs and, in turn, incentivizes return business.

The economic environment also has a significant impact on customer retention. With market instability, businesses and consumers alike are evaluating their expenses and making cuts to ride out the storm.

Monitoring these external factors and proactively preparing for potentially lower performance with scenario planning can help your business adjust for unexpected bumps in the road.

How To Increase Customer Retention and Grow Dependable Revenue

Increasing customer retention requires a combination of the right tools, insights, and personalized approaches. Each facet contributes to building valuable, lasting customer relationships.

It’s also a team effort across the entire organization. This is where finance business partnering becomes essential, making valuable data and knowledge available for key decision-makers in multiple departments.

Here are four tips to help you increase and plan for dependable revenue growth:

1. Keep Track of Customer Retention To Detect Patterns

At the baseline, tracking retention is a fundamental practice for companies aiming to foster sustainable growth. You can’t plan for what you don’t know, and CRR is a key metric to help define the business’s overall performance.

Using cohort analysis, you can track your CRR with multiple constraints, such as across different periods or customer demographics.

You should also keep a close eye on complementary metrics to churn and retention—like customer engagement—that can help you spot trouble areas sooner with your products or services. You can measure engagement with metrics such as product adoption and utilization (are customers getting the full value of their current investment with you). 

2. Use the Best Tools at Your Disposal to Track and Manage Retention

Tracking customer retention and factoring it into your business’s financial planning is easier when you can pull data directly from your CRM and ERP and consolidate it in one place.

Complete planning software like Vena can incorporate customer data from your CRM alongside data from your core business systems like your ERP for more accurate, data-driven decision-making.

Then, take it a step further by incorporating renewal and churn forecasts data into “what-if” scenario analysis to model different outcomes and proactively manage risk.

3. Know Your Customer Like the Back of Your Hand

Your customer likely has many options. To get them to choose your business again and again, you’ll need to know more about them than their purchase history.

The more you know about your customers, the more you can personalize your engagement with them.

All this customer data holds powerful possibilities. Finance and customer success teams can forge a strong partnership to boost customer satisfaction and financial health in tandem via:

• Data sharing and analysis to complement customer success insights and enable more informed decisions for both teams.
• Budget allocation to ensure adequate resources for customer training, support and engagement programs that contribute to customer lifetime value.
• Risk management to outline the financial impact of customer churn and collaboratively identify at-risk customers for a chance at retaining them.
• Forecasting and planning with customer success insights that can contribute to more accurate revenue projections, such as leading indicators of churn.

Understanding your target customers allows you to lead a customer-centric approach, aided by smooth cross-collaboration between your internal teams.

4. Reward Customer Loyalty With Something of (Actual) Value

Loyalty programs are proven tools that can significantly impact both customer retention and revenue growth.

The overwhelming majority of Americans (80%) belong to at least one loyalty program. The customers who are members of a loyalty program are about 60% more likely to stick with that brand for a future purchase — and 43% more likely to purchase weekly.

Reward customers with something of value (which requires studying your customer base to uncover what’s going to resonate with them), and they’ll be more likely to return.

What Are the Best KPIs for Measuring Customer Retention?

The best KPIs to measure customer retention rate are:

• Churn rate: The percentage of customers who stop using a product or service within a time frame
• Average Revenue Per User (ARPU): The average revenue generated per customer, indicating whether customers are increasing spend
• Customer Lifetime Value (CLV): The total revenue a business can expect from a customer throughout their entire relationship; a higher CLV suggests strong retention
• Net Promoter Score (NPS): Measures customer satisfaction and loyalty by asking customers how likely they are to recommend a product or service
• Net Revenue Retention (NRR): The revenue you retain from your loyal customer base
• Customer Satisfaction Score (CSAT): Measures customer satisfaction based on specific interactions
• Renewal Rate: Measures the percentage of customers who renew subscription-based products or services

These metrics, in tandem with other customer data like customer acquisition cost (CAC), can help illustrate the full customer experience more clearly and point to specific facets of your strategy that may need addressing.

For instance, if you’re paying a pretty penny to get customers through the door, you better hope you’re also holding on to those customers.

Fuel Customer Retention With Complete Planning Software

Customer retention isn’t just a metric — it’s a strategic imperative shaping your business’s financial health, reputation and longevity.

By prioritizing customer satisfaction and implementing effective retention strategies, you can navigate challenges, outshine competitors and pave the way for sustained growth.

With Vena’s complete planning software, you can integrate your customer data and revenue data in one place to fuel your financial planning and analysis.

You can carry out your financial modeling in the familiar environment of Excel as Vena reconciles your data back to a centralized database and enables you to collaborate across departments. Share reports and dashboards with all your most important metrics—like CRR—with your customer-facing teams as well as your board and investors.