science

Retention rate

Retention rate is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Retention rate rather than just read about it. In short: Retention rate is a statistical measurement of the proportion of people that remain involved with a group from one time period to another. The concept is used in many contexts, including marketing, investment, education, employee management, research, and clinical trials.

Key takeaways

Retention rate belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Retention rate to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Retention rate from memory before moving on to harder problems.

Reference excerpt

Retention rate is a statistical measurement of the proportion of people that remain involved with a group from one time period to another. The concept is used in many contexts, including marketing, investment, education, employee management, research, and clinical trials. The exact definition depends on the context. As a general rule, high retention corresponds to a positive outcome. In marketing, retention rate count customers and their activity irrespective transactions they make. In a survey of nearly 200 senior marketing managers, 63 percent responded that they found the "retention rate" metric very useful.

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 colleges. According to the FAFSA, the retention rate is the percentage of a school’s first-time, first-year undergraduate 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.

Contracts "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 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 x 100 = 40%.

See also Employee retention Turnover (employment) University student retention

Methodologies No retention rate methodologies have been independently audited by the Marketing Accountability Standards Board (MASB) according to MMAP (Marketing Metric Audit Protocol).

References

Worked examples

Example 1 — a first encounter with Retention rate

Start with the simplest possible case. Write down what Retention rate claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Retention rate before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Retention rate ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Retention rate

In research: Retention rate appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Retention rate in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Retention rate is common in secondary-school and first-year university syllabi. It links to neighbouring topics Customer relationship management, Rates, so understanding it makes those chapters shorter.
In everyday life: Look for Retention rate outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Retention rate in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Retention rate means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Retention rate out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Retention rate in simple terms?

Why does Retention rate matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Retention rate?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Retention rate.