Retention Rate
The term "retention rate" is used in a variety of fields, including marketing, investing, education, and in the workplace. Maintaining retention in each of these fields often results in a positive outcome for the overall organization or school. In marketing, retention rate is used to count customers and track customer activity irrespective of the number of transactions (or dollar value of those transactions) made by each customer.
"Retention rate is the ratio of the number of retained customers to the number at risk. In contractual situations, it makes sense to talk about the number of customers currently under contract and the percentage retained when the contract period runs out." This term should not be confused with growth (decline) in customer counts. Retention refers only to existing customers in contractual situations. "In non-contractual situations (such as catalog sales), it makes less sense to talk about the current number of customers, but instead to count the number of customers of a specified recency." In a survey of nearly 200 senior marketing managers, 63 percent responded that they found the "retention rate" metric very useful.
Additional Usage of the Term
In the investment field, Retention Rate (also called earnings retention ratio, plowback ratio) is the proportion of net income that is not paid in dividends. A firm earning $80 million after taxes and paying dividends of $20 million has a retention rate of $60 million/$80 million, or 75%. A high retention rate makes it more likely a firm's income and dividends will grow in future years. It's often expressed as a percentage.
- Retention rate is calculated as: (Net Income - Dividends) / Net Income
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.
Read more about Retention Rate: Purpose, Construction, Workplace
Famous quotes containing the words retention and/or rate:
“Unless a group of workers know their work is under surveillance, that they are being rated as fairly as human beings, with the fallibility that goes with human judgment, can rate them, and that at least an attempt is made to measure their worth to an organization in relative terms, they are likely to sink back on length of service as the sole reason for retention and promotion.”
—Mary Barnett Gilson (1877–?)
“As a novelist, I cannot occupy myself with “characters,” or at any rate central ones, who lack panache, in one or another sense, who would be incapable of a major action or a major passion, or who have not a touch of the ambiguity, the ultimate unaccountability, the enlarging mistiness of persons “in history.” History, as more austerely I now know it, is not romantic. But I am.”
—Elizabeth Bowen (1899–1973)