Question

Topic: Research/Metrics

Help Needed With Retention Formula

Posted by Anonymous on 9/17/2009 at 9:31 AM ET 50 Points
As I understand it the formula for measuring Retention Rates is:

((#Members at end 2009 - #Members of joined over that period) /#Members at end of 2008)*100

eg:

((590-120)/560*100 = 84%

My question is, what if no new members join over the 2008/2009 period? Is the calculation pointless/won't work, or is there a way of calculating a negative retention rate?

If there is a way, how do I calculate this if say we recruited no new members and membership numbers actually dropped by 33 members?

Thanks, answer's probably obvious!
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RESPONSES

  • Posted by koen.h.pauwels on 9/17/2009 at 9:37 AM Accepted
    hi martin,

    your formula is correct; if no new members join, the numbers in your example become:

    members at the end of 2008: 560
    members that joined in 2009: 0
    members at the end of 2009: 527
    [because no new members joined, and 'the membership numbers actually dropped by 33 members']

    Formula:
    (527-0)/560*100 = 94%

    There is no way you could get negative retention rates with this formula....

    Cheers
  • Posted on 9/17/2009 at 10:00 AM Author
    I guessed that, but is there a methodology in use to work out negative retention rates? If you were to put retention data in a table for each of the years 2002-2009, how would you generally express the negative retention rates for those particular years? Would it just be "-" in the column etc?
  • Posted by joy.levin on 9/17/2009 at 2:17 PM Accepted
    The way I have seen this handled most frequently is to divide the net by the beginning base and then make it negative. In your case, this would calculate as:

    (560-527)/560 = -5.9%.

    Hope this helps.
  • Posted on 9/21/2009 at 6:10 AM Accepted
    may be you are looking for the churn rate. your calculations are ok though.

    churn rate: # lost customers in year x / # customers at the beginning of year x * 100 %

    Kind regards,

    MLJ van de Watering
  • Posted by mgoodman on 9/21/2009 at 7:26 PM Accepted
    I'm sure I'm misunderstanding. How can you have a negative retention rate? Retention means you keep them as members. You can't keep more than you have. If you keep them all, your retention rate is 100%. If you keep 80%, then that's your retention rate. If they all leave, your retention rate is 0%.

    Can you lose more than you had in the beginning?
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