What Is a Good Retention Rate or Benchmark?

Posted 2025-09-16 16:29:27

When companies measure user retention, one of the first questions leadership asks is: “Is this retention rate good?”

The answer isn’t universal. A good retention rate depends heavily on your industry, business model, product type, and customer expectations. What’s excellent for a mobile game may be disastrous for a B2B SaaS platform.

In this article, we’ll explore how to evaluate retention rates, industry benchmarks, and how businesses should set realistic goals.

Understanding Retention Rates

Retention rate measures the percentage of users who continue to engage with your product after a given period.

Formula:

$\, Rate = \frac{Users \, at \, End \, of \, Period - New \, Users}{Users \, at \, Start \, of \, Period} \times 100$

But this percentage means little in isolation. It only gains meaning when compared to:

Historical performance (your own baseline).
Industry benchmarks (what’s normal for your peers).
Business goals (growth vs. profitability).

Why Benchmarks Vary

Retention rates differ based on:

Product Type – Daily utility vs. occasional purchase.
Frequency of Use – Messaging apps vs. tax filing software.
Business Model – Subscription, e-commerce, freemium, B2B enterprise.
Customer Expectations – Mission-critical software vs. casual entertainment.

Industry Benchmarks

1. Mobile Apps

Day 1 Retention: 25–30% is average; 40%+ is strong.
Day 7 Retention: 15–20% is common; 25%+ is strong.
Day 30 Retention: 5–10% is typical; 15–20% is excellent.

Casual games often have lower benchmarks than utility apps, which users return to regularly.

2. SaaS (B2B)

Annual Retention Rate: 70–80% is average; 85–90% is good; 95%+ is best-in-class.
Net Revenue Retention (NRR): 100%+ means upsells offset churn. Top SaaS companies often hit 120%+.

Enterprise SaaS typically has higher retention due to higher switching costs.

3. E-commerce

Repeat Purchase Rate: 20–30% is average; 40%+ is excellent.
Subscription e-commerce (e.g., meal kits, subscription boxes) expects higher retention, often 60–70% after three months.

4. Media & Streaming

Monthly Retention: 60–70% is average; 75%+ is excellent.
Retention is highly dependent on fresh content releases.

5. Gaming

Day 1 Retention: 30–40% average; 50%+ excellent.
Day 7 Retention: 10–15% average; 20%+ excellent.
Games often see steep early drop-offs, so benchmarks are lower than SaaS.

What Influences a “Good” Retention Rate

1. Business Stage

Early-stage startups may accept lower retention as they iterate toward product-market fit.
Mature companies should target higher benchmarks to sustain growth.

2. User Behavior Norms

If users only need your product seasonally (e.g., tax software), retention looks different from a daily productivity app.

3. Pricing and Switching Costs

Higher switching costs (contracts, integrations) typically correlate with higher retention.

4. Competition Level

Highly competitive industries (food delivery, ride-sharing) may see lower retention due to easy switching.

How to Evaluate Your Retention

Compare to Peers – Look at industry reports, competitor data, or analyst benchmarks.
Analyze Cohorts – See how retention trends across user groups (by signup month, persona, or region).
Set Internal Benchmarks – Establish your own targets and aim to improve steadily.
Focus on NRR (for SaaS) – This metric accounts for expansion revenue, giving a more realistic picture of business health.

Example: Productivity SaaS

Annual retention: 88%
NRR: 112%

Interpretation:

Retention is above industry average.
Expansion revenue offsets churn, meaning customers not only stay but spend more over time.

This SaaS can confidently claim strong retention performance compared to peers.

Common Mistakes in Interpreting Retention

Obsessing over one number – Retention should be measured across multiple timeframes (Day 1, Day 30, annual).
Ignoring user type – Averages may hide strong retention in one segment and weak retention in another.
Confusing retention with satisfaction – Users may stay out of necessity, not loyalty. Pair retention data with NPS or CSAT.

Improving Retention Benchmarks

If you’re below industry standards:

Strengthen onboarding to help users realize value faster.
Improve customer support and proactive engagement.
Introduce loyalty or referral programs.
Personalize communications to increase engagement.
Continuously analyze churn reasons and address them.

Conclusion

There is no single “good” retention rate that applies to every business. What matters is how your retention compares to industry benchmarks, historical trends, and business goals.

For SaaS, 85–95% annual retention is strong.
For mobile apps, 20–25% Day 30 retention is good.
For e-commerce, 25–40% repeat purchase rate is healthy.

The key is not just hitting benchmarks but continually improving retention over time, as it is one of the most powerful drivers of sustainable growth.