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Spectrum (formerly Time Warner) offers 1-year contracts to customers. This October, contracts will expire for 300,000...

Spectrum (formerly Time Warner) offers 1-year contracts to customers. This October, contracts will expire for 300,000 customers. Spectrum has called these customers, and 75,000 have agreed to renew their contract. Assuming no other customers decide to renew, what is the current retention rate for Spectrum this month? Does this seem like a good, bad, or average rate of retention?

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Answer #1

Retention Rate = % of the customers who do not leave and renew the contract = 75000/300000 = 0.25 or 25%.

The value of a good retention rate depends on the industry. This means that there’s no one-size-fits-all answer. In the USA, the average retention rate on the internet, Cable TV, and telecom have been around 70 percent (ref: Statistica). So, a 25 percent retention rate seems to be very poor for this company since it is in that same sector.

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