---
title: "Renewal rate vs retention rate: the differences"
description: "Renewal rate works for subscription businesses whereas retention rate works for all businesses. See the most important differences between the two and how to improve them."
canonical: "https://churnkey.co/blog/renewal-rate-vs-retention-rate"
category: "blog"
author: "Team Churnkey"
author_role: "Retention research"
date_published: "2024-12-16"
last_updated: "2024-12-16"
---

# Renewal rate vs retention rate: the differences

By Team Churnkey, Retention research · Published 2024-12-16

The difference between renewal rate and retention rate lies in their focus and application:

## Renewal rate

-   This metric specifically applies to subscription-based models.
-   It measures the percentage of customers who renew their subscriptions at the end of a billing cycle.
-   Renewal rates focus on the ability to retain paying customers over time. It would include zombie/at-risk customers – those that pay but don't use.
-   Formula for Renewal Rate = Total Number of Eligible Customers / Number of Customers Renewing​ × 100%

## Retention rate

-   Retention rate is a broader metric that measures the percentage of users who continue to use a product or service over a given period.
-   It can span any defined period (monthly, annually)
-   It applies to **both subscription and non-subscription models** and reflects the overall ability to keep users engaged and active.
-   Retention rates include free users too.
-   Formula for Retention Rate = Number of Customers at End of Period / Number of Customers at Beginning of Period × 100%

### Consider an example

  
Imagine a SaaS company with 1,000 customers up for renewal at the end of the billing cycle, including 100 zombie users. Out of these, 800 customers renew their subscriptions.

**Renewal Rate** = (800 / 1,000) × 100% = **80%**

If the same SaaS company has 9,000 free users, of which 3,000 are active, and excludes the 100 zombie users from the 800 renewing, the **Retention Rate** would focus only on active users. Assuming the company starts with 10,000 users (1,000 paying + 9,000 free) and ends with 3,700 active users (700 active paying + 3,000 free):

**Retention Rate** = (3,700 / 10,000) × 100% = **37%**

## How Churnkey can help?

Churnkey is retention automation for self-serve subscription companies. Fix failed payments. Reduce cancellations. Increase ARR.

[Explore Churnkey](/)

Or, get started with free churn metrics. Simply connect your billing provider to see metrics you've never seen before.

[Free Churn Metrics & Subscription Analytics | Churnkey](/churn-metrics)

### Additional reading

[Retention Cohort Analysis: Four Simple Ways](/blog/cohort-retention-analysis)

[Retention automation separates growth heroes from growth zeroes](/blog/retention-automation)

[Retention Metrics to Reduce Churn and Win Back Customers](/blog/retention-metrics-to-reduce-churn-and-win-back-customers)

[Customer Retention Curve: Calculator, Definition, Examples](/blog/retention-curves)