Retention is a Key Performance Indicator that measures the value of repeat business. It tracks the sales activity of repeat customers who bought both last year and this year. Since they are the same customers in both years, Retention must be calculated separately for each year. Retention PY is their sales activity for the Previous Year, and Retention CY is their sales activity for the Current Year. The goal is to retain customers that produce more value this year than they did last year.
When the value of repeat customers falls from year to year, it is a sign of trouble that can be corrected by reducing Attrition and increasing sales to high value customers. One way to increase sales to high value customers is to increase product offerings as well as marketing offers promoting new products. Retention is closely associated with LTV. A small boost in the Retention Rate can result in a large increase in LTV.
The Retention Rate is the sales activity of either RetentionPY or RetentionCY divided by all of last year's sales activity.