The cost of keeping existing customers engaged and loyal. It includes expenses related to customer support, loyalty programs, customer success initiatives, and retention campaigns. Why is calculating CRC important?
- Identify cost-effective retention strategies: By understanding the cost of retaining customers, businesses can evaluate their retention initiatives’ effectiveness and identify areas for improvement.
- Optimize spending: Analyzing CRC helps businesses allocate resources efficiently and prioritize retention strategies that provide the highest return on investment.
- Improve customer lifetime value (CLTV): By reducing CRC and increasing customer retention, businesses can enhance CLTV, leading to higher profitability.
- Gain a competitive advantage: Companies with low CRC and high customer retention rates tend to have a competitive advantage.
While there’s no single, universally accepted formula for CRC, a common approach is:
Loading formula...This formula calculates the average cost of keeping a single customer over a specific period. To understand it better, let’s delve deeper into the two key elements:
Total Customer Retention Expenses:
This encompasses all the costs a business incurs to keep its existing customers satisfied and loyal. It’s a broad category that includes various expenses, such as:
- Customer Support: Salaries of customer service representatives, costs of support tools and platforms (live chat, help desk software), and expenses related to providing customer service training.
- Loyalty Programs: Costs of designing and implementing loyalty programs, including rewards, discounts, and exclusive offers for loyal customers.
- Customer Success Initiatives: Expenses related to onboarding new customers, providing ongoing support and education, and ensuring they succeed with your product or service.
- Retention Campaigns: Costs of targeted marketing campaigns aimed explicitly at existing customers, such as email marketing, personalized offers, and customer appreciation initiatives.
- Technology and Tools: Costs of CRM software, customer analytics platforms, and other tools used to manage customer relationships and track retention efforts.
Number of Retained Customers:
This refers to the number of customers who continue to do business with you over a given period. It’s essential to accurately track customer churn (customers who stop doing business with you) to determine the number of retained customers.
Calculating CRC in Action:
Let’s say a company spends $50,000 in a year on customer retention initiatives, and during that year, they successfully retain 1,000 customers. Their CRC would be:
Loading formula...This means the company spends an average of $50 to retain each customer annually.
By accurately calculating and analyzing CRC, businesses can make informed decisions about customer retention strategies and build long-lasting relationships with valuable customers.