Customer Retention Cost

What is Customer Retention Cost?

CRC represents the total cost a company incurs to retain a customer over a specific period.

It encompasses everything from customer support and loyalty programs to marketing campaigns aimed at existing customers.

While acquiring new customers is important, retaining existing ones is often more cost-effective and profitable.

How To Calculate Customer Retention Cost?

Formula:

CRC = (Total Retention Costs) / (Number of Retained Customers)

Retention costs include:

• Customer service & support
• Loyalty programs & discounts
• Customer onboarding & training
• Product updates & features
• Marketing campaigns for existing customers

An Example of Customer Retention Cost

A company spends $100,000 on customer support, $50,000 on loyalty programs, and $20,000 on marketing for existing customers in a month.

They have 1,000 retained customers.

CRC = ($200,000 + $40,000 + $10,000) / 1,000 = $250 per customer

Insights on Customer Retention Cost

Understanding CRC helps you:

• Evaluate the efficiency of your retention efforts.
• Compare your cost to industry benchmarks.
• Identify areas for optimizing spending and reducing churn.
• Make well-informed choices regarding strategies for acquiring and retaining customers.

Additional Considerations for Customer Retention Cost

• Track churn rate alongside CRC to measure the impact of retention efforts.
• Segment customers based on value and tailor retention strategies accordingly.
• Utilize customer lifetime value (LTV) to evaluate the long-term profitability of different customer segments.
• Invest in building strong customer relationships to foster loyalty and reduce churn.