CATEGORY > Customer Retention
Every company appreciates it when clients engage in repeat buying. This indicates that customers are satisfied with the provided products and services. The most favorable aspect is that returning patrons indicate your brand will enjoy a strong market standing.
These customers will recommend the brand to others and always give great reviews, which will eventually add up to your growth. That is why business owners try to keep their users glued and spend significant customer retention costs to achieve desired business growth.
In an industry where everyone talks about fetching new customers, a successful business owner equally emphasizes retention. They know that the already existing customers are easy to keep glued, and the revenue push they give is significant. It happens because they will make purchases without hesitation, as they already know your products or services.
Hence, businesses even spend considerable amounts of money on customer retention. To understand the concept, let us dig deeper and discuss what CRC is and how it impacts organizational growth.
Customer retention is when your customer makes recurring purchases. Once you have acquired a customer and that customer who makes the first purchase becomes your loyal customer, it is called customer retention. The customer does not have to buy the same product again and again. The whole idea is to make multiple purchases regularly.
It is a win-win situation for everyone involved, as the customer also enjoys a smooth buying experience and unique offers kept for loyal consumers. As per an analysis, a 5% increase in customer retention results in a 25% to 30% rise in the overall profit. It is significant to note here that the retention rate gets calculated over a fixed period.
By now, you know what customer retention is. It is significant to note here that the company must have worked hard to retain these consumers. They might have offered some referral bonuses or offers that require capital. It is what we call the customer retention cost. It is the amount of money that an organization spends on retaining its existing customers. It generally includes:
Anything you do to ensure your customer sticks with you falls under the customer retention cost.
Recurring purchases bring profits and revenue growth to the business. However, if you keep spending significant money on retention, it won't be a profitable deal. Hence, knowing how much you spend on customer retention and keeping this cost in check is essential to enjoying significant revenue growth.
Some other reasons to calculate customer retention cost:
The simple formula to calculate the customer retention cost is:
Using this formula, you can find out the average cost you spend per customer. Get the total amount you spent over some time on customer success and retention teams and initiatives. Divide this amount by the total number of customers you retained till the end of that period.
Tips to reduce your customer retention cost
Customer is the king and the foundation of your business success. Every business must focus on acquiring new customers and retaining the existing ones. Plan effective strategies, implement them effectively, and keep studying their results to ensure everything works according to your expectations.
However, if you see gaps, keep upgrading your strategies to ensure your customers stick with you and you experience exponential business growth.
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