How To Calculate & Improve Your Customer Retention Rate

Disclaimer: This is a TL;DR of the longer article which you can find on the Invesp blog.

I. Introduction

• Customer retention is important for business success because it is cheaper to retain existing customers than to acquire new ones.
• Customer retention rate (CRR) is a metric that measures the percentage of customers that a business retains over a period of time.
• The benefits of improving CRR include increased revenue, reduced costs, improved brand reputation, and increased customer loyalty.

II. How to calculate CRR

• CRR can be calculated using the following formula: (E-N)/S x 100, where E is the number of customers at the end of a period, N is the number of new customers acquired during that period, and S is the number of customers at the start of the period.
• Example calculation: if a business has 1,000 customers at the start of the year, acquires 200 new customers during the year, and ends the year with 900 customers, the CRR would be (900–200)/1,000 x 100 = 70%.

III. How to improve CRR

• Offering excellent customer service includes being responsive to customer inquiries, providing prompt and satisfactory resolutions to customer complaints, and offering personalized recommendations.
• Personalizing the customer experience: this involves tailoring the customer experience to the individual preferences and needs of each customer, for example by sending personalized emails, offering customized product recommendations, or providing targeted promotions.
• Providing incentives for loyal customers could include offering exclusive discounts, rewards points, or other incentives for repeat purchases or referring friends and family.
• Encouraging customer feedback and acting on it: by soliciting feedback from customers through surveys, social media, or other channels, businesses can identify areas for improvement and show customers that their opinions are valued.
• Staying in touch with customers through email, social media, etc.: regular communication with customers can help keep the business top-of-mind and make customers feel valued.

IV. Conclusion

• CRR is a critical metric for measuring and improving customer loyalty and retention.
• By focusing on strategies to improve CRR, businesses can enjoy increased revenue, reduced costs, and improved customer satisfaction and loyalty.

To learn more about this topic, see the article on the Invesp blog.