Customer retention is often not on a company's priority list: it is essential to invest as many resources in retaining customers as are invested in selling to new people.
All of these actions can be calculated using a simple formula and their results can be modified through specific actions that are part of a process that begins from the first contact with the client.
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By investing in customer retention and analyzing retention calculations, you can make the most of your efforts without wasting energy, time and money.
In the following article you will find all the information about the customer retention rate and you will learn useful techniques and strategies to build customer loyalty.
“If you invest in customer retention and analyze the retention calculations, you will be able to make the most of all your efforts without wasting energy, time and money.”
Customer Retention Rate: Definition
The customer retention rate or CRR is the percentage that defines a company's ability to retain users for a given period of time.
A high CRR demonstrates high loyalty and a low churn rate. Through this metric, it is possible to evaluate the quality and effectiveness of the loyalty processes carried out to keep customers satisfied.
Why is Customer Retention Rate so important?
Any growing company can improve its performance by working on the basis of the CRR. This percentage not only measures the effectiveness in acquiring new clients, but also the degree of loyalty they have with the company.
A satisfied customer will return, spend more, buy more frequently and recommend the product or service to their family members. It is estimated that with a 5% increase in CRR it is possible to increase a company's revenue by 25% to 95%.
It is proven that retaining customers significantly improves return on investment.
Some of the reasons why customer retention should be emphasized for business growth are:
Accessibility. Acquiring a new customer costs between 5 and 25 times more than retaining an existing one.
ROI. A 5% increase in CRR can result in a revenue increase of 25% to 95%.
Loyalty. Loyal customers often spend more than new customers: they already know the product or service and return to buy it many more times.
Referrals. Satisfied customers are the best promoters of a company: they will recommend the product to their friends and family.
Customer retention is key to increasing a business's revenue. Loyal customers require less investment than new ones, who need to be attracted, educated and converted.
Learn below which metrics are used to calculate CRR and the formula to determine the percentage. This metric works for any company, regardless of size.
Customer retention rate s = [(Customers at end of period – Customers acquired during period) / Customers at beginning of period)] x 100 CRR = [(E – S) / N) x 100)]
Once the retention rate is known, it is recommended to conduct a customer audit to detect the reasons why they abandon the brand. It is possible to find repeated responses, such as lack of budget or dissatisfaction; in these cases, retention actions must be carried out to lower the loss rate.
