CUSTOMER RETENTION RATE
How to Calculate and Improve Customer Retention Rate
What Is Customer Retention Rate and Why Does It Matter?
How to Calculate Customer Retention Rate
Information You’ll Need
- The number of customers at the start of that period (S)
- The number of customers at the end of a period (E)
- The number of new customers acquired during that period (N)
The Formula for Calculation
CRR = ((E-N)/S) X 100
Let’s say you had 107 customers at the start of the one-month period you’re tracking (S). During that period, you lost 8 customers, but you gained 21 (N) new customers. This means that at the end of the period, you had 107 of your original customers, plus 13 new customers, so you now have 120 customers (E) at the end of the period. Input those numbers into the formula:
CRR = ((120-21)/107) X 100
CRR = 92.5%
This means that your retention rate for that period was 92.5 percent.
Benchmarking CRR (What You Should Aim For)
5 Ways to Improve Your Customer Retention Rate
There are countless ways to help improve your retention rate, but if you really want to be successful, you have to be willing to truly evaluate your company, identify why some customers are leaving, and then put an actual customer retention plan in place. This plan will differ based on your company and the needs of your customers, but in almost all cases it will help to create a strategy and implement practices that can become a part of your routine. This makes improving your CRR specific to your business.
Here are some popular tips—applicable to all companies—to consider. These will set you on the right path.
1. Set realistic expectations from the get-go
You want to under-promise and over-deliver. This means that when you begin a relationship with a customer, make sure they know what they’re getting and what they can expect. You still need to capture a customer’s attention to close the sale, but don’t over-promise. Be as realistic as possible and then do your best to outperform what the customer is expecting. This helps create brand loyalty, and when customers feel they can trust you, it keeps them coming back. This also pushes your company to work with clear goals in mind and makes it easier to impress your customers.
Remember, too, that customers often recall negatives before positives, so avoid unpleasant experiences or unmet expectations. Even if you get it right nine times out of 10, that one mistake could be enough for a customer to leave.
2. Create anticipatory services for your customers
Have a system in place so you can let your customers know of an upcoming payment, event, or problem before it happens. This helps establish trust: Customers will know you’re on top of your business. By keeping them in the loop, they’re less likely to get any late charges or surprises. The most common way to do this for most companies is to alert a customer when an invoice is due, but there are other ways your company can get creative with anticipatory strategies.
3. Build your Keep Performance Indicators (KPIs) around customer service
4. Get personal and connect on social media
5. Utilise customer feedback surveys
Who Needs to Implement Customer Retention?