![]() ![]() A mere 5% increase in customer retention can boost profitability anywhere between 25% to 95%!Ī strategic founder should not only be focusing on customer retention, but also understand the costs that go into retaining their customer base. Why? CRC can serve as an indicator of customer satisfaction, growth, and more. We may have alluded to this earlier in the article, but to make it clear - measuring and tracking CRC is just as important as measuring and tracking CAC. Why Customer Retention Costs Are Important Totango has a great overview of CRC and how SaaS companies should be approaching spend in each CRC category. This helps to understand where the most money is being spent for current customers and if you need to increase/decrease the amount of spend as it relates to the costs that go into your CRC. There are also opportunities to break down CRC costs by the level of service they are receiving, including freemium, standard, and enterprise customers. If you are measuring CRC on a monthly basis, then you can use Monthly Recurring Revenue (MRR) as your denominator instead. Similar to other ratio calculations, CRC Ratio is calculated by dividing the annual CRC (which can be found in the above calculation) by your Annual Recurring Revenue (ARR). Retaining customers is important, but you can’t blow all your capital on retaining customers alone! This is calculated by dividing the total CRC by the number of active customers during the same time period.Īnother common measurement and calculation is the CRC ratio to determine how much money is spent on customer retention as it relates to overall revenue. There are several factors that can go into calculating CRC, however, most early-stage startups begin with calculating the average CRC per customer per year. Associated costs for marketing campaigns aimed at existing customers.Tools and software, including if you use a customer experience or retention platform.Staffing costs for the customer success, account management, implementation, and onboarding & training teams.We typically see the following within CRC: The biggest challenge in tracking and calculating CRC is determining which costs should be a part of customer retention. It’s a balancing act! How To Calculate Customer Retention Cost ![]() Spend too little, and you might not be maximizing your company’s growth potential. Anything else incurred as it relates to sales and marketingįor both CAC and CRC, spend too much to acquire or retain customers and you won’t be able to recoup the money, let alone make a profit.Sales and marketing tools (CRM system, reporting tools, etc.).Design for marketing materials (ad designs, landing pages, etc.).Meaning, if you have yet to sign on the dotted line with a customer, then that is related to CAC, but everything after the sale is related to CRC. Customer Acquisition Cost (CAC)Īs you may have realized, the difference between CRC and CAC is the sale.Ĭustomer Acquisition Cost (CAC) is how much money you spend in sales and marketing to acquire one new customer. This includes all costs associated with customer success, customer service, customer engagement, marketing (to your existing customer base), training, professional services, and any additional teams or tools that are utilized to retain existing customers. In simple terms, Customer Retention Cost (CRC) is the total cost of retaining a customer. Invest In Your Customers & Watch Your CRC Drop.Make Training a Core Element of Implementation How to Decrease Your Customer Retention Cost.Why Customer Retention Costs Are Important.How To Calculate Customer Retention Cost. ![]()
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