How to Improve Customer Retention Cost in 2023 (The Complete Guide)

Customer retention is critical for making your business successful.

In fact, did you know that it costs 5 - 25X less to retain existing customers than to acquire new ones? And the chances of making a sale with existing customers are a lot higher too.


However, if your customer retention cost is too high, you might be actually losing money.

In this post, we will look at the 5 best strategies to minimize customer retention cost and retain more customers – leading to much higher profits and customer loyalty.

What Is Customer Retention Cost?

Customer retention cost is the cost of keeping an existing customer purchasing from your business.

This includes all costs associated with customer service, engagement, marketing (to your existing customer base), training, and any additional things utilized to retain customers.

How to Calculate the Customer Retention Cost

Calculating the customer retention cost is not easy since there is no universally accepted formula. This is because there are multiple ways and factors for calculating it.

When calculating customer retention cost, you’ll need to take into account the cost of:

Customer loyalty program,

The most popular way to calculate the customer retention cost is to sum up all of these per year and divide it by the number of active customers per year.


This should give you a pretty good estimate of the customer retention cost for your business.

Why Does Customer Retention Matter?

Customer retention cost is a critical metric to measure since it helps you to evaluate pricing strategies, measure return on investment, and discover real customer lifetime value.

Here are the most important reasons why you must constantly measure and optimize your CRC.

#1: Better Profitability

There are two ways to make your business more profitable, you either:

However, selling to existing customers is easier and leads to higher average purchase value. Therefore it’s a lot more profitable to sell to existing customers.


If you’re looking to increase the profitability of your business as quickly as possible, retention is the way.

#2: Stronger Loyalty

Prioritizing customer retention can help you create a loyal customer base that will help you promote your products to colleagues, friends, or family.

You can easily achieve that with referrals or loyalty programs (more on that later in this post.)

However, this is only possible if you work on reducing your customer retention cost and making your customers feel appreciated.

If your CRC is too high, it may not be worth it.

#3: Higher Engagement

Retained customers are happier and willing to spend more time engaging with your product, However, achieving this is only possible through proper customer retention strategies and delivering value to customers.

You cannot get to ‘outstanding’ if your overall company mission is about creating shareholder value.

Unfortunately, most companies can’t afford it due to high customer retention costs – it would go over their budget.  And that’s precisely where optimizing CRC comes in and resolves this objection.

5 Tips to Improve Customer Retention Cost

We’ll share some of our proven strategies that helped us drastically reduce the customer retention cost. You will discover what they are and how to apply them to your business.

Here are the best tips to improve customer retention cost.

#1: Provide Exceptional Customer Service

89% of companies admit excellent customer service is critical for maximizing customer retention. In fact, most buyers say that customer service is the top factor behind loyalty. If you can provide top-notch customer service, your customers will appreciate it – and will be more likely to spend more on your products and services.


The opposite is also true – bad customer service can lead to losing customers.


This would hurt your business, your profits, and your customer base.

More importantly, it would massively increase CRC since you’d spend money on retention tools, staff, and software but destroy it all by providing a bad customer experience.

If you’re looking to reduce CRC, provide excellent customer service with your customer’s needs in mind.

#2: Leverage Customer Loyalty Program

Loyalty programs can massively increase customer retention and average order value.


They can also help you maximize your conversions, reduce onboarding costs, and grow your business a lot quicker. This is the true power of using referral marketing to the fullest.


Your onboarding costs will quickly go down from a couple of thousand dollars to just 5 - 10% of the product price you pay to the referral customers. This can go a long way toward decreasing customer retention cost since your customers are now loyal and dedicated to your company.

And all you need to do to achieve this is to set up a referral tool in place, and you’re ready to roll.

#3: Provide Personalized Experience

Personalized experience plays a crucial role in the profitability of your business. If you provide irrelevant experience and products to your customers, you scare them away for good.

Source:Startup Bonsai

The biggest benefit of personalization is making your customers feel special and appreciated. It will let them know you care about them and increase their loyalty and probability of repeated purchases. All of this will create a stronger bond between you and your customers – increasing retention rate – and, of course, reducing customer retention cost.

There are a lot of ways you can incorporate personalization into your business, including.

The key is to collect as much customer data as possible. The more data you have, the more you can tailor the customer experience – increasing the chances of a sale.

#4: Find Ways to Constantly Improve

The only way to stay on top and not lose to your competitors is to constantly find ways to improve. It’s also one of the most important factors of customer retention. No matter how great your customer loyalty is, if your products fall behind, customers will leave.

(you would not settle for less-than-optimal products, right?)

And your customer retention cost will skyrocket – massively hurting your business and revenue.

To prevent that, you need to find a way to constantly improve your business and products. The way we accomplish this is by seeking feedback from customers.

Create a feedback form or proactively approach your customers about the things they’d improve.

This will go a long way toward providing the best customer experience, staying ahead, and getting your business to the next level.

#5: Resolve Issues Quickly

Your customers want the results immediately – they hate to wait.

If they experience any issues with your product or service, they expect you to respond to their requests within four hours.


In fact, fast response times are one of the most important attributes of customer experience.


If you can respond quickly, your customers will appreciate it – and will be willing to spend 20% - 40% more on your products and services.

(it also decreases the churn rate by 15%)

This can help you retain more customers, show your customers that you care about them,  and drive more conversions.


Customer retention cost is a critical metric for measuring your return on investment and customer lifetime value. If you’re looking to make high profits, you must reduce your CRC.

We’ve revealed our 5 best strategies that you can apply to your business to see the results immediately. The last thing you need to make this happen is to have a tool that provides you with these capabilities. That’s precisely what Konnektive CRM can help you with.

Konnektive CRM provides you with detailed statistics about your customers for tailoring the experience to them, tools for delivering the best customer service, and so much more.

Book a free demo with us and reduce your customer retention cost right now.


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