What is customer retention rate and how do I calculate it?

5 Ways to Calculate and Improve your Customer Retention Rate

When it comes to ensuring success for your business, one of the most important metrics to track and try to improve is your customer retention rate. You may be thinking: Aren’t there more important KPIs to keep track of and grow? You may even be tempted to prioritize growth in revenue, ROI, scaling your customer base, or other metrics over the customer retention rate.

However, one thing many people may not realize is that customer retention rate actually relates back to many of these common KPI metrics. In fact, customer retention rate has a huge impact on a company’s revenue and expenses. You can calculate your customer retention rate with this formula: [(E-N)/S] x 100 = CRR where:

• E = number of total customers at the end of the time period
• N = number of new customers added within the time period
• S = number of existing customers at the start of the time period

1. Make yourself accessible. There are not many things worse than not being able to get in touch with a business, especially when you’re having issues with their products, services, or platform. Make sure your business is easily accessible to your customers, whether it be through customer service, email correspondence, chat boxes, or phone calls. Doing so positions your business as trustworthy and reliable for your existing users.

To prevent momentum from falling, make sure when you do respond to your customers, you provide the best help you can in the least time it takes. Customers today value quality interactions at fast speeds. The quicker you’re able to help customers solve their problems with your business, the more likely they are to remain customers.

2. Streamline your onboarding process. Whether you like it or not, many people make judgments that last based on first impressions. This is why it’s important to optimize your onboarding process so that your customers will stick. If there is a big learning curve to your platform, it’s important to make sure you equip your new customers with the necessary tools to ramp up. Setting your customers up with the tools they need will help them maximize not only your platform’s capabilities but also their overall satisfaction. This benefits your business in the long-term, as it reduces the chance that those customers will churn. Speaking of churn…

3. Work to reduce churn. Reducing churn is one of the most important parts of customer retention. In order to do so, businesses must prioritize visibility into customer churn by identifying signs of churn at each stage — But it can get complicated. Churn doesn’t always look the same for every business model or type, but can show its face in various forms. Centralizing your KPI metrics around customer satisfaction can help your business evaluate and identify customers who may be at risk of churning, and thereby help your business adjust your strategy to keep them.

4. Reward customer loyalty. Loyalty is valuable, and it should be rewarded. Customers who have been with your business through thick and thin should be shown that they are appreciated, noticed, and valued by your company. By rewarding customer loyalty through special discounts, programs, and “first-look” opportunities, businesses have a chance to give something back to their customers while also bringing personalization into the process. As we all know, personalization can go a long way when it comes to customer-relationships.

5. Refine your customer experience and journey. To optimize your customer experience, it may be beneficial to take a look at the customer journey and touchpoints through the lens of a visitor. Are your questions being answered by the website information? If you reach out to a team member, do they respond in a timely fashion? Is the purchasing journey easily navigable and straightforward? Are you equipped with the right information to operate the platform?

These are all important questions to consider when refining and reshaping your customer experience to give your customer base the best experience possible. A seamless and enjoyable customer experience can improve the chances that those who come across and use your platform will stay on beyond the purchase point.

Aside from these five strategies, there are other key metrics that can be measured in tandem to determine the health of your customer churn and retention rates. As a thriving business, you should always be looking for ways to improve your retention while reducing your churn. Most importantly, remember that adding on customers does not make up for customers who have churned — If your churn rate is high, there may be more serious underlying issues that are affecting your business.

Need help restructuring your business operations to improve your customer retention rate? Contact our talented team at Punch Financial today to talk with seasoned professionals who know just how to help!