The best customer experience (CX) businesses see benefits reflected in their retention rate. Because loyal customers spend 67% more than new ones and the cost of acquiring a new customer is significantly higher than retaining them, it rewards both businesses and customers to invest in customer support quality. Keep reading to learn how you can calculate retention rate and improve it with different customer experience strategies that fit your brand!
What is retention rate?
Retention rate is an important loyalty metric that calculates the percentage of customers who continue paying for a product over a given timeframe. Many business experts and entrepreneurs see customer retention as the most important indicator of a company’s success. Here are a few reasons why:
- Your brand will stand out from the crowd
- Retention is cheaper than acquisition
- Loyal customers are more profitable
- You’ll earn more word-of-mouth referrals
- Engaged customers offer more feedback
- Loyal customers are more forgiving
According to Bain and Company, increasing customer retention rate by just 5% can increase profits between 25% and 95%. A high retention rate signifies that customers value your products and are continuing to purchase. A low retention rate means that customers are churning. Some attrition is unavoidable and customers will stop using your products for a myriad of reasons that are out of your control. Regardless, calculating your retention rate is the first step in converting churn-prone consumers into ecstatic brand advocates.
How to calculate retention rate
Calculating customer retention rate (CRR) is used to find out how many customers you have at the end of a given period. This can be weekly, monthly, quarterly, or even annually, depending on your business needs.
Calculate customer retention rate using this formula: [(E-N)/S] x 100 = CRR
Start with the number of customers at the end of the time period (E).
Subtract the number of new customers gained within the time period (N).
Divide the result by the number of customers at the beginning of the time period (S).
Multiply by 100.
Putting the customer retention rate equation into action would look like this: say a company has 200 customers at the start of the period (S), ended the period with 200 customers (E), and added 20 customers over the period (N). They would have a customer retention rate of 90 percent: [(200-20)/200] x 100 = 90 percent.
The performance of a business in acquiring new customers and keeping its current customers is measured by customer retention rate. It is important to enhance customer loyalty and increase return on investment (ROI).
How does CX improve retention rate?
Loyal customers are more lenient about a problem if they know that your business provides outstanding support. According to Salesforce Research…
If a company’s customer service is excellent, 78% of consumers will do business with them again after a mistake.
Good customer experience creates loyalty, which improves retention and drives growth. As a sign of product acceptance, high retention rates positively impact a company’s bottom line. Retaining customers means repeat purchases and upsell/cross-sell opportunities that result in stronger customer lifetime value (CLV).
The longer a customer sticks with your brand, the more likely they are to try out new products. With a strong CX strategy, customers will choose your business over competitors because of your long-running history and familiarity with consistent, helpful support. A loyal customer base sets the tone for growth.
Since it costs up to 7x more to acquire a new customer than to retain an old one, improving CX with the goal of retaining customers is a cost-effective strategy to boost ROI. Acquiring new customers is important, but because 65% of a company’s business comes from existing customers, it is vital to please current customers and keep them engaged with your brand.
How to improve your retention rate with CX
Customer retention strategies that inspire loyalty can include many aspects, such as leveraging convenience or prioritizing personalization. Here are 13 successful ways to improve retention rate through CX.
- Track and analyze churn rate to better understand when and why customers are leaving
- Initiate a customer feedback loop
- Create a CX critical care plan
- Tailor each interaction
- Offer support on the right platforms
- Create a community around your product or service
- Invest in top-notch customer support
- Establush trust with consumers
- Start a customer education program
- Start a customer retention program
- Capitalize on social proof
- Surprise and delight
- Offer incentives
Keeping customers satisfied is a priority. As a business, you need to understand what your customers want, what they need, and how they can benefit from your products or services. Establish a relationship with your customers and continue to offer them value with new products, updates, and through every aspect of support.
Improve each level of customer experience with Influx
According to Hubspot, 93% of customers are more likely to make repeat purchases with companies that offer excellent customer service. Our teams work on demand to provide 24/7 customer support with all management and training included. Ready to launch in one week, Influx teams provide CX support that boosts retention and allows you need to get back to what you love most. Get support today!