5 Ways to Optimize Your Customer Retention Costs

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As a business owner, you put a lot of money and manpower into attracting new customers, losing these customers can be a huge loss. This is why you need to pay more attention to customer retention processes. 


To do this, you need to create strategies and plans that can ensure these processes can work out in an optimized manner.


To help you with this, I will be providing five proven ways you can optimize your customer retention process and achieve a drastic reduction of the total cost used in retaining your customers. 


What Is Customer Retention


What Is Customer Retention?


Customer retention describes the ability of a company or an organization to keep its customers over time. It points out how a product produced by a company, or the services rendered by a business cannot only attract new customers but also keep them loyal to a brand over a specific period.


Your ability to motivate and encourage customers to repeatedly purchase your products and services instead of other stores will determine whether or not customers remain loyal to you. 


For example, imagine you sell baking products in your store but then, you notice an increase in the competition level around you. So, to remain in business you decide to take action.


You start by implementing a customer loyalty program, giving out points for every purchase and ensuring that customers can redeem the points for discounts or free items. You also take it upon yourself to interact with your customers and personalise their experience with your store.


All of these are just measures to ensure your customers keep picking your products over others.


Customer Retention Rate


This is a means of measuring the percentage of customers a  company has retained over time. 


It focuses on the ability of a business to keep its existing customers satisfied all year long without the customers leaving the brand for another. Companies and businesses need to review their customer retention rate from time to time and seek to improve on it as seen fit. 


Importance of Customer Retention Rate for Companies


The long-term success of a business or company depends greatly on how much the owner can achieve customer retention. Customer retention rate is important for the following reasons:


  1. It helps you to measure customer factors effectively. You can determine the extent to which customers are loyal to your company and also, it helps to judge how satisfied they are with the services you render.
  2. It helps your company to investigate the factors that cause customers to patronize and stay with you. It also helps to determine the loopholes that make customers leave. This is important to render or improve quality services.
  3. In addition, the retention rate helps to save costs. You get to know how many customers you’re retaining against those you’re losing and how to salvage the situation. This is because keeping existing customers is far better than getting new ones.


How To Calculate Customer Retention Rate


How To Calculate Customer Retention Rate


 To start with, calculating the customer retention rate for your company will require that you ascertain the number of customers you have at the beginning and end of a particular time. Here’s the formula:


  1. Choose a specific time period: The first step is to determine the time frame to calculate your customer retention rate. It could be within the time frame of a month, it could be quarterly or a year.
  2. Number your customers: The second step is to count the number of customers you have at the beginning of a chosen time frame. Let’s say you’ve chosen a monthly-based interval, and count the number of customers you have, starting from the 1st to the 30th of the month. Call this X.
  3. Determine new customers: The third step is to find out the number of new customers you gained within the specified time frame, and document it. Call this Y.
  4. Count customers at the end: The fourth step is to find out how many customers you have left after the specified time frame. Call this Z.


The next thing is to calculate the customer retention rate using the above values and a formula. Stated below, is the formula needed for the calculation of the customer retention rate:


 Customer Retention Rate = [ (Z – Y) / X ] x 100



  • Z stands for the number of customers at the end of a time frame.
  • Y represents the number of new customers acquired during that particular time frame.
  • X points to the number of customers at the start of that period.


For instance, if a company with 500 customers, acquires 100 new customers, and ends with 400 customers, the customer retention rate would be calculated as follows:


((400 – 100) / 500) x 100 = 60%


 Interpretation of Results


 Below, is a breakdown of how results are interpreted and applied:


  • 0-20%: Poor customer retention rate.
  • 20-40%: Below average customer retention rate.
  • 40-60%: Average customer retention rate.
  • 60-80%: Good customer retention rate.
  • 80-100%: Excellent customer retention rate.


One thing you need to understand is that customer retention rate differs from company to company. However, a rate above 60% is considered favorable, but can still be worked on.


Ways To Optimise Your Customer Retention Costs


Customer retention costs (CRC) are just the amount of money your company spends on retaining a customer for as long as possible. It is the cost or expenses incurred on customer retention over a specific time.


The following are ways to optimize customer retention costs for your company or business.


1. Improve Customer Experience: Your company must become intentional about personalizing customer interactions. Every customer enjoys being treated like a human. 


When your customers say good things about your store and leave great reviews, more customers get attracted to your business. Stats show that 20-50% of all purchase decisions are influenced by word-of-mouth.


Take time to know what they want and to what extent they want it. Provide instant responses through live chats that are integrated into your websites. This may require that you hire a customer support manager once your customer base grows to a point.


You can also use chatbots to answer the inquiries of customers. Just preload answers onto the chatbots that would get triggered once certain keywords are passed. 


Use fulfillmentfulfillment companies and services that provide fast and reliable delivery services that will leave your customers satisfied. 


Globallyfulfill can help you with this. With their state-of-the-art storage technology and shipping system, your customer’s package will be delivered swiftly and in the best condition. Try them out. 


Have engaging interactions with customers and be swift to resolve issues faced by customers as promptly as possible. This goes a long way to give customers a rewarding experience.


customers a rewarding


2.Offer Loyalty Programs: In addition to providing excellent customer service and selling high-quality products, customers generally appreciate it when you give them little benefits here and there. It shows you value them for patronizing you.


Loyalty offers are discounts and offers you provide to customers who have returned to purchase from your store. It serves to show how much you appreciate their patronage.


It does not always have to be some huge offer that could excessively affect your profits especially if you are just getting started; it could just be a 5% per cent discount for people who have made at least three purchases. Make sure it’s easily achievable and free of ridiculous Terms & Conditions.


The truth is, competition is everywhere and if you’re serious about keeping your customers, then giving benefits cannot be sidelined. 


By putting reward systems in place for customers who make continued patronage, customer retention costs get optimized. 


This not only encourages customer retention but also leads to potential referrals and the acquisition of new customers.


3.Act on Customer Feedback: Customers would appreciate it when their observations, comments, recommendations, and pieces of advice are attended to. But, before you can do this, you’ll first have to get their feedback. 


You can do this through reviews. Encourage customers to drop their honest reviews on your products and their overall experience after they make a purchase. Here’s a detailed explanation of how to do this.


You can also use surveys. This survey will provide some insight into how much satisfaction customers derive from interacting with you and your products. 


Write up an appreciative response anytime a client provides feedback be it good or bad. Once you start implementing the feedback, make sure you inform your clients of these changes so they know you are listening and that you value their input.


Doing this shows that your company values its customers’ opinions.


4.Build Strong Communication Channels: Every company should identify the importance of communication in the success of its business. The importance of communication cannot be downplayed in this 21st century. 


Strong and effective communication channels should be established. While some customers have no problem waiting for their turn on customer care calls, or on live chats others may not have this time, preferring to leave a message on social media or an email you can reply to later. 


Your company could gather the contacts and emails of customers and send them personalized emails from time to time. The emails could be to appreciate them for the last patronage made or to inform them of available new products and services. 


The idea is to get into a strong connection with customers and keep them abreast of all they need to know about new products and services.


5.Provide Value-Added Services: Improving customer satisfaction should be the goal of your company. As much as you go all out to give your customers a rewarding experience when they come to make their purchases, you should consider the integration of value-added services.


Value-added services like making deliveries free for customers, extending warranties, giving out discounts, and free access all contribute to an increase in the satisfaction of customers. 


Surprising them once in a while is a good way to register the company in their heart as a forever go-to company.




All these ways and many more are important in the optimization of customer retention costs. It’s important to note that customer retention is cheaper than getting new customers. Therefore, the concept of customer retention is worth pursuing.

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