The Customer Retention Cost (CRC) is a metric used to measure the costs associated with retaining customers over time. It is used to evaluate the efficiency of customer retention efforts and the return on investment (ROI) of customer retention strategies.
The formula for CRC is:
CRC = (Total cost of customer retention efforts / Number of retained customers)
In this formula, “total cost of customer retention efforts” refers to the expenses incurred by the company to retain customers, such as marketing and advertising costs, customer service and support costs, and loyalty program costs. “Number of retained customers” refers to the number of customers who remain with the company over a certain period of time, such as a year.
For example, if a company incurs $50,000 in customer retention costs and retains 1,000 customers over a year, the CRC would be $50,000 / 1,000 = $50 per retained customer.
A low CRC indicates that the company’s customer retention efforts are efficient and cost-effective. On the other hand, a high CRC indicates that the company’s customer retention efforts may not be as efficient or cost-effective and might need to be reevaluated.
It’s important to note that the CRC is a metric that should be considered along with other metrics, such as customer retention rate (CRR) and customer lifetime value (CLV) to evaluate the overall effectiveness of the customer retention strategy, and to make data-driven decisions.
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