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What is Retention Rate: definition and calculation formula

retention call center

In the service industry, every customer interaction with a business transforms into a customer experience. It’s clear that the more positive this experience is, the better the prospects for business development. Call centers play a tremendous role in shaping Customer Experience. That’s why, among the multitude of metrics measured in a call center, the Customer Retention Rate (CRR) is one of the most crucial.

As companies increasingly realize the profound impact of retaining existing customers, understanding and optimizing this index has become a strategic imperative. In this article, we will explore what the Customer Retention Rate is, unveil its significance, discuss the calculation methodology, and reveal the transformative power it holds for businesses. Join us to uncover the secrets of building lasting relationships with customers and learn how the Customer Retention Rate not only influences the customer experience but also contributes to long-term loyalty and sustainable business growth.

What is Retention Rate?

It has been repeatedly proven that it is more advantageous for businesses to sell products and services to existing customers than constantly seek ways to attract new buyers. To understand how to retain existing customers and enhance their loyalty, marketing employs the metric “Customer Retention Rate.” Among professionals, it is common to use the shortened term – Retention rate. So, what is Retention rate?

Retention rate is a coefficient that determines a company’s ability to establish strong, long-term relationships with consumers over a defined period. If the customer retention rate is above the market segment average, it signifies that consumers are loyal to the brand, making more frequent purchases or ordering services and recommending them to friends. Does it somewhat resemble the Net Promoter Score (NPS)?

The difference between the metrics lies in their focus and measurement: unlike NPS index, the retention rate primarily concerns the percentage of customers that a company retains over a certain period. Measuring Retention Rate focuses on calculating the number of customers at the beginning and end of a period, considering new customers acquired during that time, to determine the overall retention level.


Why is it so important for businesses to measure Retention Rate?

What is Retention Rate essentially? It’s the percentage of customers who remain with a business over a certain period after their initial purchase. And what needs to be done to keep a customer from leaving? Yes, communication is essential: conducting marketing surveys, obtaining feedback, offering related products, discounts, making personalized offers, and using communication channels that are convenient for them. If companies succeed in this, cross-sales and repeat sales grow. This is where the importance of measuring the retention rate comes into play, as the Retention Rate directly impacts:

Loyalty and long-term value

As mentioned, lead generation outsourcing usually requires more effort and resources compared to servicing existing customers. A high Retention Rate indicates customer loyalty, contributing to the long-term value of the customer for the business.

Revenue stability

Repeat customers are more likely to make additional purchases, contributing to a more predictable income stream. A high Retention Rate helps stabilize and maintain income levels over time.

Brand promotion

Here, the Retention Rate aligns with the Net Promoter Score (NPS). Satisfied and loyal customers are likely to become brand advocates, promoting the business through positive reviews and recommendations to friends, potentially attracting new customers.

Cost savings

Acquiring new customers is generally more expensive than retaining existing ones. Marketing campaigns for new audiences can be costly. Focusing on Retention Rate optimizes marketing and operational costs by prioritizing efforts on retaining existing customers.

Feedback loop

Monitoring Customer Retention Rate provides information about customer satisfaction and areas for improvement. Understanding why customers leave or stay allows companies to make informed decisions to enhance their products, services, or customer support channels.

How to calculate Retention Rate?

To measure the Customer Retention Rate, follow these steps:

  • Define the measurement period for the Retention Rate (monthly, quarterly, annually).
  • Determine the initial and final number of customers for the selected period.
  • Count the number of customers at the beginning and end of the measurement period.
  • Exclude new customers acquired during the measurement period from the calculation.

Customer Retention Rate: calculation formula

CRR = ((Number of customers at the end of the period – Number of customers acquired during the entire period) / Number of customers at the beginning of the period) * 100%

A high Retention Rate percentage indicates strong customer retention, while a low percentage suggests room for improvement. Regularly tracking CRR allows companies to assess the effectiveness of their customer retention strategies and make data-driven decisions to enhance customer satisfaction and loyalty.

Customer Retention Rate: calculation example

Imagine a local internet service provider starting the year with 15,000 subscribers. Over the year, they gained 2,000 new subscribers but lost 2,500 subscribers who discontinued their services. By the year’s end, there were 14,500 subscribers remaining. Applying these figures to the Retention Rate formula, we get the following calculation:

Retention Rate=(14,500−2,00015,000)×100%=83.3%

What is a good level of customer retention?

A good Customer Retention Rate (CRR) can vary from industry to industry. CRR is particularly crucial for companies that offer their services through subscriptions and paid plans: online services, SaaS (CRM systems, cloud call center software, email services, website builders, task managers), mobile apps, IP telephony providers, internet providers, and more.

In general, a Retention Rate above 80% is considered very good, indicating a high level of customer loyalty and effective retention strategies. However, the optimal rate may differ based on the specific industry and business model. It is important to regularly monitor and compare your CRR to industry standards and past performance to assess the success of customer retention strategies for your business.

Call center for Retention Rate research

Marketing research from an outsourcing call center is a service that helps client companies timely obtain information about the economic situation, competitor offerings, needs and preferences of the target audience, and demand for products and services.

Global Bilgi provides comprehensive contact center outsourcing services and can conduct Retention Rate research through a call center for your business as a powerful marketing tool. Global Bilgi combines technology with an award-winning contact center team to achieve the best financial and operational results for the client.

Why choose outsourcing marketing research at Global Bilgi?

Finding a contact center outsourcing team that will help deliver the best phone survey services for your company through a call center can be a challenging task. The key is to find an outsourcing call center that aligns with the needs, goals, and budget of your company. The company should have experience not only in outsourcing services but also expertise in marketing.

Global Bilgi meets all these criteria, and by choosing us as your provider for outsourcing survey services through a call center, you can focus on building customer loyalty and improving process quality for your business. Meanwhile, we will conduct marketing research and surveys on indicators such as Retention Rate, Net Promoter Score, Customer Satisfaction Index, and more.

Technologies of the outsourcing call center for surveys

Modern call center technologies are crucial for providing exceptional services to customers. From IVR and automatic dialing (power dialer software) to the fully integrated Sirius cloud call center platform and CRM system, our company has all the available solutions that will help you optimize this process. With market research automation and business automation solutions, your tasks will be executed at the highest level.

Customer Retention Rate (CRR): conclusions

Customer Retention Rate (CRR) is a crucial metric for businesses, as a high level of customer retention indicates loyalty and contributes to revenue stability. Among the reasons to analyze Retention Rate:

  • Stable Sales: A company is likely to sell a product to an existing customer with a probability of 60-70%, while the probability for a new customer is only 5-20%.
  • Free Product Recommendations: Satisfied customers can recommend the company’s products to their relatives, friends, and colleagues.
  • Time and Effort Savings in Product Promotion: An active customer who is already familiar with the company doesn’t need detailed explanations.

By entrusting Retention Rate tracking to an outsourcing call center service, companies gain access to the necessary tools and qualified specialists, facilitating the effective implementation of customer retention strategies, thereby ensuring more accurate measurement and improvement of Customer Retention Rate.


About author

Фахівець з маркетингу компанії Global Bilgi
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