There are many important metrics business owners should measure, and chief among them is customer retention rate (CRR). CRR measures the percentage of customers a business has been able to retain over a given period of time. A high customer retention rate is generally seen as a positive sign for a business, as it suggests that customers are satisfied with the products or services being offered and are more likely to become loyal, repeat customers.
What you might not know is that CRR varies by industry. Curious where your business falls? In this article, we’ll go over the average CRR for 10 industries, how to calculate CRR, why it’s important, and how to improve it.
Why Is Customer Retention Important?
Customer retention is an important metric to measure because it provides valuable insights into the overall health of a business. By measuring the percentage of customers a business has been able to retain over a given period of time, it can gauge how well it is performing in terms of customer satisfaction and loyalty.
A high customer retention rate indicates that the business is doing a good job of meeting the needs of its customers, which can lead to increased revenue and profitability over the long term. Additionally, retaining customers is generally less expensive than acquiring new ones, so improving customer retention can also help to reduce customer acquisition costs.
How To Calculate CRR
To calculate your business’s customer retention rate, start with your customer count at the end of a certain period. Then subtract the new customers you gained over that period. Next, divide that number by the starting customer count and multiply by 100 to get a percentage.
Average CRR by Industry
Average customer retention rates vary from 55% to 84% across 10 major industries, with an average of 75%. These five industries have the highest CRR:
- Media & Entertainment and Professional Services (tie): 84%
- Commercial Insurance: 83%
- IT Services: 81%
- Telecom: 78%
Meanwhile, these industries have the lowest CRR:
- Hospitality: 55%
- Manufacturing: 67%
- SaaS: 68%
- Banking: 75%
- Healthcare: 77%
If you’re wondering what a good customer retention rate is, keep in mind that “good” is subjective, and largely depends on the nature of your business. Various factors impact CRR, and lower customer retention rates may be perfectly normal depending on the industry. For example, hospitality customers often prioritize price, which fluctuates often, making it difficult to build long-term customer loyalty.
3 Tips To Increase Your CRR
Improving your business’s customer retention rate requires a focused effort. Here are three tips:
- Track retention: Your first order of business is to track current customer retention so you can spot patterns. Keep an eye on other complementary metrics like churn rate, customer engagement, net revenue retention, renewal rate, customer lifetime value, and customer satisfaction score to give you greater insights.
- Know your customers: Getting to know your audience on a deeper level can help you personalize your interactions with them, encouraging them to stick around. This includes conducting surveys, collecting reviews, tracking behavior, engaging in social listening, diving into analytics, and more.
- Reward customer loyalty: Make your customers feel valued by rewarding their loyalty to your business. Refer to the data you gathered in your customer research to figure out what kind of reward will resonate with your audience.
While CRR might seem like just another metric to keep track of, it’s much more than that. Customer retention is paramount for business success in any industry. By understanding your audience and making data-driven decisions about their satisfaction, you can optimize your CRR and drive long-term growth.
