Customer retention cost

Customer retention cost (CRC) is the total expense of maintaining customer loyalty and preventing them from switching to competitors.

What is customer retention cost (CRC)?

Customer retention cost (CRC) measures how much it costs to keep a customer and prevent them from switching to a competitor. It’s an important metric for SaaS and subscription-based businesses because it captures the investments that drive loyalty and long-term relationships.

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Acquiring new customers is typically at least five times more expensive than retaining existing ones—and in some industries, the gap is even wider. With retention now a top priority for many companies, understanding your CRC helps you invest wisely in keeping customers engaged, supported, and committed to your brand.

Calculating CRC: formula + example

To calculate customer retention cost (CRC), add up all expenses related to retention and divide that total by the number of active customers.

Formula:

• Customer retention cost = total retention cost / number of active customers

Example:

If you spent $125,000 last month on retention initiatives—such as customer support training and retention-focused marketing—and had 250 active customers, the calculation would look like this:

• CRC = 125,000/250 = $500 per customer for that period

While this formula won’t show the exact cost of retaining each individual customer, it gives you a reliable average. To estimate lifetime retention cost, multiply the average annual CRC by the average number of years you expect to keep a customer.

What’s included in customer retention costs?

For your customer retention cost (CRC) calculation to be accurate, it needs to be fully burdened—that means including all expenses tied to keeping customers engaged and loyal. Deciding what counts can feel tricky, but a good rule of thumb is to include any role, tool, or initiative that supports existing customers.

Examples include:

• People costs: Salaries and benefits for teams like customer success, technical support, account management, implementation, onboarding, and training
• Tools and software: Platforms that support customer experience, engagement, or retention
• Loyalty and engagement: Programs, campaigns, or events aimed at building customer loyalty
• Training and onboarding: Costs tied to customer education sessions or guided onboarding
• Renewal incentives: Discounts or perks designed to encourage contract renewals
• Feedback programs: Surveys or research to better understand customer needs

In short, any expense that helps strengthen customer relationships, increase renewal rates, or improve overall satisfaction should be considered part of CRC.

Key takeaways

• Customer retention cost (CRC) is the total expense of maintaining customer loyalty and preventing them from switching to competitors
• Understanding CRC is vital for SaaS businesses aiming to maximize customer lifetime value and optimize operational efficiency
• Key components of CRC include marketing to existing users, training, support, and loyalty programs
• Retaining customers is generally more cost-effective than acquiring new ones, emphasizing the importance of a strategic retention approach
• By refining onboarding, automating walkthroughs, optimizing product experiences, refining pricing strategies, and enhancing support resources, businesses can effectively manage CRC

Customer retention cost vs. customer acquisition cost

Customer retention cost (CRC) and customer acquisition cost (CAC) are both essential for understanding the full picture of customer-related expenses.

• CRC reflects the investments made to keep customers engaged, satisfied, and loyal. These efforts maximize customer lifetime value and support recurring revenue growth
• CAC captures the costs of bringing in new customers—covering marketing, sales, and advertising activities to attract and convert prospects

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In SaaS, acquisition can be particularly costly due to long sales cycles, targeted campaigns, and personalized onboarding. That’s why balancing CAC with CRC is critical.

Here are some key differences at a glance:

• Retention is about nurturing and maintaining customer relationships; acquisition is about converting prospects into customers
• Measuring CRC helps guide strategies to maximize lifetime value, while measuring CAC helps identify ways to make acquisition more efficient
• Marketing to new customers (CAC) is usually more expensive than marketing to existing ones (CRC)

5 ways to decrease customer retention costs

There isn’t a universal benchmark for customer retention cost (CRC), but the goal is always the same: keep costs as low as possible while maintaining strong retention rates.

Even an impressive gross dollar retention of 90+ percent can be inefficient if you’re overspending to achieve it. If your retention costs feel high, here are five strategies to improve efficiency:

1. Strengthen the onboarding experience

Onboarding shapes how much support a customer will need later. A clear, well-designed onboarding process reduces questions, lowers support costs, and helps customers get value from your product sooner.

Ways to improve onboarding include:

• Analyze user behavior to see where people drop off
• A/B test onboarding flows to find the most effective approach
• Personalize onboarding by segmenting users
• Streamline the process so it’s aligned with business goals

A smooth onboarding experience creates confidence, reduces churn, and even opens the door to upsell opportunities.

2. Invest in automation to support self-guided walkthroughs

Product tours and self-guided walkthroughs give customers the tools to succeed on their own—reducing the load on support and training teams.

Tips to optimize walkthroughs:

• Track where users stop or exit the tour, and refine accordingly
• Gather feedback from customers and power users to shape the content
• Use clear, simple language and avoid jargon
• Keep tours visual, engaging, and concise

The aim is to help customers discover key features quickly, reach their “aha” moment faster, and stay with the product longer—while lowering your support costs.

3. Optimize your product experience

A strong product experience is one of the best ways to keep customers satisfied—and satisfied users are far more likely to stay.

By reducing friction and addressing issues proactively, you not only prevent churn but also create long-term loyalty. Some ways to improve product experience include:

• Monitor performance regularly, fix bugs quickly, and release features that reflect evolving customer needs
• Optimize for speed, reliability, and responsiveness
• Ensure the interface is intuitive and accessible for all users

While product improvements may carry upfront costs, they’re investments that reduce retention costs over time by driving renewals and customer satisfaction.

4. Refine your pricing strategy

The right pricing strategy can give customers another reason to stick with you. For example, you might:

• Reward loyal customers with discounts or perks at key milestones
• Offer incentives to upgrade to premium tiers
• Provide flexible plans that meet the needs of different customer segments

Whatever approach you choose, prioritize transparency and communication. Review your pricing regularly to make sure it evolves with your product, market shifts, and customer behavior.

5. Improve support resources and customer success workflows

Customer support often shapes how people feel about your product. Quick, effective solutions build trust and loyalty, while delays or friction can push customers away.

To strengthen your support and success workflows:

• Set clear customer success goals and monitor progress against them
• Tailor onboarding so it’s seamless and intuitive
• Segment customers and adjust workflows to their unique needs
• Gather feedback regularly and act on it
• Proactively address recurring issues to minimize repeat problems
• Empower customers with helpful content like guides, webinars, or product tours

Investing in customer success not only lowers retention costs but also turns happy customers into advocates—helping reduce acquisition costs through referrals and positive word of mouth.

Customer retention cost FAQs

What is a good customer retention cost?

There isn’t a single benchmark for a “good” CRC—it depends on your industry, business model, and stage of growth. In general, you want to keep CRC as low as possible while maintaining strong retention rates. If your CRC is low but your retention rates are slipping, it’s a signal to invest more in customer success and retention initiatives.

What is the difference between customer acquisition cost and customer retention cost?

Customer acquisition cost (CAC) measures how much it costs to bring in new customers, including expenses for marketing, sales, advertising, lead generation, and promotions.

• CAC = Sum of all marketing and sales expenses / number of new customers acquired

Customer retention cost (CRC) measures what you spend to keep existing customers engaged and loyal. This can include customer success and support, account management, loyalty programs, engagement campaigns, onboarding and training, and cross-sell or upsell efforts.

• CRC = Total cost of customer retention / number of active customers

What is an example of customer retention cost?

Hiring and maintaining a customer success team, creating support resources, resolving customer issues, and gathering customer feedback are all common examples of CRC.

What does a 100 percent customer retention rate mean?

A 100 percent retention rate means every customer you started with in a given period stayed with you through the end of that period. For example, if you had 200 customers at the start of January and still had 200 by month’s end, you achieved 100 percent retention for that month. While 100 percent is ideal, many SaaS companies achieve retention rates closer to 90 percent—still considered very strong.