Customer Retention Cost Calculator
Retention cost per customer and per customer actually saved, against acquisition cost and lifetime value, with the salaries counted where they belong.
Retention spend over 12 months
support and success salaries $148,000.00, 74.7%
tools and platforms $9,600.00, 4.8%
loyalty and rewards $22,000.00, 11.1%
retention discounts given $18,400.00, 9.3%
total $198,000.00
Cost a customer
across the whole base $82.50 for 2,400 customers
per customer actually saved $1,064.52 for 186 saves
the difference 12.9× as much, which is why the denominator matters
a month $6.88
The save rate
at risk in the period 310, 12.9% of the base
saved 186, 60% of those at risk
lost 124
Against what a customer is worth
lifetime value, gross profit $705.71
retention cost as a share of it 11.7%
per save, as a share of it 150.8% ← a save costs more than the customer is worth
Against what a customer costs to acquire
acquisition cost $240.00
retention cost a customer $82.50
ratio 0.34× the acquisition cost
a save against a new customer $1,064.52 to save one against $240.00 to win one, so acquiring is cheaper here
The cost is $82.50 a customer across the base and $1,064.52 per customer
actually saved, which is 12.9 times as much. The second number is the
one that belongs in a decision about retention spending, because a
customer who was never going to leave did not need retaining.
Most retention spend is salaries. Support, success and account
management are the bulk of it, and a calculation that counts only the
loyalty programme and the discounts reports a small fraction of the
truth. The salary line above is usually the largest one for a reason.
"It costs five times more to acquire a customer than to keep one" is a
slogan, not a finding. It is sometimes true and it depends entirely on
your own two numbers, which is why both are printed above rather than a
multiple being asserted.
A save currently costs more than the customer is worth, which means the
retention effort is destroying value even though it looks like success.
Either the spend has to come down or it has to be aimed at customers
worth more.
A retention discount is a permanent price cut to your least satisfied
customer. It usually works, it is often worth it, and it sets a
precedent that travels by word of mouth, so count it as a reduction in
that customer's revenue rather than a one-off cost.
Not all churn is worth preventing. A customer who cannot afford the
product, who bought the wrong thing, or who costs more to support than
they pay is a customer you are better off without, and retention spend
aimed at them is the most expensive kind.
Some retention work is not a cost at all. Fixing an onboarding step that
loses a fifth of new customers is engineering work with a permanent
effect, which does not sit in this calculation and usually returns more
than the whole loyalty programme.
Output is valid and updates as you type.
Fix the highlighted fields to update the output.
“It costs five times more to acquire a customer than to keep one” is a slogan. On the figures below it is the wrong way round: a save costs $1,064 and a new customer costs $240.
Two things produce that result, and both are usually hidden. The denominator: retention cost divided by the whole customer base gives $82.50 a customer, which is comfortable and meaningless, because most of those customers were never at risk. Divided by the customers actually saved it is thirteen times higher.
And the numerator: most retention spend is salaries. Support and success are 74.7 percent of the total here, and a calculation that counts only the loyalty programme and the discounts reports a fraction of the truth.
How to use
- Put in what retention costs, with the salaries included.
- Put in how many customers were at risk and how many you saved.
- Add lifetime value inputs and acquisition cost, because this number only means something next to those two.
Example
Retention spend over 12 months
support and success salaries $148,000.00, 74.7%
tools and platforms $9,600.00, 4.8%
loyalty and rewards $22,000.00, 11.1%
retention discounts given $18,400.00, 9.3%
total $198,000.00
Cost a customer
across the whole base $82.50 for 2,400 customers
per customer actually saved $1,064.52 for 186 saves
the difference 12.9× as much, which is why the denominator matters
The save rate
at risk in the period 310, 12.9% of the base
saved 186, 60% of those at risk
Against what a customer is worth
lifetime value, gross profit $705.71
per save, as a share of it 150.8% ← a save costs more than the customer is worth
Against what a customer costs to acquire
acquisition cost $240.00
ratio 0.34× the acquisition cost
a save against a new customer $1,064.52 to save one against $240.00 to win oneA save costing 151 percent of lifetime value is a retention effort destroying value while looking like success, because the save rate is 60 percent and that sounds good.
Pitfalls
The denominator decides the answer. Divide by the whole base and retention looks cheap; divide by the customers who needed retaining and it often does not. The second figure is the one that belongs in a spending decision.
Count the salaries. Support, success and account management are the bulk of retention spend. Leaving them out is the single most common reason this number comes out implausibly low.
Don’t trust the five-times slogan. It is sometimes true and it depends entirely on your own two numbers. Calculate both and compare them rather than repeating the multiple.
Not all churn is worth preventing. A customer who cannot afford the product, bought the wrong thing, or costs more to support than they pay is one you are better off without. Retention spend aimed at them is the most expensive kind.
Retention spending has diminishing returns. The first pound aimed at obvious problems returns a great deal; the last pound chasing customers who have already decided returns nothing. The boundary moves as the easy problems get fixed.
A retention discount is a permanent price cut to your least satisfied customer. It usually works and it sets a precedent. Count it as a reduction in that customer’s revenue rather than a one-off cost.
Some retention work is not a cost line at all. Fixing an onboarding step that loses a fifth of new customers is engineering work with a permanent effect, it does not appear in this calculation, and it usually returns more than the whole loyalty programme.
Compatibility
Arithmetic in the browser: nothing is uploaded and nothing is stored, which matters for salary figures.
Both denominators are computed and shown together, with the ratio between them, so the choice is explicit rather than buried. The save-rate section is only printed when you say how many customers were at risk, because without that the per-save figure does not exist.
Lifetime value uses gross profit per customer divided by monthly churn, the same formula as the other tools here, so the numbers reconcile across the site. The comparison against acquisition cost is a plain ratio rather than an assertion about which is cheaper in general.
Cost lines are reported as a share of the total, which is usually the most surprising part of the output: the salary line dominates in almost every real case.