How To Calculate Customer Retention Cost in FinancialForce | Arithmix

Customer retention cost is an important metric for any business that wants to keep its customers happy and loyal. It is the cost associated with retaining existing customers over a certain period of time. This includes the cost of marketing, customer service, and any other expenses incurred in order to keep customers coming back. In this article, we will discuss what customer retention cost is, when it is valuable to calculate it, and how to calculate it in FinancialForce.

What Is Customer Retention Cost?

Customer retention cost is the total cost that a business incurs in order to retain its existing customers. This includes the cost of marketing, customer service, and any other expenses associated with keeping customers happy and loyal. The goal of calculating customer retention cost is to determine how much it costs to keep a customer over a certain period of time, and whether or not that cost is worth it.

Calculating customer retention cost is important because it helps businesses determine the value of their customers. By understanding how much it costs to retain a customer, businesses can determine whether or not it is worth investing in customer retention strategies. For example, if the cost of retaining a customer is very high, it may be more cost-effective to focus on acquiring new customers instead.

When Is It Valuable To Calculate Customer Retention Cost?

Calculating customer retention cost is valuable for businesses of all sizes and industries. It is particularly important for businesses that rely heavily on repeat customers, such as subscription-based services or businesses with high customer lifetime value. By understanding the cost of retaining customers, businesses can make informed decisions about how to allocate their resources and prioritize their efforts.

Calculating customer retention cost is also valuable for businesses that are experiencing high customer churn rates. By understanding the cost of retaining customers, businesses can identify areas where they can improve their customer retention strategies and reduce churn.

How To Calculate Customer Retention Cost in FinancialForce

Calculating customer retention cost in FinancialForce is a straightforward process. Here are the steps:

1. Identify the time period you want to calculate customer retention cost for (e.g. one year).
2. Determine the total cost of all marketing and customer service activities during that time period.
3. Determine the total number of customers you had at the beginning of the time period.
4. Determine the total number of customers you had at the end of the time period.
5. Subtract the number of customers you had at the end of the time period from the number of customers you had at the beginning of the time period.
6. Divide the total cost of marketing and customer service activities by the number of customers lost during the time period.

For example, if you had 1,000 customers at the beginning of the year and 900 customers at the end of the year, and you spent $100,000 on marketing and customer service activities during the year, your customer retention cost would be:

($100,000 / (1,000 - 900)) = $10,000

This means that it costs $10,000 to retain each customer over the course of one year.

By calculating customer retention cost in FinancialForce, businesses can make informed decisions about how to allocate their resources and prioritize their efforts. It can also help businesses identify areas where they can improve their customer retention strategies and reduce churn.

How Do You Calculate Customer Retention Cost in FinancialForce

FinancialForce itself isn’t naturally geared towards letting you calculate complex metrics like Customer Retention Cost. As an alternative, teams typically use products like Arithmix to import data from FinancialForce and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like FinancialForce, combine it with data from other systems, and create calculations like Customer Retention Cost.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Customer Retention Cost in Arithmix

Calculating metrics like Customer Retention Cost is simple in Arithmix. Once you've created your free account, you’ll be able to import your FinancialForce data, and use it to create natural language formulas for metrics like Customer Retention Cost.

Arithmix is designed to give you the power to build any calculations you want on top of your FinancialForce data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.