A Simple Formula Measures Customer Service Success

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So you think your customer service is great and you’ve got lots of happy customers coming through the door and accessing your online stores.  You’re making money, making payroll and everything looks good.  Not so fast.


What seems good may not tell the real story.  You may have a lot of customers, but are they steady, loyal customers?  Are they even the same people?  You may have a lot of traffic to your store or site, but if you’re always gaining and losing customers, the end result may not be as good as you think. 


Tracking new customers and those you lose on a regular basis can determine your company’s attrition rate, or the rate at which you lose customers.  The opposite is the retention rate.  How many customers are you retaining?  It’s easy to underestimate your businesses success rate if you don’t have a reliable way to measure success.


An Inc.com article, “The Best Way to Track Customer Retention,” shared a formula that every business needs to know.  The article’s focus was on businesses that sell memberships, like fitness clubs, but the formula can be used for any business. 


The formula looks complicated, but is really pretty simple.  You take the number of customers you have at a certain point in time, such as the end of a year, month or week (CE).  Then the number of new customers acquired during that period (CN).  The third number is the number of customers you had at the start of that period (CS).    To determine the retention rate, use this formula, from the article.



Ex. –220 (CE) -40 (CN) =180

180/200 (CE) =.9 or 90% Retention rate


Now a 90% retention rate seems good, but to get that, the business had to attract 40 new customers to make up for the 20 it lost.  At that rate, a company can’t keep up and could eventually fold.  It costs a lot more money, time and labor to gain new customers than it does to keep the ones you have.  Gaining customers and keeping them happy keeps retention rates high and helps build the business, by adding more customers and losing fewer each period.


The real question behind the number is why?  Why are we losing customers?  Is it the product, service, accessibility, lack of information on the website?  Do we make it hard to buy our products or services, or is it a hassle to get someone to help with problems? 


Working the numbers gives solid data, not just a hunch.  You can’t ignore the numbers.  A retention rate can be charted from month to month, giving employees an incentive to make improvements and a visual to show if they’re improving and at what rate each month or year.


Another way to use the formula is to track sales results as it applies to bringing in new business.  Improving customer service shows in retaining old customer and building a solid reputation that attracts new customers.  Simple metrics that anyone can calculate and track are useful tools for all employees to track their personal success rate and set goals to make improvements that boost the company’s success.


Photo Source:  Freedigitalphotos.net


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  • Robert F
    Robert F
    Any sales professional should be glad that customer service is tracking results as shown here. Great confidence is achieved by knowing that everything possible is being done to keep customers satisfied and retained.

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