What is benchmarking in CRC and how to apply it?

Have you ever wondered how much it really costs you to keep your customers? We’re not just talking about money, but also time, effort, and resources. Understanding this cost, known as Customer Retention Cost (CRC), may seem a bit complicated, but I promise you that it has a direct impact on the profitability of your business. And this is where we turn to benchmarking in CRC, a tool that allows you to measure, also compare and improve your retention strategies.

Maybe you have an amazing product, your customers seem satisfied, but the numbers don’t add up. Possibly you are spending more than necessary on loyalty or on processes that could be more efficient. Without clear benchmarks, you could be missing opportunities to optimize your business. But by comparing your metrics to those of others —whether it’s your competitors, industry standards or even other areas of your company— you can discover exactly where to adjust for better results.

In this article, we’ll break down what benchmarking is at CRC and, more importantly, how to apply it practically. Because, let’s face it, customer retention is just another metric; it’s the foundation for building strong relationships and sustainable growth. Ready to find out how to optimize your efforts?

Benchmarking definition and objectives

benchmarking is a methodology that consists of comparing an organization’s processes, metrics, and results with those of its competitors or with established industry standards. When we apply this concept to Customer Retention Cost (CRC), we focus on evaluating how much we are investing in keeping our current customers compared to other similar companies.

What is benchmarking in CRC?

The main objective of CRC benchmarking is to improve the efficiency and effectiveness of retention strategies, but it also includes:

1. Identifying optimization opportunities: recognizing areas where costs can be reduced without compromising service quality.
2. Set internal standards: use data to set achievable goals based on best practices.
3. Increase profitability: reducing CRC helps maximize customer long-term value (CLV).

As Michael Porter mentions in Competitive Advantage, “benchmarking is a mechanism to stimulate innovation and continuous improvement.” In the case of CRC, benchmarking does not seek to imitate competitors, but to learn from them in order to adapt more effective strategies.

Main objectives of benchmarking in CRC

1. Identify areas for improvement: detect weaknesses in CRC processes and prioritize corrective actions.
2. Learn from the best: adopt proven practices that have generated successful results in other CRCs.
3. Set realistic goals: base internal objectives on measurable and achievable standards.
4. Monitor progress: continually evaluate the impact of implemented changes and adjust as needed.

Differences between benchmarking and other performance metrics.

It is easy to confuse benchmarking with other performance evaluation practices, such as internal audits or analysis of individual KPIs. However, benchmarking goes further by providing a comparative framework that puts results in context.

Main differences:

1. External comparison: unlike an internal audit, benchmarking compares the CRC with external standards or competitors.
2. Strategic focus: while KPIs focus on specific metrics, benchmarking evaluates the system as a whole, identifying opportunities for improvement based on best practices.
3. Continuous process: it is not a one-off exercise, but a constant cycle of measurement, analysis, implementation of improvements and re-evaluation.

Fundamentals of CRC benchmarking

The success of benchmarking CRC lies in following certain basic principles that ensure that the data collected is useful and applicable:

1. Selection of relevant metrics: we must identify KPIs that are directly related to the CRC. For example, measure customer satisfaction level (CSAT) or first contact resolution rate (FCR) instead of generic metrics.
2. Identifying suitable comparators: the value of benchmarking depends on whom the CRC is being compared to. It could be a direct competitor, an industry standard, or even a company in another sector with outstanding practices.
3. Analysis and adaptation: It is not just about copying successful practices, but adapting them to the specific characteristics of our CRC.

Types of benchmarking in CRC

The effectiveness of benchmarking in CRC depends on choosing the most appropriate approach according to the company’s objectives and needs. Each type of benchmarking brings different perspectives that allow evaluating the Customer Retention Cost from different angles. Below, we explore in more depth the main types of benchmarking and how they can be applied to optimize customer retention.

1. Internal benchmarking

This benchmarking consists of analyzing and comparing the CRC between different areas, products, or departments within the same organization. This approach is useful for companies with multiple lines of business or presence in different geographic regions, as it allows identifying which units are operating more efficiently in terms of customer retention.

Practical applications

• Comparison between product lines: A software company that offers both enterprise solutions and consumer tools can compare the CRC of both areas. If retention costs are higher in the enterprise segment, it can investigate the reasons and optimize processes such as technical support or loyalty campaigns.
• Regional analysis: a retail chain can analyze the CRC in different markets to identify areas where costs are higher and assess whether local strategies are aligned with the organization’s standards.

Advantages of internal benchmarking

1. Total control over the data: as it is internal data, it does not face legal or ethical barriers related to access to external information.
2. Easy implementation: does not require collaboration with third parties, which simplifies the process.
3. Identification of internal best practices: allows replication of successful strategies within the same organization.

Internal benchmarking may be limited if the processes of all business units have many similarities. In such cases, it is necessary to complement it with external approaches to obtain a more complete perspective.

2. Competitive benchmarking

Compares a company’s CRC with that of its direct competitors. This approach provides a clear view of an organization’s positioning in its sector and allows identification of both strengths and areas for improvement in relation to the competition.

Practical applications

• Loyalty program evaluation: a telecommunications company can compare its retention costs with those of its rivals to assess whether it is investing too much in discounts and promotions to keep its customers.
• Technical support analysis: a hardware company can investigate whether its after-sales support costs are competitive, considering market standards.

Advantages of competitive benchmarking

1. Relative evaluation: provides a direct reference whether the company is spending more or less than its competitors on customer retention.
2. Gap identification: helps to detect areas where the organization may be at a disadvantage and allows developing strategies to close them.
3. Development of competitive advantages: by identifying where competitors have higher costs, a company can optimize its processes to gain a market advantage.

Competitive benchmarking challenges

• Access to data: Competitor information is not always publicly available. It is necessary to resort to secondary sources or market research to obtain valuable insights.
• Ethics and confidentiality: It is important to ensure that data collection methods are ethical and comply with legal regulations.

3. Functional or generic benchmarking

This benchmarking involves comparing a company’s CRC with that of organizations in other industries facing similar challenges. This approach fosters innovation by enabling the adoption of successful practices from completely different industries.

Practical applications

• Adoption of rewards programs: a retail company can take inspiration from how airlines manage their points programs to retain frequent customers.
• Self-service strategies: a technology company can analyze how banking companies implement self-service solutions to reduce support costs and apply them to their industry.

Advantages of functional benchmarking

1. Innovative perspective: it allows discovering new strategies and adapting them to the specific needs of the company.
2. Sector flexibility: by not being limited to one sector, companies can find creative and differentiating solutions.
3. Adoption of disruptive technologies: makes it easier to identify advanced tools or processes that have not yet been widely adopted in their own sector.

Challenges of functional benchmarking

• Limited relevance: some strategies may not be directly applicable or require significant adaptation to be effective.
• Lack of direct comparability: differences in business models may make direct cost comparison difficult.

Comparison of benchmarking types

Choosing the right approach

Selecting the right type of benchmarking depends on your company’s specific objectives and available resources. Here are some questions that can help determine the most relevant approach:

• Do we want to learn from competitors or explore different industries? If the goal is to stay competitive within the industry, competitive benchmarking is ideal. If we are looking for innovation, functional benchmarking may be more beneficial.
• Are we looking for a specific operational improvement or a broader strategic impact? For tactical improvements, internal benchmarking is an excellent choice. For aligning CRC with business objectives, the strategic approach is more appropriate.
• Are we willing to collaborate with other organizations? If there is a willingness to share and learn together, collaborative benchmarking can offer great benefits.

Benefits of benchmarking in CRC

The benchmarking of CRC, in addition to measuring costs, also transforms how companies understand, optimize and maximize the efficiency of their customer retention efforts. By benchmarking metrics against internal standards, direct competitors or even companies in other industries, organizations can identify opportunities for improvement and ensure that every retention dollar invested generates the greatest possible impact.

Let’s take a deeper dive into the main benefits of benchmarking in CRC and how they impact the profitability and sustainability of business strategies.

1. Identification of inefficiencies

One of the most outstanding benefits of CRC benchmarking is its ability to reveal inefficiencies in processes related to customer retention. By comparing our costs with those of competitors or with industry standards, we can detect areas where we are overspending or where our efforts are not generating a commensurate return.

Practical applications:

• Technical support costs: if the analysis shows that we spend more on customer support than other similar companies, we can evaluate options such as implementing chatbots or improving self-service.
• Loyalty programs: by comparing the cost of our retention campaigns with their effectiveness against other companies, we can adjust strategies to prioritize the most profitable actions.

Impact: the identification of inefficiencies allows us to redirect resources towards more effective initiatives, increasing productivity without compromising service quality.

Example: a SaaS company discovers that its CRC is higher than the industry average because it offers recurring discounts on renewals. After benchmarking, it adjusts its approach toward loyalty programs based on non-monetary benefits, reducing costs and increasing customer engagement.

2. Setting realistic standards

CRC benchmarking provides a solid foundation for setting internal standards that are both ambitious and achievable. Without external benchmarks, it is easy to fall back on unrealistic goals or settle for mediocre results. Benchmarking provides clarity on what is possible within the industry or in leading companies.

Practical applications:

• Specific CRC goals: define clear objectives, such as reducing CRC by 15% in two years, based on market averages.
• Prioritization of efforts: identify which areas, such as technical support or relationship marketing, require more attention to achieve the desired standards.

Impact: realistic standards motivate teams and create an organizational culture based on continuous improvement and learning.

Example: An online retailer benchmarks its CRC metrics against market leaders and establishes a plan to reduce its cost to the industry average. This includes improving its personalized email strategy to increase loyalty and reduce reactivation costs.

3. Continuous improvement and adaptation

CRC benchmarking is not a one-time exercise, but an ongoing process that drives companies to constantly adapt to an evolving marketplace. By conducting regular analyses, organizations can identify emerging trends, adjust their strategies and remain competitive.

Practical applications:

• Technology assessment: use benchmarking to analyze how other companies are integrating new technologies, such as artificial intelligence, into their retention strategies.
• Results monitoring: compare performance before and after implementing changes in CRC strategies to evaluate their effectiveness.

Impact: continuous improvement ensures that the company achieves competitive standards and is prepared to adopt innovations that improve its long-term performance.

Example: A technology company performs annual benchmarking and discovers that its competitors have reduced retention costs by implementing customer self-service platforms. The company adopts this practice and manages to reduce its CRC by 20% in one year.

4. Increase in long-term customer value.

Reducing CRC without compromising service quality has a direct effect on long-term customer value (CLV). This increase in CLV improves the company’s profitability and financial stability by relying less on new customer acquisition.

Practical applications:

• Cost-benefit optimization: identify retention strategies that deliver high customer value without incurring excessive costs.
• Redesign of loyalty programs: create more effective incentives that strengthen the relationship with existing customers and maximize their lifecycle.

Impact: higher CLV allows companies to reinvest in their retention strategies, creating a virtuous cycle where revenue from existing customers funds initiatives to attract new prospects.

Example: A subscription business discovers, through benchmarking, that its retention costs are high because they include benefits that are undervalued by its customers. After optimizing its offering, it reduces the CRC and increases the average duration of subscriptions, increasing CLV by 25%.

5. Competitive differentiation

CRC benchmarking can also become a competitive differentiation tool. Companies that optimize their retention costs without sacrificing customer experience have more resources to invest in key areas, such as innovation or expansion, consolidating their market position.

Practical applications:

• Personalization strategies: use insights gained from benchmarking to implement more personalized and engaging retention strategies.
• Reinvestment in marketing: redirect savings generated by reducing CRC to branding campaigns or new customer acquisition initiatives.

Impact: a clear differentiation in cost and customer experience strengthens loyalty and positions the company as a leader in its industry.

Example: A manufacturing company implements a retention program based on functional benchmarking data. This allows it to offer predictive technical support at a lower cost, increasing customer satisfaction and gaining a competitive advantage over its rivals.

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Start with the basics: measure your CRC, identify what kind of benchmarking you need and use the insights you gain to make adjustments.

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Conclusions

If you’ve gotten this far, you probably already have a clear idea of why benchmarking at CRC is such a powerful tool. But I want you to stay with something very important: this isn’t about numbers or comparing yourself to others, it’s about understanding how you can make every effort to retain customers count. Because at the end of the day, keeping your customers happy is a matter of cost, but more importantly an investment in the future of your business.

Think of it this way: How many times have we been so focused on attracting new customers that we’ve neglected the ones we already have? If we know our Customer Retention Cost and compare it to what other companies do or even what we could improve internally, we’re a step ahead. It’s not about spending less, it’s about spending better.

Also, benchmarking gives us something we all seek: clarity. Knowing if our strategies are working, if we’re being competitive or if there’s something we could do differently to get more value. It’s like adjusting a compass; it helps you make sure you’re going in the right direction.

So what’s next? My advice would be to start with the basics: measure your CRC, identify what kind of benchmarking you need (internal, competitive or functional) and use the insights you get to make adjustments. Not everything has to be perfect from day one, but every step you take will bring you closer to a more efficient strategy aligned with your goals.

Remember this: every retained customer is proof that you’re doing something right. And with CRC benchmarking, you can make sure you’re doing your best to keep them coming back again and again. What do you think?