MDS Brand Blog

Customer Acquisition vs. Retention - Where your investments are better spent.

Posted by MDS Brand


Did you know that it costs five times more to attract a new customer than to retain existing ones? However, it has been shown that about 44% of businesses invest more in acquiring new customers than building loyal and lasting relationships with the existing ones. Considering this amount of cost, it is surprising that only 18% of companies focus on customer retention in a significant manner.

One thing to consider, especially with everything we have presented in relation to the value that the customer places on customer service, is at least placing equal investment in the areas of customer acquisition and retention. Right now, it has been shown that only 40% of companies and 30% of agencies actually focus on these two areas equally.

It is easy to believe that new customers are going to be the best growth and development for any business, and for that reason there are at least eight media channels focused on customer acquisition. Within these are website, email, social media, direct mail, web banners, mobile apps and more. Such channels are continuously defending their role in business growth by stating that customer acquisition is the better of the two to invest in. The actual data on the matter points in the other direction, as previously described.

The first step in increasing customer retention is understanding the Customer Lifetime Value (CLV). Similar to many of our previous presentations of the focus on customer service, 86% of companies value the customer experience as the greatest point of value in determining retention. Additionally, while 76% of companies believe that the CLV is essential to building customer retention there are only about 42% of companies that can measure it accurately.

One major component to keep in mind, especially when considering the lower cost of selling to existing customers, is the extreme difference in probability of selling to new versus existing customer. The probability of selling to an existing customer is 60-70% while you are only 5-20% likely to make a sale to a new customer. Sales goes up, while the expenses and efforts towards gaining new business are relieved.

Lastly, the most effectively used digital communication method for selling to an existing customer is the FREE email. They are already on your customer list so there is no need to pay for ad space or development of apps or videos to draw their attention. 56% of the time, it simply takes an email to sell to the existing customer. There are ways to trim cost of growing a business and most of them involve shifting from acquisition-focused methods to more of those where customer retention is the goal. It goes without saying that new business is always a good thing and some efforts should continue to be put forth in that area. However, the numbers are pretty clear; keeping your existing customers is less of an expense than trying to gain new ones. So, making small shifts towards customer retention may prove to boost your business in ways unforeseen.


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Topics: Customer Retention, Customer Satisfaction (CSI), Customer Care, Marketing Tips & Tricks