When it comes to discussing the cost of bringing in new customers versus repeat customers, it’s important to look at statistics. Research shows that it can cost five times as much to attract a new customer than to keep an existing one. Below, we’ll explore what these numbers mean for you and your business.


The Cost of Acquiring New Customers 

Customer acquisition cost (CAC) is a metric that has grown in use in recent years and is easy to use. It can be calculated by dividing all the costs spent on acquiring more customers (also known as marketing expenses) by the number of customers brought in during the period the money was spent. For example, if a company spends $1,000 on marketing in a month and acquires 100 new customers during that month, their CAC would be $10.00. 


Benefits of Retaining Repeat Customers

Forbes believes that increasing customer retention rates by 5% increases profits by 25% to 95%, according to a study done by Frederick Reichheld of Bain & Company. Besides being much more affordable than trying to bring in new customers, retaining your customers (and then turning them into engaged customers) will also bring in better returns. According to research, engaged customers (or loyal customers) buy 90% more frequently, spend 60% more per purchase, and are five times more likely to leave a positive review or give a referral to a friend. This means that on average, they’re delivering 25% more profitability over the average consumer. No wonder many businesses believe it’s worth retaining repeat customers. 


How to Determine Where to Spend Your Efforts

It makes sense to focus your efforts and money on nurturing existing customers who are purchasing your goods or services time and time again. This doesn’t mean you shouldn’t target new consumers, but it will determine where you spend most of your time and efforts. Each business is different, so you’ll need to figure out your average customer’s lifetime value (CLV), which you can calculate here. Then you need to figure out the cost of acquiring new customers (CAC). Once you figure out these numbers, you will be able to budget how much you spend on acquiring new customers versus taking care of your existing customer base.


How to Increase Customer Retention Rates

We’ve talked about how retaining repeat customers brings in higher profits. And in a recent blog post we talked about how 61% of loyal customers will make an effort to buy from their favorite brands. So although turning your returning customers into loyal customers will take some effort, it is well worth it! To help you out, we’ve provided these tips for increasing your customer retention rates: 


We hope these tips and insights into the cost of bringing in new customers versus repeat customers will help you determine how to divide your marketing efforts to boost returns and profitability. Happy marketing! 

For more insights on marketing strategy that actually works for small business, connect with Jay Bean, Founder of FreshLime and Small Business Marketing Expert on LinkedIn and Twitter. If any of these tips have helped you or if you have anything to add, please comment below. We’d love to hear from you!


Submit a Comment

Your email address will not be published. Required fields are marked *

© 2019 FreshLime Inc. — All Rights Reserved | Privacy Policy | Terms & Conditions