Customer Acquisition Costs Five Times More than Customer Retention

Comprehensive Consulting Solutions for Small Businesses works with clients to train service staff on business processes. We have noticed that when some business owners think about marketing, they focus on acquisition tactics and don’t examine retention tactics. Even though stats show that keeping a current customer is much less expensive compared to winning a new customer.

Here are a few examples -

According to Forbes, a business needs to spend 5 times more to attract a new client instead of nurturing exiting ones.

According to Harvard Business Review, “Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.”

According to Outbound Engine, “Increasing customer retention by 5% can increase profits from 25-95%.”

According to Ivesp, “It’s a well-established fact that 44% of companies have a greater focus on customer acquisition vs. 18% that focus on retention. Also, it’s true that only 40% of companies and 30% of agencies have an equal focus on acquisition and retention.”

If retention and the relationship with the customer are so important and less costly – why aren’t all businesses focused on developing, implementing, and measuring retention or customer service tactics? That’s a great question – we don’t know the exact answer to that question, but do have a couple of ideas:

Maybe the business owner is a sales person and doesn’t understand how to retain customers – he/she just knows how to attract them, not service them? Or the business owner started small and has now grown and doesn’t have the staff to keep up with the growth? Maybe the business owner assumes staff understand and are executing the service tasks as the owner would – which is not the case.

There could be a variety of reasons that small business owners aren’t implementing and measuring the service side, but we suggest that all businesses have service processes that are communicated, tested, and measured. Business owners need acquisition tactics as well, but there must be a balance of growth and retention tactics.

When thinking of service tactics for your small business, think about customer contacts that are proactive – reactive contacts are just that – reactive. Proactive touch points have a much more memorable impact on retention. In addition to proactive customer touches, the company must be accessible, dependable, and timely – if a customer calls or visits, make sure staff are trained on what to say, when to say it, when to escalate, and how to handle.

Here are a few examples of customer service or retention tactics:

• • Follow-up with client on her/his birthday
• • Email client on anniversary
• • Give away a pie on Thanksgiving
• • Organize customer appreciation events with food and fun, movie theater, or community center
• • Call on special occasions – new child or grandchild, marriage, child accepted to college, and more
• • Send New Year’s Eve Card – handwritten address and note inside
• • Inform clients of news or announcements related to the client’s interest
• • Email or send card for other holidays from Thanksgiving to Groundhog Day

Here are a few of our blog posts that you may find helpful:

• Are you Inspecting What You Expect

• Calendaring and Prioritization

• Foundational Processes

• Marketing Your Small Business

If your business needs guidance on service, tactics to keep more customers, to know how to train staff on service business processes, or process creation, please text a Small Business Consultant today at (479) 439-8844.

Comprehensive Consulting Solutions for Small Businesses is a Northwest Arkansas based business consulting and business coaching firm that specializes in helping small businesses increase operational efficiencies, revenue and profit, and productivity. For more information on our services, click here.