Cost of Acquiring New Customers vs Retaining Existing Customers

cost of acquiring new customers join progress

Many businesses are doing it wrong. Oftentimes, so much attention is put on sales and acquiring new customers that once the deal is closed, those customers fall to the wayside or do not get the treatment they feel they deserve. The result? Over time, they grow unhappy, unsatisfied and eventually take their business elsewhere.

Don’t get me wrong. Sales and customer acquisition is an important part of any business. If you’re not bringing in new customers, you’re not growing your business. That said, customer retention and management is a big revenue driver with a much lower cost.

In fact, it’s such a big revenue driver that increasing customer retention rates by only five percent increases profits by 25 percent to 95 percent depending on the industry and business type (Harvard Business Review).

So rather all of your company’s focus being on customer acquisition and closing sales, it’s important to develop a strong customer success strategy that will lead to retaining customers once the deal is closed.

Cost of Acquiring a New Customer vs Retaining an Existing Customer

Here are some more statistics to get you thinking:

  • Acquiring a new customer is anywhere from five to twenty-five times more expensive than retaining an existing one; a large factor is industry or business type (Harvard Business Review).
  • It costs five times as much to attract a new customer as it does to keep an existing one happy (Gartner).
  • 65% of a company’s business comes from existing customers (Gartner).
  • 44% of companies have a greater focus on customer acquisition vs 18% that focus on customer retention (Invesp).
  • 89% of companies see customer experience as a key factor in driving customer loyalty and retention (Invesp).
  • Existing customers are 50% more likely to try new products and spend 31% more when compared to new customers (Invesp).
  • The probability of selling to an existing customer is 60% - 70%, while the probability of selling to a new prospect is 5% - 20% (Invesp).

So, if customer retention is so important to a company’s bottom line, then why aren’t more putting a focus on it? They don’t know how.

How can I Retain Customers?

I’m so glad you asked! For starters, take a look at your company. Is there any time being spent on customer success and satisfaction?

customer communication join progress

At the heart of creating happy customers and brand evangelists is ongoing client communication. Your customers want to be communicated to, especially if you’re working on a project directly for them. They want to be kept in the loop with project progress; they want to know what tasks you’re completing and how quickly you’re completing them; they want to follow along as you complete phases of the project.

Imagine you’re building a custom home. Your contractor tells you it should be completed in eight months and, for your safety, asks that you don’t visit your lot without a scheduled meeting with him since it’s a full-blown construction site. Makes sense.

custom home

However, throughout the construction process, you call and email your contractor for updates. He rarely responds and when he does, you still have questions. You drive by and it doesn’t seem like much progress has been done. You begin to find yourself wondering whether your home will even be completed in the proposed timeframe.

Overtime, you begin to become unhappy with your contractor. You’re frustrated that you chose to work with a contractor that was so uncommunicative on a project that’s so important to you. When your house is finally completed, not only do you not feel comfortable recommending the building company you used to others, but you’re also not going to hire that contractor again for that basement remodel you’re planning next year.

Ouch. If only that contractor and his company had done a better job of keeping you happy and satisfied; they could have acquired more customers through your referral and gained more business from you.

Implementing Customer Success Doesn't Have to be Difficult

Resolving the issues pointed out in the story above wouldn’t be time-consuming. It’s not actually a difficult process for companies to implement customer success and satisfaction methods to keep their customers happy.

join progress for construction

By implementing a tool like the Progress app, businesses can spend little time on customer success by simply tracking their progress throughout the project in the app.

Let’s go back to our custom home example.

The contractor could have mapped out the phases of the build - i.e. floorplan development, foundation and drywall, flooring and roofing, appliances and custom features, painting, etc.

He could have outlined tasks within each phase of the project and as his workers completed them, simply checked off what had been done each day or week. He could have shared photos of progress, scheduled meetings with the homeowners, responded to messages from the homeowners, and even gotten any necessary paperwork signed through DocuSign - all within the Progress app.

All of these are activities that would need to be logged throughout the project anyways, so why not log them in a way your client can see?

Consistent customer communication? Check. Project progress updates? Check. Easy to use and manage customer success too? Check. Happy customers? Check!

Implementing customer success in your business doesn’t have to be a huge feat. Take a simple step with big results to retain your customers and create brand evangelists by joining Progress!

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