How Much Does It Cost to Acquire a Customer?

Is that such a strange question?  Take into account the cost of advertising, websites, direct marketing, PR, networking, SEO, exhibitions, conferences, meetings (including travelling), sales teams, brochures and so on and you soon realise that the real cost of acquiring a customer can be a lot higher than you think.

Well the reason for asking the original question is that if you knew the real cost of acquiring a customer then would you be willing to lose them so easily?

Programmed Behaviour

In the quest for business success the focus is often on the securing new clients - you could argue that there needs to be a justification for the investment in existing sales processes and personnel. 


Often existing clients receive little or no ongoing marketing support.  There is often less communication to this audience, often with assumptions that they are being kept up to date on new developments by other departments. 


Increased Revenue

The irony is that investing in activity aimed at existing customers helps increase customer lifetime value (the value of a customer in pounds and pence to your organisation over the lifetime of them remaining your customer). 


Reduced Cost of Sales

This incremental revenue from existing clients is less expensive to secure than from new clients, given the relationship you already have with them.


As more satisfied existing customers become the greater the chance of increasing customer loyalty and them becoming your brand advocates.  The later helping secure (again at reduced cost!) yet more customers.


There of course has to be a balance and there will always be a requirement for securing new clients the 'traditional' way. 


However by understanding the true cost of acquiring a customer will help you evaluate your relationship with your customers, as well as provide an insight into the effectiveness of your existing marketing efforts.


Posted by: Binal Sawjani on Aug 24, 2012
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