Why is customer acquisitions expensive compared to customer retention marketing? There are several reasons why it’s costly and here are some of the reasons why that’s the case:

  1. Number of Purchases

Compare this fact to customer retention marketing. In the case of customer loyalty, your clients are making multiple purchases. This can exponentially boost your company’s sales and profits. That’s compared with new customers who are making their first purchase. An existing customer isn’t just more likely to make more purchases but also bigger ones. These are major issues that can make the return on investment (ROI) much higher for customer retention than acquisition.

  1. Customer Lifetime Value (CLV)

This figure related to customer retention marketing includes the total value of your customer. A loyal customer buys more than a one-time customer, right? While that’s a fact the problem is that over 40% of companies often aren’t able to calculate CLV accurately.

As a result, it can be tough for companies to determine how critical it is to focus more on customer retention. For example, a CLV is often much higher than companies realize. This highlights the need to focus more on customer retention over the acquisition. However, companies often don’t do that since the true value of taking that approach is unknown.

  1. Conversion Rates

The conversion rate of selling to a lead is a maximum of 20%. Meanwhile, the figure is 70% when selling to existing customers. In fact, the chance of selling to new prospects is as low as 5%. In terms of profitability that’s a rock-bottom figure and explains why companies should focus more on customer retention.

This brings up the issue of ROI. Companies are spending more money on acquisition than retention but that’s just the start. When the chance that leads will convert into sales is as low as 5% it means the ROI will generally be lower than when selling to current customers. In fact, the lowest average probability of selling to current customers is 60%. So if you odds on your side you should definitely consider investing in customer retention since there’s a good chance over half of your audience will place an order.

  1. Costs of Marketing Channels

Another issue related to the cheaper costs of customer retention marketing is related to the cheaper channels that are typically used like email and mobile. However, customer acquisition? The most common methods are the website (89%), email (81%), and social (72%). These are all generally inexpensive marketing options.

However, there are other more expensive channels like direct mail (66%), SEO (65%), and web banners (60%). These Pathwwway Game channels are also used for customer retention campaigns. However, the big difference is it’s a lot easier to convince existing customers to keep buying from you instead of convincing non-customers to buy from your customer. This can have a major effect on your return on investment (ROI), which can, in turn, affect your profitability.

These are some of the main reasons customer retention marketing is more profitable than finding new customers. It’s much easier and more affordable to keep the customers you have.