11 Customer Acquisition vs Retention Statistics (2022) (2024)

FAQs

Which is more important customer acquisition or customer retention? ›

Acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95%. The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.

Retention Is Likely to Be More Profitable Than Acquisition

Existing customers are much easier to sell to. According to Marketing Metrics, the probability of converting an existing customer is 60 percent to 70 percent. The probability of converting a new prospect, on the other hand, is only 5 percent to 20 percent.

For most industries, average eight-week retention is below 20 percent. For products in the media or finance industry, an eight-week retention rate over 25 percent is considered elite. For the SaaS and e-commerce industries, over 35 percent retention is considered elite.

Did you know that it costs five times as much to attract a new customer, than to keep an existing one? The first rule of any business is to retain customers and build a loyal relationship with them, and thereby avoid customer acquisition costs.

Acquisition vs retention

For many marketers, it is a given that it is cheaper to retain existing customers than to acquire new ones, particularly in industries, such as car insurance, where the lifetime value of a customer is a more significant metric than the profit arising from an individual sale.

The main findings contain that the most common factors that affect customer retention are service quality, satisfaction, trust, and commitment.

The more loyal customers you have – the higher your profits. In fact, studies by Bain & Company, along with Earl Sasser of the Harvard Business School, have shown that even a 5 percent increase in customer retention can lead to an increase in profits of between 25 and 95 percent.

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. It makes sense: you don't have to spend time and resources going out and finding a new client — you just have to keep the one you have happy.

Even businesses with relatively high rates of retention stand to benefit from improving retention rates. A mere 5% increase in customer retention can boost profits more than 25%. Businesses may think they have time to reveal the true value of their product to their customers.

A 100% retention rate is always good. Meanwhile, a 15% retention rate is usually bad.

What is a good retention rate for a small business? ›

Often, a small business's customer retention rate during a two-month period is closer to 20%, though when e-commerce is factored in, the rate increases to 35%.

“Retaining customers is cheaper than acquiring new ones”.

Customer retention also has a network effect that paves the way for sustainable growth. In fact, customer retention is 5- 25 times¹ cheaper than customer acquisition.

Customer retention is critical because the cost of acquiring new customers is much higher than retaining existing customers. Retained customers are also more likely to engage in word-of-mouth marketing or become brand ambassadors.

A loyalty and rewards program is one of the most effective customer retention tactics at your disposal. It allows you to reward points to shoppers to encourage them to come back.

Growth without retention is not growth, retention is the single most important strategy for growth. This is demonstrated by a KPMG study, which states that the biggest revenue driver for companies was, in fact, customer retention (KPMG's 2014 Retail Industry Outlook).

While customer acquisition is the act of gaining new customers, customer retention is focused on developing better relationships with your existing customers with the goal of increasing loyalty and driving repeat purchases.

Customer retention is crucial for forecasting consistent growth in financial planning. If you can count on committed customers returning for the next financial quarter, anticipatory budgetary decisions are easier to make.

The products you sell have a considerable impact on customer retention levels, because your catalog should give customers a need or desire to come back. For example, a store selling high-end furniture will naturally experience lower retention levels than a store selling affordable beauty products.

Out of seven variables tested it is found that switching barriers (interpersonal relationship and switching cost), brand image, price perception, trust and customer satisfaction have the effect on customer retention. However, customer satisfaction has little to do to increase the customer retention.

Minimizing acquisition costs. Targeting high value customers by developing marketing communication strategies. Encouraging existing customers to migrate to online for purchase or service. Optimizing service quality and use of right channels.

What is the average customer retention rate by industry? ›

Customer Retention Rate by Industry

Retail: 63% Banking: 75% Telecom: 78% IT: 81%

Reichheld and Sasser (1990) found that when a company retains just 5 percent more of its customers, profits increase by 25 percent to 125 percent. Their study caught the attention of both practitioners and researchers, arousing a great interest in customer loyalty.

The Customer Retention KPI measures the ability of your organization to retain customers over the long term and to generate recurring revenue from existing customers.

Not only do repeat customers convert more often, they have a higher average order value than first time buyers. This means that your repeat customers are buying more from your store and more often! The number of previous purchases and how long they've been a customer directly impacts how much a repeat customer spends.

The probability of selling to an existing customer is 60-70 percent. The probability of selling to a new prospect is 5-20 percent. 80 percent of your future profits will come from just 20 percent of your existing customers. 65 percent of a company's business comes from existing customers.

Net revenue retention (NRR) formula

If you're experience a high rate of account expansion, NRR can be above 100% and is often referred to as Negative Churn. A rate above 110% is considered best-in-class.

There are four stages of customer retention strategies, which are: 1. Financial Bonds 2. Social Bonds 3. Customisation Bonds 4.

The higher the retention rate, the better. If it's 80%, that means only 20% of employees leave the business during a given period.

Customer retention is more powerful than customer satisfaction: a. over 60% of an organizations future revenue will come from existing customers. b.a 2% increase in customer retention has an equivalent impact upon profitability as a 10% reduction operating costs.

How You Can Measure CAC. Basically, the CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent.

How do you improve customer retention metrics? ›

How is customer acquisition cost calculated? In short, to calculate CAC, you add up the costs associated with acquiring new customers (the amount you've spent on marketing and sales) and then divide that amount by the number of customers you acquired.

Acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95%. The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.

Although benchmarks vary from company to company, most ecommerce businesses have 25-30% percent returning customers. This is backed up by Alex Schultz, VP of Growth at Facebook who says, “If you can get 20-30% of customers coming back every month and making a purchase from your store, you should do pretty well”.

Retention Is Likely to Be More Profitable Than Acquisition

Existing customers are much easier to sell to. According to Marketing Metrics, the probability of converting an existing customer is 60 percent to 70 percent. The probability of converting a new prospect, on the other hand, is only 5 percent to 20 percent.

This assumption was based on extensively cited research, which offered empirical evidence indicating that long-term customers are satisfied, loyal customers and that (1) they generate more profits because they get accustomed to the service and use the service more; (2) they are less price sensitive and thus, companies ...

While customer acquisition relies on your ability to reach and attract new audiences, customer retention is more about ongoing engagement, personalization, and value provided over time.

Do you think it is important to learn a customer retention and acquisition Why? ›

Customer retention is incredibly important to maintaining consistent growth and financial planning. Existing customers require less maintenance than new customers. Moreover, strong customer retention rates can be an excellent driver for customer acquisition, through referrals and positive reviews.

Customer acquisition is critical for creating a firm and developing a foothold in the market, from bringing in new clients to increasing revenue. It aids in the acquisition of new clients for your company. More clients mean more income, which means more profit for your company.

Customer acquisition is important for businesses of any age and size. It allows your business to: Make money to meet costs, pay employees, and reinvest in growth, and. Show evidence of traction for outside parties such as investors, partners, and influencers.

Customer Retention Rate by Industry

Retail: 63% Banking: 75% Telecom: 78% IT: 81%

Customer retention helps increase the profitability of your small business. Build lasting customer relationships by providing personalized quality service, communicating effectively, rewarding loyal customers, and offering innovative products and services.

The probability of selling to an existing customer is 60-70 percent. The probability of selling to a new prospect is 5-20 percent. 80 percent of your future profits will come from just 20 percent of your existing customers. 65 percent of a company's business comes from existing customers.

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. It makes sense: you don't have to spend time and resources going out and finding a new client — you just have to keep the one you have happy.

Minimizing acquisition costs. Targeting high value customers by developing marketing communication strategies. Encouraging existing customers to migrate to online for purchase or service. Optimizing service quality and use of right channels.

How is customer acquisition cost calculated? In short, to calculate CAC, you add up the costs associated with acquiring new customers (the amount you've spent on marketing and sales) and then divide that amount by the number of customers you acquired.

Ideally, it should take roughly one year to recoup the cost of customer acquisition, and your LTV: CAC should be 3:1 — in other words, the value of your customers should be three times the cost of acquiring them.

How do you write a customer acquisition strategy? ›