What is the average cost of retaining an existing customer or aquisition of a new one?
I am mainly interested in h following industries: Telecom, FMCG, Banking, Automotive, Luxuries, HORECA). any insights regarding measuring those costs will be welcomed.
Clarification added January 11, 2010:
Of course a rough estimation or a range would help also :)
Clarification added January 11, 2010:
Looking for absolute numbers from your industry (I am aware of all the barriers...:))
Good Answers (2)
Antonio M.
Data Product Management Specialist
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Hope this link can help
Antonio
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Gianluigi C.
Managing Partner 90:10 Group ★ Do you leverage Social Media as business accelerators? Be Faster, Better and Cheaper
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Hi Gilad,
It is said that it costs 5 times more to get a new customer instead of retaining one.
Best regards,
Gianluigi Cuccureddu
Links:
More Answers (6)
Andy H.
CEO CodeBook Solutions Inc | BIM Sharing & Information Management
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I am not sure anybody can provide actual costs. But it's at least 5 - 10 times cheaper to keep a customer than acquiring a new one
New clients costs all over the board as Andy noted - the ones that "fall in your lap" can be less costly, and it depends on what you are doing - - I've been involved in deals where BD costs have been $1-milion range for BPO multi-year deals, win or lose.
Retaining clients is less costly, must be done with a solid strategy to know what is up, knowing meeting and managing client expectations and the rest.
Been a while, but when started a region, kept a Excel on the things that went into it and by that, you start to capture the things you may miss initially.
Basics, need to know the team involved, time, costs of travel and communication, internal construction of all the sales collateral, RFI/RFP responses, resources including materials, and other as fits your business.
Marvin B.
Commercial Agent at Merlinsky Insurance Agency
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Your question is a lot like: How long is a piece of string?
Bernard G.
Programme, Project & Change expert
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I've seen several presenttations that state it costs 5 times more to gain a new customer than it does to retain an exisiting one, but don't know where this originates - as with many such "universal" stats it could have originated in a single industry or even company and may not really be applicable elsewhere.
Bhalchandra P.
Brand Advisor, Branding Consultant, Marketeer right till the bone. Now!!! Tempting Brand Owners by SCENT....
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Debunking Marketing Myths: The Cost Of Acquisition Versus The Cost Of Retention
by Ron Shevlin
How many times have you heard that it costs X times more to acquire a customer than to retain one? The most recent incident for me was in an article in CRM magazine. In this case, the author wrote
according to Gartner it costs eight to ten times more to acquire customers that it does to retain them.”
Oh really? I had heard it was five times more, but I guess that with inflation and all, it’s now eight to ten. Yeah, right.
It’s time to eliminate this urban legend from our repertoire. Here are just a few of the reasons why the claim that acquisition is so much more costly than retention is pure fiction. The costs of acquisition and retention:
1) Vary by industry, by product, and company strategy. Don’t tell me that the ratio is eight or ten to one across every product and industry. The automotive industry probably has a fifty (or hundred) to one acquisition to retention ratio. Car dealers, as far as I can tell, don’t spend a dime on customer retention. In the world of financial services, though, I’d bet that HSBC and Emigrant Savings have effectively acquired savings account customers online with above-average industry rates. Retaining — and, as importantly, cross-selling — those customers could not have been as easy (i.e., cheap).
2) Ebb and flow with economic cycles. Lenders found it a whole lot cheaper to acquire new mortgage and home equity loan applicants a few years ago than they do today. And why would anybody assume that retaining those borrowers from a few years ago was a piece of cake that didn’t require much investment? Hogwash.
3) Are incalculable. Let me put it this way: You have no idea how much it’s costing you to retain customers. Do you include all the costs associated with providing customer service to customers in your retention calculations? After all, if you don’t service them, you will have less chance of retaining them. Do you allocate all IT application maintenance and enhancements to your retention calculations? If you don’t continually improve your transaction and interaction service capabilities, your ability to retain customers diminishes, you know.
No, the fact of the matter is that you don’t have the slightest clue what it costs to retain a customer, because no one has really defined a standard for what costs to include and which ones to exclude.
So the next time you find yourself wanting to cite the “fact” that the cost of acquiring customers is X times greater than the cost of keeping them, do us all a favor. Don’t. Cuz’ it ain’t true.
Dave M.
Professional trade show booth traffic builder and party entertainer. Corporate and private sector events.
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Costs me absolutely nothing...
