Acquisition vs Retention Costs

One of the most common beliefs in modern marketing – and one that we often echo on this site, for reasons we'll get to shortly – are that customer acquisition (through marketing, sales, finding leads, and more) costs more than customer retention. It's a belief that's existed for years, and one that, when looked at with a skeptics eye, may not actually be true.

The truth is that there's no way for us to know exactly how much it costs your company to acquire a customer or retain them. As an example, let's look at the story of a fictional online business.

You're an entrepreneur with a great idea for a digital product with a monthly subscription system. You want to set up a website, and you know that your product is so remarkable that you'll attract buyers from all different types of markets. You hire a great SEO company and you target dozens of different keywords.

Your website shows up highly ranked in Google and suddenly it takes off, all for essentially the cost of creating the product and a few thousand dollars in website development. Like most digital products, however, you get copycats. Suddenly you have other website vying for your same customers with a similar product.

To make sure that customers keep coming back to you, you need to invest in more product development, offer competitive rates, and perform additional website development techniques designed to keep those customers interested in your product. You need to do this for essentially the rest of time. These would be considered the costs of retaining a customer, not necessarily acquiring them.

You need to make sure that all those customers you already attracted aren't wooed by another competitor. In this case, you initial investment was far less than your retention investment.

Obviously this is an extreme example, but it's one that shows that it's not as cut and dry as saying that new customers always cost more than old customers. It depends on the industry you're in, what you do to maintain your customers, your competition and more. Each and every company, product, and service is going to have its own unique numbers.

So why do we use this idea in our own writing? We'll discuss this in the next article.