Customer Acquisition vs Retention Costs
Did you know that it costs five times as much to attract a new customer than to retain an existing customer? The cost of acquiring a new customer vs retaining an existing customer is expensive and businesses need to continually focus on the overall customer experience by properly training employees and having processes in place with the goal of customer retention.
- I explained to a computer company rep that I had 12 new laptops that would not power on no matter what I did. His answer to me was “What do you want me to do about it?” I said excuse me? He clarified by saying “if they don’t power on I can’t trouble shoot them and if they aren’t powering on, it has to be something you did to them that made them not work.” I still have nightmares.
—Submitted by: Liz M.
There is no one to escalate this call too. It won’t help you to talk with my supervisor because he will give you the same answer. Like a broken record, that answer was repeated multiple times when trying to cancel a contract for a storage unit two hours after my college-aged daughter had signed it; the rental was canceled the week prior via email, but the reservation had not been removed from their system which resulted in an automated text stating “it’s time to sign your lease”. To add to the frustration, the representative kept saying, “I will schedule your daughter’s move out for next month” as I argued back that it was a miscommunication and she’s not moving in and we have 48 hours to cancel the contract. In the end, the supervisor apologized and refunded us our money.
- 89% of companies see customer experience as a key factor in driving customer loyalty and retention”
- – Invesp
Negative customer experiences result in the loss of not only repeat customers, but also future customers. Analyst Esteban Kolsky published a study that illustrates the impact of a negative customer experience. The study shows that even after a negative experience is resolved, the risk for a consequential business impact is high. Here is a sampling of the results of Kolsky’s research:
- 67% of customers site bad experiences as a reason to take their business elsewhere; 55% of customers are willing to pay more for a guaranteed good experience.
- 84% of consumers are frustrated when the representative does not have the information needed to help them.
- Customer frustration leads to 13% telling 15 or more people if they are unhappy; 72% will share a positive experience with 6 or more people.
The Cost of Acquiring a New Customer vs Retaining an Existing Customer
With the cost of attracting new customers being 5x as high as the cost of retaining existing customers, companies must consistently strive towards providing exceptional customer experiences at every customer touchpoint. The general rule of thumb is to avoid customer acquisition costs by building a loyal customer base. A few related statistics:
- 44% of companies have a greater focus on customer retention vs. 18% that focus on customer acquisition
- 40% of companies and 30% of agencies equally focus on customer retention and acquisition
- The probability of selling to an existing customer is 60-70%, while the prospect of selling to a new customer is 5-20%.
Decision Makers Top Budgeted Customer Service Projects
Today decision makers top budgeted customer service projects are based around having the right technology and enablement tools to empower employees to provide the best customer experience possible. With the biggest targeted items focused on the customer experience and customer engagement, the projects that received the most approvals in 2016-17 were related to the cloud, knowledge, employee empowerment and analytics.
- Our clients are amazed that we not only have better databases than they do, but can retrieve data so quickly while on a call. This has given us an exceptional competitive advantage, which in turn helped us foster nearly 15 years of continuous growth.
- -Epicor ERP manufacturing company
The cloud, knowledge, employee empowerment and analytics all come together to enable businesses to create the customer centric focus that helps to build customer loyalty. The Cloud allows for improved connectivity and collaboration between the corporate location, field employees, customers and vendors. Access to data and employee empowerment streamlines the process of servicing customers. Analytics lead to a vast amount of knowledge, providing endless customer insights from purchasing habits to trends that can potentially lead to new opportunities for business growth. Each of these targeted projects benefit both the business and the customer in the long run.
Short and Long Term Costs of Unhappy Customers
Still not convinced? Then consider both the short and long term costs of customer dissatisfaction to today’s business:
- For a company to expand its clientele, its growth rate, as measured by number of new customers, must exceed its churn rate.
- 50% of customers will naturally churn over 5 years.
- 66% of consumers switch brands due to bad customer service; 85% was preventable.
- Attracting a new customer is 6-7 times more expensive than keeping existing customers.
- 65% of companies are successfully able to upsell or cross-sell to existing customers
- Only 12% of companies are able to upsell or cross-sell to new customers.
- 1 out of 26 dissatisfied customers complain; 91% of non-complainers will not return (absence of feedback does not mean a good experience).
There is no doubt that today’s technology serves as an advantage over ERP technologies from as little as five years go. If you have not taken the time to explore the benefits of upgrading your ERP software, then it’s time to start discussions. Let 2W Tech with 30 years of experience helping companies identify technology solutions, show you how Epicor Kinetic uses the latest Microsoft technologies, combined with industry best practices, to improve operational efficiencies and insights. Operational efficiencies and insights are only the beginning of how current technologies will enable your organization to meet and exceed the expectations of your most demanding customers.
Customer Experience for Executives – Esteban Kolsky
The 25 Worst Customer Service Stories to Train the Best CSRs – Kate Nasser
Customer Retention vs Acquisition Costs – Statistics and Trends – Khalid Saleh