Do you know how much a new customer costs you?

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When times are tough recruiting more customers often seems to be the attractive option, but at any cost? Budgets will be tight if not now in the near future, so customer acquisition may be helpful but there may be better uses of marketing budget. The first question you should ask is do you know how much new customers cost you? Why not work it out; divide the marketing budget by the total number of customers you recruited last year and that is a good start point. You'll see that if you are trying to keep costs to a minimum then customer acquisition may not be the most suitable option. Customer retention may be where your focus should be and it is possible to have a recruitment campaign that also doubles as a retention programme.

Our Customer FarmingĀ® process suggests that there is no point in recruiting new customers unless you are going to hold on to them. Bain and Company have suggested that a 5% improvement in customer retention can increase profit by between 35% and 115%.

Trial purchasers buy less because it is a test purchase so they are judging the quality and service. You will also find that trial purchasers are more likely to buy one product and not browse the rest of products on offer. You need to ensure that you take the appropriate action to ensure that trial purchasers become regular customers and that means planning a customer journey and building a process. If you know something about your customers, through a database of details and preferences, it is easier to get more out of them through targeted communications and tailored offers. In overall terms, we've seen time and again that the cost of acquisition is five times the cost of retaining an existing customer and existing customers spend twice as much as new ones.

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