- The cost of acquisition occurs only at the outset of the relationship - the longer the relationship the more time to amortize the cost
- Account maintenance costs decline as a % of total costs
- Long term customers are less price sensitive and less inclined to switch
- Long term customers tend to purchase additional products/services
- Long term customers can grow the brand via word of mouth and social channels
Why then do marketers still over-index on acquisition over customer retention ( at least, as Lester Wunderman would say "acquire customers with the intention to loyalize them). A recent report from Bain & Company reaffirms that acquiring a new customer can cost 6 to 7 times more than retaining an existing customer, yet the lions share of marketer's budgets are allocated to pure acquisition plays, even in a period of economic downturn. For example, the Lloyd James Group in the U.K. surveyed 1000 finance directors and senior financial managers - more than 70 percent of the respondents favored a reduction in resources for CRM while boosting investment in prospecting for new customers. The truth is that it is often hard to measure the true cost of retention, so I am not sure that I buy the simple maths here, I do know that there needs to be a holistic view of, and balance between the two, intrinsically connected (yet often organisationally distinct) activities...