Customer Acquisition vs. Customer Retention

Posted on November 29, 2006 by Tom Gray
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Frederick Reichheld of Bain & Company reports that …

  • Over a 5 year period businesses my lose as many as 1/2 of their customers over a 5 year period.
  • Acquiring a new customer can cost 6 to 7 times more than retaining an existing customer.
  • Businesses who boosted customer retention rates by as little as 5% saw increases in their profits ranging from 5% to a whopping 95%.

So why is retaining customers so often given such short shrift (and resources) compared to obtaining new ones?

Do we take existing customers for granted?

Are we unsure of the level of their satisfaction with our products or services and we’re therefore uncomfortable in approaching them to buy more?

Are our sales’ compensation programs more heavily weighted to acquiring new business?

Has there been turnover in our sales staff and we have accounts who no longer have an account manager or salesperson assigned or, if one has been assigned, who has no relationship developed with that account?

Whatever the reasons it’s obvious that attention to a customer retention program will pay dividends in diamonds to those wise enough to make the investment. My dad would call it, “working smarter not harder.”

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  • alexgrachev

    Because customer retention belongs to sales department (account management/customer service) and customer acquisition – to marketing. Different functional ownership. :-)

  • tomgray

    This may be true in larger companies but in smaller companies the two departments are often blended and in really small companies it's often the same person handling it all or they have a sales guy/gal and the customer service role defaults to the receptionist ;-)

    Customer acquisition is the sexy, exciting side and the topic of myth, Glengarry Glen Ross anyone, its the whirlwind courtship and honeymoon phase of a relationship while customer retention is the hard work of actually maintaining the relationship even though sometimes s/he has bad breath and squeezes the toothpaste from the middle, not the end!

  • tomgray

    This may be true in larger companies but in smaller companies the two departments are often blended and in really small companies it's often the same person handling it all or they have a sales guy/gal and the customer service role defaults to the receptionist ;-)

    Customer acquisition is the sexy, exciting side and the topic of myth, Glengarry Glen Ross anyone, its the whirlwind courtship and honeymoon phase of a relationship while customer retention is the hard work of actually maintaining the relationship even though sometimes s/he has bad breath and squeezes the toothpaste from the middle, not the end!

  • tomgray

    This may be true in larger companies but in smaller companies the two departments are often blended and in really small companies it's often the same person handling it all or they have a sales guy/gal and the customer service role defaults to the receptionist ;-)

    Customer acquisition is the sexy, exciting side and the topic of myth, Glengarry Glen Ross anyone, its the whirlwind courtship and honeymoon phase of a relationship while customer retention is the hard work of actually maintaining the relationship even though sometimes s/he has bad breath and squeezes the toothpaste from the middle, not the end!

  • jo

    But in some companies its the other way round: customer acquisition belongs to sales department and customer retention is to marketing.

  • http://www.essentialsocialmedia.com Tom Gray

    That’s right and I think that both departments need to collaborate on this particularly where it concerns nurturing newer, smaller accounts. Maybe their needs to be a separate function that spans both departments and whose sole focus is retention.