There is a lot of conflicting ideas amongst marketers over which is more important, customer retention or customer acquisition. Customer acquisition is particularly popular among sales marketers, mostly because there is something very satisfying in gaining a new customer and finally seeing results from all the money, time and effort spent on marketing campaigns.

However, the truth is that it’s often better to focus your efforts on customer retention, particularly for established businesses. After all, what’s the point of investing time, effort and resources into customer acquisition, only to miss out on the benefits of building a relationship with them.

Below we look at the main arguments why customer retention is more profitable than acquisition…

It’s Cheaper

There’s no doubt that attracting new customers is very rewarding for businesses, however, it is often a very time consuming and expensive task. The good news is that the costs associated with repeat business are significantly lower. In fact, according to Harvard Business Review, acquiring new customers is anywhere from 5 to 25 times more expensive than customer retention.

By targeting existing customers you’re much more likely to make a sale since they have a demonstrated interest in your product. Studies have proven that the probability of converting existing customers is 60-70%, whereas the likelihood of converting a new prospect is only 5-20%.

Marketing to existing customers not only reduces the amount spent on marketing, but it also gives you a chance to show your customers that you’re committed to rewarding their loyalty. Some simple examples of retention promotions include things like customer loyalty programs and birthday offers, all of which can show your customers that you value their custom and can be an effective tool in building lasting, profitable relationships.

It’s Faster

Again, it’s often much easier to sell to an existing customer than it is to sell to a new one, this is because barriers to purchase have already been overcome. Existing customers may just need a slight nudge to make another purchase, whereas getting new customers to make a sale can be much more time-consuming.

By focusing your efforts on good customer retention, you’ll find yourself making quicker sales with easier-to-please customers.

It Better Positions Your Business

Another key benefit of having great customer retention is that it enables you to build a more meaningful view of who your customers really are. This data is key to your customer retention efforts as it allows you to create personalised and targeted promotions which maximise your chances of success.

The data you collect on your existing customers will also come in handy in your future acquisition efforts. You can find out more about the kind of people who are most likely to become loyal customers, such as who they are, what motivates them and what kind of messages they respond to the best.

Another key point to remember is that if you neglect your customers, they’ll have a reason to shop elsewhere. Statistics show that 61% of consumers take their business to a competitor when they end a business relationship, this is why retention is so important to the success and growth of your company.

By implementing the best possible customer retention plan you can, you’ll be able to set yourself apart from your competitors.

Retention Often Leads to Acquisition

Another way that customer retention can be beneficial to your business is that it can result in customer acquisition through word of mouth. Word of mouth advertising is not only free but possibly one of the most credible forms of advertising. In fact, according to Nielson, 83% of consumers say they either completely or somewhat trust recommendations from family, friends and colleagues – this makes recommendations the highest ranked source for trustworthiness.

Final Thoughts…

It’s clear that by treating your existing customers well, you will constantly reap the benefits. After all, your customer base is a growing source for referrals for new customers.

Marketers don’t tend to focus on customer retention enough because they see loyalty and customer engagement as ‘unmeasurable’, however, this doesn’t mean they aren’t important. Customer acquisition is critical in the early stages of start-up businesses, but once you’ve built a customer base, you should focus your efforts on retention.

So there you have it – customer retention is vital for the success of your business, and focusing your efforts on it can massively benefit your business.

PERX Rewards provides a suite of reward based marketing tools designed to increase your customer retention by saving them money on the things they already buy day to day. If you’re interested in finding out more about how PERX can benefit your business, contact us at or call 01254 878 956.