The actual difference between the cost of acquiring and retaining clients.

Throughout my career, I have worked for several businesses having various unique professions. Interestingly enough, I have worked for three separate companies that shared the same fate. I believe that sharing their stories can benefit all small businesses. Each of these companies, at a certain point, was the dominant power in their field. Because of the lack of continuity, once they were at the top, they began to disintegrate. In each of these cases, I was employed toward the end of their company’s dismantling. Allowing me to see their entire account. Also, I am a very observant and curious person, gathering knowledge through past memos, reports, missed promotions, and juicy gossip. Archetypes then emerged, revealing what worked and what did not. Clarifying what they did wrong and where they were exceptional at, without acknowledging the secret of their success. Understanding the recipe of their triumph and failure. This knowledge permits me to achieve a unique perspective to give advice that works to a small business. Here is the best advice I can give based on these accounts and my own personal experience.

One of the things I observed is that all of these businesses focus on the acquisition and farming of new consumers. An attitude of developing more and more clients. Invoking a “business tunnel vision” that sees existing customers in the rearview mirror. Allowing their precious clients to be courted by a rival competitor and being compliant to their pilfering. Thus, the long-lived ” struggle” with consumers to win their business. In each company, the owner pushed the desire to find new clients almost every day. Mainly because they had lost communication with their former customers. In some cases, it was due to a deteriorating reputation or overcharging clients. Encouraging the agenda of constantly stocking the consumer reservoir with new guppies. 

The Accurate Deduction Cost of Customer Acquisition


Let me start by declaring, spending your money on keeping your customers is the proper way to grow your business. Unlike what these organizations did, they focused primarily on customer acquisition. Although you need to acquire new customers to get started and producing new customers is encouraged to grow. These businesses concentrated mainly on new customers and did not pay much attention to existing clients. Slowly losing business and profit. To start, using laymen’s terms, a client acquisition cost is how much it costs for the client to initiate a trade with your business. It’s fair to start by declaring my judgment; the focus of customer acquisition is the most expensive moreover exhausting way to grow your business. Together with these examples, the majority of corporations assume spending more money will attract new customers. Placing weight on the assumption more interest is going to develop more revenue. This is an unsuccessful commercial practice. I think this idea is proven by marketing agencies that convince owners that their investments are working. Advertising costs are just one part of a moving wheel on the cost of purchasing a new customer.

First, allow me to disclaim that there are various costs with each acquisition of a new customer. It’s also too complicated to go through all the expenses that transpire to generate a new buyer. But believe me, it’s more costly to acquire a new client. So the first part of understanding why it costs more money to acquire a new customer can be best summarized with a short anecdote of a fisherman.

A fisherman pulling the net out of the water.

A fisherman earns his livelihood by fishing. Fish cannot be produced without bait. The angler must use fresh bait daily, either by buying it or creating his own. At any rate, he has to spend money to construct his bait to catch a significant amount of fish. Depending on the fisherman, he also can use his smaller caught fish as a lure to produce a larger fish. In any event, bait is a consumable cost to the fisherman, which means he must resupply to catch more fish. In other words, money is required to produce the catch of the day.

Besides, the bait is occasionally squandered adding a further loss to the fisher. Also, take into account the fisherman can only carry a certain quantity of bait at a time. This can be due to many factors, such as the cost of the bait, how much can be carried or afforded at the time. Hopefully, you can see how this story can be applied to any small business. This brings me to another metaphor of fishing regarding business. The more fishermen there are in the same boat, the little fish are caught. The cheaper you are, like fishing off the docks. Is only going to produce bottom feeders, the little fish, or dead fish.

So what is the point of this story?

The allegory suggests that all customers require a cost to catch and reel them in. Because every new customer comes with a price. Your business needs every new client to generate a little more revenue to compensate for the cost incurred by attracting them with your bait. For example, many companies these days use leader losses to get your attention and interest to purchase. Typically involving stipulations, making the purchaser invest a certain amount to be generated revenue from the sale. A leader loss is a product that the retailer knows their profit is close to zero. A sort of undercutting the competition to stand out. Designed as a marketing scheme to attract customers. But this lost leader product is more damaging than good. Add up the money for advertising, the cost of shipping, storage, inventory, training, support, and the background cost of your business. You find yourself making even fewer earnings because each little bit eats up your profit. Additionally, obsolete or old inventory that doesn’t sell is even more expensive. Ultimately leading to the liquidation of the proceeds resulting in higher loss, waste, and time. Not to mention adding the taxes paid for the inventory through its life cycle. All of this adds up, assessing to more cost, ensuing the new customer makeup for the difference to hit your profit margin target. If not, the customer acquisition cost increases over time without your awareness.  My point is to educate small business owners. To make sure they understand each new customer acquired, needs to spend a little more money than initially thought to compensate your loss to earn the customer. 


Each person involved costs a portion of the total cost of your product or service.

Group of a young business people putting their hands together in the meeting

This is true when you look at what it really costs to get a new customer. It sacrifices time, money, and effort to gain a new customer. It also takes even more time, to cultivate that new customer to be fruitful. Start with the idea that you may have used a designer, a marketer, or a team of developers to find a way to raise awareness of your branded company. In addition to that, look at where you focus your efforts to get new customers. There are all sorts of fees, taxes, and charges to acquire a new customer. Look at when you advertise on the web or social media. You could be charged a pay-per-click, pay per view or pay a commission. Culminating to an exchange of financial charges occurring for the acquisition of this new client. Adding to a loss of revenue because it costs money to obtain the attention of this new buyer. Not to forget my story of lost fishermans’ bait, not everyone bites. Also, remember that each marketing avenue has an acceptable percentage of lost traffic. Again, you are not going to win them all.

Inbound Marketing, Lead Magnet, Customer Attraction and Retention, B2B Concept

So why is customer retention more important?

So what is customer retention, it is keeping the customers as long as possible. Customer retention is less costly, creates referrals and longevity with more profit gains.

So why should you spend more money on your customers than trying to get new ones?

The power of customer appreciation is probably the most underrated way to market your business. By investing in your customer, you ensure they will be more satisfied and see the value of your business. The sense of being appreciated brings loyalty. Loyalty plus customer satisfaction coupled with social proof brings free recommendations and referrals. Growing your business in areas that were unthinkable prior. Take notice of businesses that have extra precautions for their customers like Apple or Porsche, spending a large amount on their employees, materials, and development to produce guaranteed quality. An existing customer knows that he purchases without hesitation the most reliable, innovative, and high-quality product. All of these areas are an example of spending on your existing customers. Some companies focus on financial outcomes, not the customer. There comes a shift in small businesses where it becomes a large business, where profit takes the wheel. But companies who understand if the client loves their products. They are more than likely to purchase the latest items, let alone more likely to purchase multiples. It cuts down on the cost of doing business with your client. The aim of the enterprise is to reduce your cost of doing business without sacrificing quality. In addition, businesses that offer excellent customer service also see their profits increase because they spend more money to keep their clients. Hopefully, this can be an example that spending money to keep customers can be done in more ways than concentrating on advertising directly to consumers.  Additional customer support, product support, and guarantees are examples of other ways to support current customers. Take Costco, for example, they will return any item, without asking any questions. What this means, is that Costco will assume the costs of an existing customer, knowing that the customer will most likely take a wager on new products and  promotions.

Customer service form

The power of fantastic customer service

Depending on your business, you can spend money for your client through your people. Outstanding customer service is a cost to retain your customer. You must employ and train your employees to represent your business in the best way possible. The more money you spend on your employees is a cost to retain your client. Believe me, I have witnessed the decline of business due to underpaid staff and cheap labor. Having no one properly trained in specific situations with ample experience. Is equivalent to placing a rock in your shoe and trying to win a race. With comprehensive training, your people can deliver the best image and experience. Winning business every time and creating a unified promotional selling force. If you treat every customer as number one, in turn, your company will be number one in their book. 


Smiling people

Social proof and the proof is in the pudding.

 A powerful way of using social proof is customer referrals. Social proof is based on the idea of normative social influence, which states that people will conform to be liked by, similar to, or accepted by the influencer (or society). This means that if a group of people you feel connected to if they enjoy something, you are more likely to choose it as well. Using the power of recommendation already makes you familiar and trustworthy to your new client. Simply put, someone vouched for you. Immediate likability rating increases substantially. Therefore, when your likability score rises, thus your income with your potential sale.

 This is why testimonials and websites like Yelp are so powerful. Product endorsements by athletes and actors are types of social proof to make my point. Hence the most profitable version of social proof in my eyes is referrals. Referrals come at a zero cost opening doors and gain contacts to unexpected places. Let your customers be your largest sales force.


Focusing your money on keeping your customer will increase the longevity of your customer. Why is longevity so important? Having a trusting relationship and good rapport with your customer allows for steady growth. Ensuring they will be spending more money with you over time. Having a relationship with your customer takes time. but that time can be cut in half through referrals and strong references. Frequent communication with your customer makes them less viable for poaching and fixing issues before costing your relationship. Customers who stay longer as a client tend to spend more per order. On top of customer longevity, customers become more persuasive through rapport and more agreeable to larger ticketed items. Involving personal touches cost more money making the customer feel appreciated and more satisfied. Creating an edge in business that no computer or order taker can substitute. In turn, generating even more profit through referrals, by staying the forethought of your clients internal Rolodex of recommendations. They will let their friends know that you’ll take care of them, earning their business almost immediately.

It takes more than one sale with a client to stay in business.

Sale notice in a clothes store.

Too many companies are trying to attract new buyers through promotions to win new customers. However, the percentage drops as you depreciate your product value when beginning a new alliance. Your customer will not buy unless your service or product is reduced. Don’t give yourself away. Offer precision, quality, and unmatched service. Companies that have a loyal foundation increase their chances of multiple purchases and marketing promotions to successful existing clients. Give the guy who’s buying from you a break, rather than new clients. Because he’s the one spending money and keeping you in business. Remember though, a break is only once and while. Discounts and promotions should be few and far between. Do not lower your price to win clients, because less profit is less money to keep the quality needed to keep the customer. This brings us back to the decline of a lot of corporations. If the quality keeps slipping along with the requested price. Pertaining to lowering the quality of materials, workers, and tools to hit your profit margin. It slowly turns into a sinking ship where the management left is just the last men and women standing. Still using the fish metaphor, you have to feed your pond to fatten your fish.

To stay in business, you have to establish a client relationship over time, building a foundation. Thus, becoming a leg of the foundation in your business with that customer. Otherwise, he is a one-time buy, and a one-time purchase cannot hold a structure or build a rapport. 

Before I conclude, I also think you don’t need to spend a lot of money to attract a client’s attention, merely respond to your audience’s requests. Don’t go chasing’ waterfalls! What I mean is avoid avenues that have nothing to do with your small business. 

In my conclusion, focusing on acquiring new customers is expensive, requires more effort, and takes longer. Focus on retaining your clients for whom you have spent so much time trawling. Spend less on getting your customers and more on keeping them interested. I hope my advice is informative and profitable. It’s the best I can give you at the time.



(Visited 19 times, 1 visits today)

Leave a comment

Your email address will not be published. Required fields are marked *