Why is it worth selling to an existing customer base?
Posted: Tue Jan 21, 2025 9:19 am
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Amidst the hustle and bustle of rushing to meet sales targets and acquire new customers, many businesses often overlook existing customers. While acquiring fresh customers is of utmost importance for any business, keeping existing customers satisfied and subscribed is critical.
According to a recent study, companies focus more on customer acquisition than retention, even though acquiring new customers can cost up to seven times more.
Calculating Customer Acquisition and Retention Costs (CAC)
Both customer acquisition cost and customer retention cost are based on calculable equations iceland consumer email list that, when applied, will give you numbers that could be critical to the future growth of your business.
CAC = amount of money spent on sales and marketing ÷ number of customers acquired during a given period of time.
The amount of money spent should include things like marketing staff salaries, sales commissions, and advertising costs. The derivative obtained from the calculation is useful in determining how to best calibrate your investment and make necessary growth decisions.
CRC = total purchases ÷ period mitigated by retention costs, turnover, acquisition costs and overhead.
Calculating retention costs is not easy as a general formula is not commonly accepted by everyone. The predictable component of the equation is that customer retention directly affects customer lifetime value. High retention costs reduce margins and profits as each subsequent purchase is actually worth less overall.
Balancing CAC and CRC
Juggling the balls of CAC and CRC can often seem daunting. But, keeping these costs in balance is a necessity for any business. Furthermore, tracking the ROI of both costs is essential to justify the expenditure and effort directed at each. Low ratios in either area could indicate that further research is needed both internally, within the company, and at the market level.
Amidst the hustle and bustle of rushing to meet sales targets and acquire new customers, many businesses often overlook existing customers. While acquiring fresh customers is of utmost importance for any business, keeping existing customers satisfied and subscribed is critical.
According to a recent study, companies focus more on customer acquisition than retention, even though acquiring new customers can cost up to seven times more.
Calculating Customer Acquisition and Retention Costs (CAC)
Both customer acquisition cost and customer retention cost are based on calculable equations iceland consumer email list that, when applied, will give you numbers that could be critical to the future growth of your business.
CAC = amount of money spent on sales and marketing ÷ number of customers acquired during a given period of time.
The amount of money spent should include things like marketing staff salaries, sales commissions, and advertising costs. The derivative obtained from the calculation is useful in determining how to best calibrate your investment and make necessary growth decisions.
CRC = total purchases ÷ period mitigated by retention costs, turnover, acquisition costs and overhead.
Calculating retention costs is not easy as a general formula is not commonly accepted by everyone. The predictable component of the equation is that customer retention directly affects customer lifetime value. High retention costs reduce margins and profits as each subsequent purchase is actually worth less overall.
Balancing CAC and CRC
Juggling the balls of CAC and CRC can often seem daunting. But, keeping these costs in balance is a necessity for any business. Furthermore, tracking the ROI of both costs is essential to justify the expenditure and effort directed at each. Low ratios in either area could indicate that further research is needed both internally, within the company, and at the market level.