How much are your customers worth? How much does it cost you too acquire a new customer? Customer service is a tricky issue. Most experts say a disgruntled customer can usually be saved after the first major infraction and the relationship with them may even be stronger if saved properly. Sadly though some customers just will never be satisfied and can be costly to keep on board.
The Question: How much are my customers worth and if our relationship just is not going to work when should I drop the relationship?
Really it depends on the business industry you’re in, the type of customer being described and the kind of relationship that has been built. In any business situation you can always calculate the cost of acquiring the last set of customers by simply divide the money you spent on the task by the number of customers you’ve acquired. But this doesn’t help us figure out how much it costs to keep a customer. The only way would be with a control groups and creating a set of policies with a fixed cost designed to build customer loyalty. Apply these policies to one group and not the others; make sure both groups are of a similar background in terms of customer and relationship type. The just figure out the difference in your customer retention rates following these policies. Some professionals claim that it can costs anywhere between five and ten times the amount of money to acquire a new customer over keeping an old but again it all honestly depends on your specific situation.
The Solution: In just about any case it will always cost you the business more money to acquire a new customer over retaining and existing one. Try to focus on your customer needs and wants with the goal of boosting your customer retention ratings.
The Moral of the Story: Either way you look at it customer retention is important. It boosts your marketing appeal, underlying cash flow and overall health of the business. It is always a good idea to get an estimate of how much your common and power customers are worth though. It would be a shame to let a power customer go over petty change or to pay off a common customer for little return.
– Joshy G
Further Reading
http://www.1to1media.com/weblog/2008/05/what_does_it_really_cost_to_ac.html
