Why Repeat Customers Are Cheaper to Acquire Than New Ones

Larry VanDenHandel on August 15, 2019

Whatever industry you may be in, there’s no such thing as “too much emphasis” on the customer. It’s always understood that the customer is the foundation of the success of any business.

As business owners and marketers, the primary goal is to meet the needs of the customer. By considering the importance of customers in all aspects and stages of the market process, you’re also ensuring greater customer loyalty and satisfaction — leading to a repeat in business.

The repeat business phenomenon happens when customers tend to go back, again and again, to purchase products or avail services from your company. This type of customer is called “repeat customers”.

But what can you do to gain repeat customers?

The answer is simple:

Focus on customer retention.

Customer Retention Leads to Lower Marketing Costs

According to the Harvard Business Review,

Acquiring new customers for your business is anywhere from 5 to 25 times more costly than retaining an existing one.

Not just that. There’s a 60% to 70% success selling rate to customers you already have, while 5% to 20% success selling rate to a new prospect.

But how, exactly, are you able when retaining customers than just acquiring new ones?

Lead Generation Cost

In business, a lead is someone who left some kind of contact information behind.

Commonly, it’s in the following forms:

  • Email address
  • Phone number
  • Name and address

This type of information doesn’t come cheap.

In fact, according to Survey Any Place, the average cost per lead across industries is around $33 to $34.

That means you have to spend at least $33 to gain a new lead, not counting the success rate of selling to them.

But for customers who already bought something from you, there’s no need to spend the same amount of money to reach them.

Why? Because obviously, you already have their information!

You can reach them whenever you want though, of course, you still have to follow the proper etiquette of marketing assuming you already gained their permission to use their email addresses and other forms of contact information.

Marketing Expenses

Marketing budgets vary from company to company. That’s because companies utilize different marketing schemes, tactics, and channels.

But for you to understand how enormous companies spend in marketing, the US alone spent $197.47 billion while China spent $79.08 billion on just advertising.

According to Deloitte Digital’s data, industries, on average, spend a good 11.61% of their budget on marketing.

Here are the specifics for each industry:

The percentages represent millions of dollars.

But the cost in marketing or advertising to repeat customers is lower. More often, all you need to do is send them an email about your new offers and products.

When it comes to repeat customers, there’s no need to spend on other mediums to reach them and market them. There are plenty of free channels you can use — social media and email.

The bottom line is:

Focusing on existing customers lowers marketing expenses.

You will spend less effort, money, and time finding and cultivating new prospects and convincing them that your business is the one they should avail from.

When a customer has availed services or shopped items from your business a few times, this certain person does not require more convincing to come back to your store unless they have a disappointing experience.

Since you have already established trust between your business and these repeat customers, you have inspired great confidence in your products and services.

You may already know much information about them through repeated transactions, making it easier for you to identify and predict their needs and next moves.

How about the revenue?

You might consider the research entitled “Prescription for Cutting Costs” by Bain & Company that emphasizes loyal relationships into cost savings:

Increasing focus on customer retention by 5% can increase profits and sales from 25% to 95%.

Through a recent retail survey by KPMG LLP’s Retail Industry, here are the significant drivers of your business’ revenue:

As you can see, 52% believed that customer retention is the top significant driver of a company’s revenue growth in the next 1 to 3 years.

These will help you grow revenue!

Here’s the caveat:

You need to constantly earn your customer’s loyalty.

Because if you stop trying, your customers will feel that you no longer care about them. This is the main reason, according to SuperOffice, why a customer abandons a business or company.

Here are other benefits of customer retention:

1. Repeat Customers are less sensitive to price shifts

Price stops being a big issue once a customer had good experiences shopping products or availing services from you.

According to John Dawes from the University of South Australia, customers who have been shopping, dealing and transacting a certain company for a long period ( i.e., long-tenured group, repeat customers ) were half as sensitive to a high change in price as compared to newer customers.

2. Repeat Customer Considerations

Loyal customers are 5 times as likely to forgive when there are errors in their purchase.

Handling orders manually often leads to inevitable human errors, especially when you are stuck working with paper-based order forms.

However, with loyal customers, they tend to understand and consider these minor incidents. This ensures you that if these errors happen, there would be a lesser problem.

3. Brand Advocates through Customer Retention

Customer Retention is also a way of promoting your brand or company.

Simply because it is human psychology — when a person experiences something nice, he or she would share it with almost everyone around.

When your customers have experienced reliable service and quality products, the likelihood of these people spreading the good word about your company can go up exponentially.

Know that satisfied customers will willingly share with their social circle about how their remarkable shopping experience effortlessly.

This is a marketing technique of your brand for free of cost!

Use Loyalty Systems More

Now that you have an idea of how advantageous it is to focus on customer retention, you should have a loyalty system in place.

A loyalty system or program is a rewards program of a company for customers who are ‘loyal’. Loyal customers are those who willingly make frequent purchases as a result of great customer service and satisfaction.

Do loyalty systems cost less than marketing and advertising for new customers?

This may sound a bit contradictory but even if you’re giving money in the form of a coupon, discount, or freebies, loyalty systems definitely cost less.

With loyalty programs, what you spend comes back right away in the form of repeat purchase or a referral! You only reward customers who took action which is also profitable for your business.

The action can be:

  • Purchase
  • Referral
  • Sharing to social media
  • And others

Suffice to say that loyalty systems pay for themselves.

If you don’t have a paid loyalty system in place, there are a few things you can do to earn a customer’s loyalty:

  • Stay in touch with your current customer base
  • Maintain a professional appearance in every way
  • Gather every actionable data point concerning the transactional and behavioral aspects of your customers
  • Take time to reach out to customers you have not talked to in years
  • Craft a loyalty program that rewards repeat customers
  • Let repeat customers be the first to know about upcoming events and seasonal tips

To wrap things up…

As marketers, recognizing the role of customer experiences with your services and products is vital in the growth of your customer base, customer satisfaction, and sales growth.

Engaging in a more personal level where there are a stress-free setting and customer-centric experience helps you collect customer loyalty. It is the value of loyalty from repeat customers that would make a company stand out from the market competition.


Larry VanDenHandel

Larry is the Co-Founder of Lootly

Grow your brand with Lootly

Whether you are looking to acquire new customers, increase customer loyalty, or drive
new DTC subscriptions, Lootly’s loyalty marketing platform software can help.

Request a Demo