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Compare and contrast the cost of customer retention vs customer acquistion

Write a paper in which you compare and contrast the cost of customer retention versus customer acquisition.

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Companies have realised that they require more analysis of campaigns and need to compute and manage return on marketing investment. In addition to this, companies have become aware with the need to justify and line up the cost of serving customers with the value rendered by the relationships. Due to this consideration of cost of customer retention and cost of customer acquisition has emerged. Here in this paper, the comparison and contrast among the cost of customer retention and customer acquisition will be discussed.

Cost of Customer Retention
Customer retention pertains to the percentage of customer relationships that, once instituted, a business is capable to assert on a long-term basis. It is a main conducive factor in the net growth rate of businesses (Pogol, 2007). This could also be understood with an example, a company that step-ups its number of new customers by 20 percent in a year but retains only 85 percent of its subsisting customers will have a net growth rate of only 5 percent (20 percent increment less 15 percent diminish). But the company could triple its growth rate by retaining 95 percent of its customers.

With this example it is clear that growth is one experience that companies can confront with increased retention rates but with this their profits should also improve substantially as with this customers stay on board for more retentive periods of time. The cost of developing new customers and laying them on the boards normally extends two to four times to the annual cost of attending existing customers (Customer Acquisition and Retention, 2008). So, with this it can be said that the longer an organization keep its customers, the more years over it can spread its one-time cost.

Customer Acquisition Cost
Customer acquisition cost is the cost consociated ...

Solution Summary

The expert compares and contrasts the cost customer retention versus customer acquisition.