You’ve no doubt heard the commonly spouted stat “It costs 5 times more to acquire a customer than to retain a customer”. This is a well-loved and tirelessly cited piece of data in the world of business. I myself am guilty of utilising this piece of information to back up past blog posts. So why is it that so many companies still place more weight and importance on acquisition marketing over relationship marketing?!

Acquisition Marketing is the act of promoting a business product or service with the end-goal of attracting a brand new customer to your offering, whereas, Relationship Marketing focuses on nurturing existing customers. The goal of relationship marketing is to keep your buyers happy so that they keep buying.

Let’s review the over-used statistic, shall we? It is sadly true that most businesses put the vast majority of their marketing effort into getting new customers, yet it can actually cost between 7 and 20 times more to sell to a new customer than it does to sell to an existing customer.

“Woah, woah, hold on! Did you say between 7 and 20 times”? Yes, the old data needs to be reviewed because the rule of “5 time more” is no longer relevant. The average cost disparity between retention and acquisition is entirely dependent on your industry and could be costing you more than you think.

For example, if your business offers consultancy services, there is a huge time and financial burden associated with acquiring a new client. You need to learn your new customer fully and construct a tailored strategy and plan for them before any capital starts flowing. This process is costly and you tend to only reap the financial benefits of this work much further down the track when this new acquisition becomes a loyal buyer. The acquisition of customers for product-based offerings can be seen as less costly than consultancy, however, these businesses still experience this huge cost per customer disparity in their marketing efforts. These businesses tend to dedicate a huge amount of marketing money and time to making previously oblivious consumers aware of their product. This is time and money that could be better utilised to gain more from those who are already aware and have actively bought.

A 5% increase in retention yields a profit increase of 25%-95% (Bain and Company, 1990)

Take a moment to really consider where your marketing budget is being used…

Now consider this: A study conducted by Econsultancy surveyed 159 business marketers and found that customer retention is both cheaper than customer acquisition and can deliver a higher Return On Investment (ROI).

70% of companies from the study said that it is cheaper to retain a customer than to acquire one and 49% said that, dollar for dollar, they achieve better ROI by investing in relationship marketing over acquisition marketing.

More than simply contributing their own capital to your business, loyal repeat customers can also aid in the cheap acquisition of new prospects for your company through referrals and testimonials.


The way in which businesses engage with their customers is quickly changing in both tone and strategy. As trust in paid advertising declines, word of mouth marketing has become the most effective way to build a loyal consumer base, meaning more engagement and more revenue for businesses.

According to research by Nielsen, 92% of people trust recommendations from friends and family more than all other forms of marketing.

Referrals are the most cost-effective acquisition strategy for businesses. If you do not have a referral strategy in place already you should consider redirecting a portion of that wasted acquisition marketing budget into setting up a solid referral plan.


According to another study by Econsultancy, when a site has customer reviews, 63% of visitors are more likely to make a purchase. Reviews also produce an average of 18% uplift in sales.

The average buyer in 2011 used 10.4 sources of information before buying a product [Google; Zero Moment Of Truth Report]

It costs a business nothing to ask their repeat buyers if they would write a testimonial, and most loyal, satisfied customers are happy to do so. By employing this free resource from your current buyers you can influence prospects into making a purchase decision.

So you stand to be able to acquire new business through your loyal customers but how about maximising the capital you can get directly from your loyal buyers?

Cross selling:

One way to get more capital out of existing customers is to cross-sell. Cross selling is the practice of selling an additional product to an existing customer.

Always remember the 80/20 rule: 20% of your customers bring you 80% of your revenue. [Perry Marshall, 2013]

It is much easier to sell something to someone who already trusts you than to sell to a stranger. If a customer who is already satisfied with your service is in need of an additional product and discovers that you can offer that to them, the pre-existing relationship you’ve established greatly increases the chance of buying that product from you. Seeking another supplier would require the building of a whole new business relationship.

To get the most out of your pre-existing clients ensure you make them aware of any additional offerings that you can help them with on top of the service you already offer. Once a buyer trusts your company it becomes much more beneficial for them to receive multiple services from the one business, rather than several. Building this sort of relationship is mutually beneficial as it can streamline their service and gain you more business.

Up selling:

Up selling is a sales technique whereby a seller encourages the customer to purchase more expensive items, upgrades or other add-ons in an attempt to make a more profitable sale.

The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%. [Marketing Metrics, 2014]

Consumers would much rather buy from a company they already trust than from one they’ve never done business with before. The key here is to make sure you communicate how any additional features or upgrades to your customer’s service will help them. Make it a win for them. With the trust you have already gained through past work they are more likely to have confidence in your suggestions and offerings.


The lifetime value of a customer comprises everything they will ever buy from you today, tomorrow, and in the years ahead.

Repeat customers spend, on average, 67% more [The chartered Institute Of Marketing, 2010]

It really does pay to stay close to your consumers, so you know their exact needs, today and tomorrow. Your aim is to be irreplaceable as their supplier so you can reap the long-term benefits.


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