The Cost of Attracting New eCommerce Customers VS Retaining Previous Ones

Published on

July 23, 2022

The Cost of Attracting New eCommerce Customers VS Retaining Previous Ones

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Without customers, businesses would not exist. So, it’s safe to say the business world revolves around customers. In light of this, it’s no wonder the new customers vs existing customers controversy has existed for so long.

As a business owner, should you focus on retaining your existing customers? Or throw all your energy into acquiring new ones?

Well, the truth is there is no definite answer to this question. But, we’ll approach the question from a new angle by examining the cost of attracting new customers vs retaining existing ones.

This way, you have more information to help you decide the focus of your customer strategy — customer acquisition, retention, or both.

Also, you’ll discover some of the factors that can affect the cost of acquiring new customers and retaining old ones.

Finally, we’ll share tips on how you can manage both campaigns. So, let’s get into it!

New Customers vs Existing Customers: A Brief Explanation

The simple difference between a new and an existing customer is whether they’ve bought something from your brand before or not.

A new customer is a person (or even another brand) that had previously not purchased a product or service from you but has now made a purchase. In other words, a person can only become your customer when they buy from you.

On the other hand, an existing customer is one that has already made a purchase (or several purchases) from your brand.

Here, it doesn’t matter how much or how frequently a customer buys from you. As long as they have already made their first purchase, they qualify as existing customers for your business.

That said, let us examine how the cost of acquiring a new customer vs an existing customer compares.

The cost of attracting new customers vs retaining old ones explained

The Cost of Attracting New Customers Vs. Retaining Old Customers

You probably know that it is an excellent idea to do all you can to keep all your customers loyal to your eCommerce. But, do you know much of a cost implication this can have on your profit margin? 

You see, experts have discovered that it costs significantly more to acquire new customers than to retain the ones you already have.

Now, you’re probably wondering what the new to existing customer cost ratio is. Well, we’ll tell you.

According to research, the cost of acquiring one new customer is at least five times the expenses you’ll incur trying to retain a previous customer. And that’s just one customer!

So if you have to acquire a new customer every time you sell a product or service, you’ll find the cost can have a significantly negative impact on your ROI.

That is not all.

Depending on your eCommerce industry, the variance between the cost of attracting new customers vs retaining existing ones can sometimes go as high as 25%!

However, this is not to say there are no perks to acquiring new customers. For one, you get to increase your customer base and eventually boost your brand advocacy numbers. Aside from that, getting new customers allows you to show your investors proof of traction and growth.

But, it goes without saying that if you want to increase your profits (and you should), customer retention is crucial.

That said, why is there so much disparity between the cost of acquiring customers and retaining them? The answer is simple. Customer acquisition requires more systems, tools, and campaign efforts, which increase expenses compared to customer retention. 

After all, with customer retention, you already got them through the door (which is the hard part). So all you have to do is encourage them to stay.

Here are some of the reasons responsible for high customer acquisition costs in eCommerce:

  • Digital advertising
  • Email campaigns
  • Social media campaigns
  • Customer acquisition events
  • Content marketing
  • Search Engine Optimization for your eCommerce website
  • Referral fees for brand advocates
  • Discounts and related incentives for new customers, etc.

Attract New Customers or Retain Existing Ones: Which Should You Do?

Now that you know the difference between the cost of acquiring a new customer vs retaining an existing customer, you’re probably thinking you should be all about maintaining your present customers.

No doubt, this is an excellent strategy.

But, any business that hopes to thrive must strike a balance between its customer acquisition and customer retention campaigns.

Yes, the cost of retaining old customers is lower than what comes with attracting new customers. Nevertheless, each strategy comes with its unique perks.

Let us quickly examine the advantages of each side of the argument.

Advantage of acquiring new customers 

  • They boost your customer base
  • They help you build your brand presence and recognition
  • They keep you updated on the market’s expectations for your business
  • They replace old customers who no longer buy from you.

Advantages of retaining existing customers 

  • They are easier to convince to make more purchases (at least 60% more likely)
  • They are more likely to spend more money than first-time customers
  • They are loyal brand advocates that can help you spread the word about your eCommerce
  • They contribute a significant part of your business revenue.

That said, both new customers and old customers contribute to your brand positively.

So, while retaining existing customers is a more cost-effective endeavor, you cannot afford to dismiss customer acquisition. New customers are also vital to your business growth.

Now That You Know

We hope this article answers your questions regarding the cost of attracting new customers vs retaining existing ones.

Remember, this is not the time to solely follow the numbers and focus on only customer retention.

Your business can only thrive when there is a healthy balance between customer acquisition and retention. After all, you can only retain customers that you acquired in the first place!

Vince Moreau

I'm the CEO & founder of ScaleCrush. You can often find me ranting way too much about BS marketing advice, fluffy and regurgitated content, and calling out gurus. I also happen to have my very own unoriginal thoughts about the stuff we're going through.

Marketing gurus are lying to you. Am I?
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