A well-documented rule of thumb states that it costs ten
times or more to acquire a new customer than it does to retain
an existing customer.
To put this rule into perspective, consider the following:
- Cost of sales for a typical company averages around 25%
of revenues or more. This means that about 22.5% of your
revenue is spent in acquiring new customers.
- The Pretax profits for most organizations is around 15%.
Taking the above two figures together, if you were able to
lower cost of new customer acquisition by 20%, this would
reduce your cost of sales to 18% of revenues. You gained a
30% increase in Pretax Profits by reducing your new customer
acquisition cost by 20%.
Since new customer acquisition is far more expensive than
customer retention, this White Paper focuses on strategies
for reducing the cost of new customer acquisition.
The main objective of designing an effective sales organization
is to increase the rate of new customer acquisition while
reducing the associated cost of acquisition.