

It costs 5x more to attract a new customer than to retain an existing customer. - jcklnruns
http://tomfishburne.com/2013/11/acquisition.html

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gizmo
In my experience this is false for SaaS products. This is because you can get
new customers by improving the amount and quality of passive traffic you get,
or by optimizing ads. This has a very good return on investment. But if a
customer is somewhat unhappy and wants to leave but you persuade them to stay
by building that "one small feature" they really wanted your return on
investment is terrible. The feature will take several days to build and test
and in exchange the customer will be happy for a only month or two after which
they will again come with unreasonable demands.

Retaining a customer makes a lot of sense when you are a consulting shop where
customers pay you for the work you do. In a SaaS world where a small
percentage of the customers is already responsible for 80% of the support load
trying to retain them is often just not worth it.

How much effort you should put in retaining a customer is a function of the
cost to require new customers (CAC) and the LTV of the customer. And for SaaS
focusing on customer acquisition works much better. Or to put it really
simply: if your goal is to grow your SaaS business at 20% month over month the
few customers that want to leave but could be persuaded to stay are simply a
distraction.

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tlogan
The most important thing in any business is that you really need to know who
is your customer and who is NOT your customer. If you master that, then
everything else is "easy".

Here is my take on this:

\- if customer is leaving because he or she is demanding some feature to be
implemented, then he or she is not your customer anyway.

\- if customer is leaving because your service seems too expensive, then he or
she is not your customer anyway.

\- if customer is leaving because he or she is generally unhappy about the
service, it is important to work hard to understand customer use case and
whether your solution is really for that customer

\- if customer is leaving because your service does not work or it is flaky,
then... oh well fix it and try to convince customer via nice support. Or maybe
that feature you are selling should not be part of your service...

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a3voices
I wonder if the same sort of idea applies to retaining employees, girlfriends,
etc.

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seiji
...with the caveat that there's negative cost associated with retaining bad
ones instead of cutting them loose and finding better fits.

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hopeless
the same is true of bad customers and clients

~~~
ars_technician
only if keeping a customer is exclusionary to having another in its place
(e.g. consulting or services with limited 'slots' for customers).

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mnw21cam
Out of interest, how many people here have been in a startup company where it
has been _really_ hard to gain new customers, but once they realise what you
are doing for them they love you forever?

This was my position ten years ago. The company folded because it was just so
expensive to get new customers and the bubble burst so we couldn't get any
further investment.

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jcklnruns
We've had this issue with our startup since our competitors are either a
Goliath in the space or well-funded startups. Yet we probably get at least a
few emails each week from users who just love what we do. We've also had a
fair share of users email us asking us how they can give us money, because
they don't want us to disappear. So, I guess, we're doing something right.

~~~
gk1
Do you have some sort of referral system in place? If people like you enough
to email you, I bet they'd email their friends too if you give them a hint and
way to do so.

~~~
jcklnruns
Yup. People even earn silly badges for referring their friends and, actually,
we do get a high conversion rate from user invites. There's just not enough
eyeballs hitting the site outside of users that search for us directly.

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verelo
Lovely blanket statement.

There are plenty of cases where it costs 25x more to attract a new customer
(Think aviation), and 25x less to retain an existing customer (Think Twitter).
It really depends what you're building and who you're selling it to.

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mathattack
Of course it does. Most sales organizations know this.

There are still reasons to hunt new customers though:

\- You don't want your business to fail at the loss of one customer.

\- New customers can help you push the product.

\- It's possible to simultaneously invest in new and existing customers if
both are profitable activities.

\- In a SaaS model, your existing customers keep revenue flat. New customers
grow the top line.

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kirk21
Great post. Wrote about how much effort it was to fill my beta list here:
[https://medium.com/what-i-learned-
building/3408064eda35](https://medium.com/what-i-learned-
building/3408064eda35)

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mrtriangle
I learned this fact from the temp in an episode of the Office.

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salient
Does that rule really apply to regional monopolists, though?

This is why I don't like some of the states' proposals for bringing fiber
there by giving even more such regional monopolies to companies. Fiber is
great, if they do make it happen, and don't trick us like they did the last
time when they received hundreds of billions of dollars, but giving them
regional monopolies just means we'll go through this again in 10-15 years,
when we'll need to upgrade to quantum Internet or whatever.

The solution is to let companies fight it out, not give them special
privileges/monopoly in order to "bring something" to a community.

~~~
maxsilver
> Does that rule really apply to regional monopolists, though?

Exactly.

Comcast is a bad example in this article, because they have near 100% complete
monopoly control over the vast majority of the markets that they serve. (And
what little competition they have from DSL is almost never remotely
competitive)

If you have 100% monopoly, then you _can_ have terrible customer service, spam
everyone with marketing offers, and have it work. Your a monopoly, your
customers have no other choice than to do business with you, regardless of how
terrible you are.

