The Only Law You Should Follow When It Comes to Customers

How much does it cost to find new customers? How much revenue, on average, will your business see when it retains a customer for another month? Six months? Every month you retain a customer is pure profit as you have already paid off acquisition costs.

Customer Math

Let's do the math.

If you sell a service where customers stick with your company for an average of one year, you bring in $1200. If the cost to acquire the new customer is $900, you reach the break-even point after nine months. The three months after that is $300 of profit.

What if you work to hold on to that customer for another month? That means an additional $100 profit at $0 acquisition cost. Make it six months and it's $600 profit. Continue adding on to the profit while the acquisition cost remains $0.

Internet Effect on Customer Acquisition Costs

Seth Godin recently wrote about the lifetime value of a customer. In the post, he explains that the Internet has revolutionized the cost per customer. It's true that the Internet has lowered acquisition costs, but not to $0.

Acquisition still requires action on your company's part. You need to create Web content and keep it fresh for search engine optimization. You have to show up somewhere online for people to find you. It's not enough to post a website and leave it alone in hopes that people will come to you. A static website has a hard time attracting search engines.

Social media gives companies a way to connect with clients, prospects and colleagues. It helps people remember you when they need your business. All of these activities require the investment of time.

Do you know what it costs to acquire new customers? What do you have in place to ensure current customers remain happy?