Repeat Customers vs New Customers: What's Better?

Our best insights and know-hows for sales, marketing, and customer success teams.


Most business owners tend to spend their marketing dollars on strategies that will attract new customers in the hopes that this will boost sales. Unfortunately, this hyperfocus means that they often forget about their existing customers – those who already purchased from them and would have done so again had they not been ignored.

What Is Customer Acquisition?

The term “customer acquisition” refers to attracting new prospects, adding them to the lead generation process, and ultimately converting them into paying customers. Doing this will benefit your business in the following ways:

  • Higher Return-on-Investment (ROI): New customers means more sales, which allows your business to fulfill its operational cost and invest in other projects to improve growth
  • Better Business Look: Acquiring new customers proves that the business is growing, which is something that investors find very important

What Is Customer Retention?

The term “customer retention” refers to keeping your existing customers on board with your product or service offerings. It continues throughout the business-customer relationship, beginning when they first made contact with you. Doing this will benefit your business in the following ways:

  • More Chances of Selling: Customers who have already bought from your business are more likely to make another purchase
  • Increased Brand Loyalty: Customers will be more loyal to your business if they continuously have positive experiences with it
  • Organic Marketing: Customers who have had positive experiences with your brand are more likely to recommend your products or services to their social circle

Customer Acquisition vs. Customer Retention

So which one is better – acquiring new customers or nurturing existing ones? Before answering this question, let’s first take a look at some significant numbers:

  • Acquiring a new customer can cost five times more than retaining an existing customer (Huify)
  • The probability of selling to an existing customer is 60-70%, while the chance of selling to a new customer is a mere 5-20% (Invesp)
  • Loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering (Microsoft)
  • 33% of customers will consider switching companies after just one experience of poor customer service (American Express)

These figures show that retaining customers is just as important as acquiring new ones. But if this is the case, then why do most businesses ignore marketing strategies that focus on increasing loyalty in favor of those that aim to expand their customer base?

Well, here are a few reasons why:

  • Ease and Convenience: Retention takes a ton of time and effort, which is why businesses would instead implement marketing strategies that focus on customer acquisition
  • Short-Term Revenue Boost: Increasing their customer base gives businesses a quick way to boost their short-term revenue
  • Fast and Measurable ROI: Businesses can keep their shareholders happy by issuing reports that show an increase in their customer base

All these may seem tempting; however, remember that these are short-term advantages. They may prove business growth, but you're back to square one three or six months from now.

Why Focus on Customer Retention?

Nurturing your existing customers creates solid and long-lasting relationships that will result in more profits for your business. But that’s not the only reason you should focus on customer retention.

Repeat customers tend to spend more money.

“Repeat purchase revenue is a major indicator of a company’s health. In month one, top-performing companies are getting more than 20% of their revenue from repeat customers, while the rest start with 10%. Additionally, at year three, top-performers get as much as 60% of their revenue from return customers.” – Daniel Levine, RjMetrics

In short, repeat customers spend 300% more than new customers. This is likely because they already trust your business, so much so that they’re willing to purchase products or services with higher price tags.

Repeat customers are more open to your products or services

“You have a 60-70% chance of persuading a returning customer to make a new purchase. From a marketing perspective, investing your efforts in them makes better business sense than heavily spending on prospects. After all, only 13% of future consumers make a purchase.” – Hrvoje Smolic, Graphite.

Repeat customers help raise awareness for your brand

Marketing can be costly, especially for small businesses, which don’t have budgets big enough to shoulder the high costs of campaign materials and social media advertising. Influencers are also often out of the question since many charge exorbitant prices for one or two posts online.

However, focusing on customer retention creates a group of loyal “brand ambassadors” who will happily promote your brand to their friends and family. Research shows that they refer 50% more people than one-time buyers.

How to Focus on Customer Retention?

As previously mentioned, marketing strategies focused on customer retention are more challenging to develop and implement. If you don’t know where to begin, then here are a few tips to help you out:

Here are a few tips to get you started:

Create a Customer Feedback Loop

Improving your business is impossible if you have no idea what your customers feel about it. Retaining them means creating a process for obtaining their feedback, which should then be shared with the rest of your team.

For example, product reviews should be handed to the engineering and development teams. This will help them identify and resolve any product design flaws.

Establish a Loyalty Program

As old-fashioned as this strategy might seem, it can bring significant value to your business. Consider the following statistics from software firm Annex Cloud:

  • 69% of customers say that loyalty programs influence their choice of retailer
  • 79% of customers believe that loyalty programs strengthen their relationships with brands
  • 50% of customers say they would change their behavior to attain a higher tier of the customer loyalty program

Note that a loyalty program should incentivize customers by rewarding them for their continued commitment to your business. The more they purchase from you, the more perks they receive.

For example, you can give customers points whenever they buy something from your business. Once they reach a certain number of issues, they receive a free product or a significant discount on their next purchase.

In Conclusion

Nurturing your existing customers can be a crucial selling point, distinguishing your business from its competitors. However, it requires dedicated sales representatives who can provide real-time answers to customers as they browse through your website.

Investing in your sales representatives translates to a happier and more loyal customer base, leading to better profits.

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