Sales Relationship Paper
Companies have realized that they require more analysis of campaigns and need to compute and manage return on marketing investment. In addition to this, companies have become aware with the need to justify and line up the cost of serving customers with the value rendered by the relationships. Due to this consideration of cost of customer retention and cost of customer acquisition has emerged. Here in this paper, the comparison and contrast among the cost of customer retention and customer acquisition will be discussed.
Cost of Customer Retention
Customer retention pertains to the percentage ...view middle of the document...
According to an important business metric, it is believed that customer acquisition cost should be deliberated along with other data, mainly the value of the customer to the company and the leading return on investment (ROI) of acquisition (Evan, 2009).
This calculations of customer valuation assists a company in determining how much of its resources can be productively spent on a specific customer. It is not beneficial for a business to expend more on acquiring a customer than the amount that customer will offer the company in return (Mukerjee, 2007).
Cost of Customer Retention vs. Customer Acquisition
In present, some companies with high customer agitate rates or a more transactional sales style primarily concentrate on bringing new customers, whereas those with more retentive business cycles or more relationship establishing sales processes focus on retention (Customer Acquisition and Retention, 2008). Both customer acquisition and retention are vital for long-term business success and growth, but the number of businesses irrespective of sales approach can arrive at substantial benefits by concentrating on retention and selling back into their subsisting customer base (Baker & Hart, 2007).
Retaining existing customers is the primary function of Customer relationship Management whereas attracting, bringing up and captivating new customers is a secondary function of a CRM solution. The concentration on customer retention is due to the high cost associated with customer acquisition. Customer acquisition is usually more costly than retention and effective acquisition advancements like extending munificent incentives to new customers can blowback with subsisting clients (Pogol, 2007).
Marketing campaigns and exploring done in a disorganized and unrestrained manner can cost much more than the additive gains to businesses. On the other hand, customer retention and loyalty ordinarily cost less and effective retention can in reality heighten acquisition, because subsisting customers who experience valued will expend more and will become liberal with word of mouth recommendations (Customer Acquisition and Retention, 2008). Moreover, distinguishing and getting to be acquainted with the organization's most profitable customers will help them in tuning their strategies for winning more high-value clients.
The prominent goals organizations that are making use of Customer Relationship Management are revenue, loyalty, ROI, retention and acquisition. All these goals are somewhat entangled, but the power holding them all at once is customer retention (Pogol, 2007). If an organization undertakes...