Whether you have 1,000 or 1 million customers, in order to grow you must spend a portion of your marketing dollars on retention. As the cost to acquire one new customer continues to rise and attrition rates escalate, ask yourself, "How much can I afford to spend on customer acquisition versus retention?" The worksheet below can help you answer the questions.
Retention vs. Replacement
A Retention Budget Calculator
A. Acquisition Cost:
Enter your cost for acquiring one new customer.*
B. Annual Attrition Rate:
Enter the percentage of customers you lose each year.*
C. Customer Base:
Enter the total number of customers you currently have.
D. Annual Loss (B X C):
This represents the total number of lost customers per year.
E. Cost of Replacement (A X D):
This is how much it would cost you each year to replace lost customers.
F. Potential Newsletter Impact on Attrition:
How much could you affect attrition with regular communication? Establish a realistic goal (typically 5%-10% reduction) for your program.
G. Potential Number of Customers Saved (F X D):
This represents the number of customers you could save each year by implementing a retention-oriented newsletter program.
H. Retention Budget (A X G):
This represents your break-even point for a retention program: If you can meet or exceed
the goal you set in Line F by spending this amount on retention, you've come out ahead!
I. Annual Cost of Newsletter Program:
Based on your specifications, this is how much it will cost to communicate with all of your customers for an entire year. (We will provide you with this figure.)
J. Savings from Implementing Retention Program (H-I):
Money available for other marketing programs or for savings.
* If you do not know your actual acquisition cost and attrition rate and would like the current averages for your industry contact First Marketing and we will provide them to you.