There seems to be a fairly dramatic shift among small businesses with regard to the money they spend on customer acquisition. For the first time, according to a new study, small businesses are spending MORE of their time, money, and resources on strengthening relationships with existing customers rather than acquiring new ones.
Previously, small business owners prioritized customer acquisition over customer retention at a 7 to 1 ratio, reported BIA/Kelsey, the research firm that has studied small businesses. But in the new study conducted for Manta, an online community for small business, 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers. A repeat customer spends 67 percent more than a new customer. Only 14 percent of small businesses surveyed are spending the majority of their annual marketing budget to acquire customers. According to Manta, "This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers."
Obviously, small businesses shouldn't abandon new customer acqusition, since customer attrition is inevitable and new customers need to supplement and replace the old. Still, it makes a lot of sense to invest in existing customers -- they cost less to retain than acquiring new customers, and they are worth more in the long run, both in terms of ongoing business and referring other customers.