You could be wasting 70% of your marketing cost

In my last post on the subject of customer satisfaction and retention, I had discussed the customermath formula 10%=47%. Let us continue learning customer mathematics.

When we lose customers, we end up wasting 70 percent of my marketing resources. I am sure you’re wondering how I arrived at this amazing conclusion. Simple maths, actually.

Lets again consider the example of the company with 100 customers as discussed in my previous post on the subject. We had calculated that the company needed 35 additional customers to meet its growth objective of 10%. Let us assume that the company spent Rs 100 to get 35 additional customers. Now how much would the company spend to get 25 new customers to replace the customers that it had lost? To get the answer all I have to do is divide 100 by 35 and multiply the answer by 25. The answer is Rs. 70 or 70 percent (Rs. 71.42 or 71.42 percent to be exact).

So, the Customer Math formula 25%=70% states that a company could be wasting 70% of its marketing costs in trying to replace 25% of the customers it loses with new ones. Just imagine how much money the company could save if it just retained its customers.

It is primarily because of lost customers that one finds companies struggling to meet targets at the end of every month and every year. Most companies extend their month-ending as well as year ending in order to show that they have achieved their established targets. This happens because when a company is looking for a 10% increase in sales, it allocates marketing resources for just that much. It does not consider the sales that it would have to recover because of lost customers, resulting in a mismatch between the marketing resources allocated and the desired objective. No wonder, companies are in a panic mode at the end of every month and every year.

So when you retain your customer, you not only achieve your sales targets but also save 70 percent of your marketing cost. “What more can you ask for?”

avinash narula

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.


No comments yet.

Leave a comment