As a young student studying at Utah State University, I earned my way through college and the first few years of adulthood after graduation by working for a vegetation management company. I am most happy when I’m outside exploring, so this job was perfect for me. I got to spend significant time outdoors helping restore natural mountain landscapes.
Being a seasonal business, employee churn was a constant challenge. We struggled every year to find new employees that were willing to work outside, rain or shine, in temperatures that sometimes soared north of 100 degrees Fahrenheit.
But, we thought, it’s cheaper to hire someone new than to increase employee wages in an effort to retain employees. That is, until we sat down and actually calculated the costs associated with hiring and onboarding a new employee. Each new employee could cost us nearly $4,000 in hiring and training costs, not to mention the drop in efficiency and knowledge loss that occurred when the old employee left. We decided then and there that saving a dollar or two an hour in wages would never cost less and maintain the same results as trying to retain our best employees.
Connecting the Dots: How Does This Relate to Retail?
If you’ve made it this far in the blog you might be asking, what does this story have to do with customer retention?”. Well, the answer is in customer retention vs acquisition. Each day you have the opportunity to create new relationships with new customers or strengthen your relationship with your current customers.
So, what is the cost of acquiring a new customer and would your time and money be better spent retaining your current customers? Have you ever tried to figure that out? There’s a simple formula: Customer acquisition cost (CAC) = (the dollar amount spent on sales and marketing efforts) / (the number of new customers gained over a time period) . So, if you spent $10K on marketing expenses and $5k on sales in the quarter and gained 100 new customers the total Customer Acquisition Cost (CAC) would be $15k/100 or $150 per new customer. That’s pretty pricey…and what if they never come back?
Over the next few weeks on this little blog, we will be exploring how to keep your current customers coming back…so you don’t have to continually pay the price to keep acquiring new customers. As Zig Ziglar said, the “First Sale is the hardest”. If you’re like me, you want the “easy button” and selling to a satisfied customer versus finding a new customer is always easier.
We are excited to explore this topic over the next few weeks. Join us and you might find some new and creative ways that you can gain new customers and retain them. We’ll also explore the unique ways that Stride Retail’s software can make things even easier for you in these tasks. We look forward to the journey!