The cost of acquiring new customers is much higher than keeping old customers — new customers spend advertising, promotions, discounts and sales effort; Old customers just need to take care to come back. Popular estimates: Acquiring new customers is 5 to 25 times more expensive than retaining old customers, depending on the industry. For SMEs, this means: don't pour your entire budget into advertising new revenue when old customers are being neglected. Zenify recorded a 34% increase in retention and a 34% decrease in operating costs (approved).
TL;DR
- Acquiring new customers is 5-25 times more expensive than retaining old customers.
- New customers: advertising, promotions, commissions — all cost money.
- Old customers: care is key — low cost.
- SME should balance: don't "only focus on new revenue" and neglect old customers.
- Measure your new collection costs (CAC) to know your true numbers.
Why are new customers expensive?
New customer acquisition costs (CAC) include:
Advertising: advertising budget — increasingly expensive over time.
Attractive promotions: First-time discounts, discount codes — eating into profit margins.
Commission: discounts for affiliates/e-commerce platforms.
Sales effort: consulting, monitoring, closing — staff time.
Conversion risk: many customers "know" but don't buy — advertising fees.
Why is it cheap to keep old customers?
Costs for retaining old customers include:
Care: thank you messages, order updates, inquiries — very low cost.
Loyalty program: accumulated points, member incentives — controlled costs.
No cost of "first persuasion": Old customers already believe, no need to spend money to create trust.
Bottom line: returning customers have paid a one-time acquisition cost — each subsequent return is a higher “net profit.”
Is the number 5-25 times correct?
Common industry estimate: Acquiring new customers is 5 to 25 times more expensive than retaining old customers. Wide range because:
Registration/service industry: old customers are kept almost "free" → big difference.
Competitive retail: still different but narrower.
Depending on your advertising spending level.
Important: Your exact number must be measured using actual CAC — not mechanical pressure.
How to calculate new customer acquisition cost (CAC)
CAC = Total sales & marketing costs (period) / Number of new customers (period)
For example: Spending 30 million on advertising + 10 million effort per month, collecting 200 new customers.
CAC = 40 million / 200 = 200,000 VND/guest
Compared to the cost of keeping an old customer coming back (usually several thousand to tens of thousands) — the difference is very clear.
Reasonable budget allocation for SMEs
1. Measure your CAC first
Know how much it costs to attract a new customer — don't guess.
Track by month, by channel.
2. Don't "all new revenue"
If the budget goes 100% to advertising new revenue but old customers are neglected — you are paying twice.
Consider shifting part of it to retention (taking care of and giving incentives to old customers).
3. Invest in retention before increasing new revenue and expenses
Old customers are cared for and return → increased revenue at low costs (see Customer retention).
Only increase advertising for new revenue when old customers have been well retained.
4. Compare effectiveness
LTV of old customers vs new customers — which brings in more over the long term (see What is LTV).
Allocate budget according to the most profitable place.