It costs 5x more to attract a new customer than to retain an existing customer.

In my experience this is false for SaaS products. This is because you can get new customers by improving the amount and quality of passive traffic you get, or by optimizing ads. This has a very good return on investment. But if a customer is somewhat unhappy and wants to leave but you persuade them to stay by building that &quot;one small feature&quot; they really wanted your return on investment is terrible. The feature will take several days to build and test and in exchange the customer will be happy for a only month or two after which they will again come with unreasonable demands.<p>Retaining a customer makes a lot of sense when you are a consulting shop where customers pay you for the work you do. In a SaaS world where a small percentage of the customers is already responsible for 80% of the support load trying to retain them is often just not worth it.<p>How much effort you should put in retaining a customer is a function of the cost to require new customers (CAC) and the LTV of the customer. And for SaaS focusing on customer acquisition works much better. Or to put it really simply: if your goal is to grow your SaaS business at 20% month over month the few customers that want to leave but could be persuaded to stay are simply a distraction.

I wonder if the same sort of idea applies to retaining employees, girlfriends, etc.

Out of interest, how many people here have been in a startup company where it has been <i>really</i> hard to gain new customers, but once they realise what you are doing for them they love you forever?<p>This was my position ten years ago. The company folded because it was just so expensive to get new customers and the bubble burst so we couldn&#x27;t get any further investment.

Lovely blanket statement.<p>There are plenty of cases where it costs 25x more to attract a new customer (Think aviation), and 25x less to retain an existing customer (Think Twitter). It really depends what you&#x27;re building and who you&#x27;re selling it to.

Of course it does. Most sales organizations know this.<p>There are still reasons to hunt new customers though:<p>- You don&#x27;t want your business to fail at the loss of one customer.<p>- New customers can help you push the product.<p>- It&#x27;s possible to simultaneously invest in new and existing customers if both are profitable activities.<p>- In a SaaS model, your existing customers keep revenue flat. New customers grow the top line.

Great post. Wrote about how much effort it was to fill my beta list here: <a href="https://medium.com/what-i-learned-building/3408064eda35" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;what-i-learned-building&#x2F;3408064eda35</a>

I learned this fact from the temp in an episode of the Office.

Does that rule really apply to regional monopolists, though?<p>This is why I don&#x27;t like some of the states&#x27; proposals for bringing fiber there by giving even more such regional monopolies to companies. Fiber is great, if they do make it happen, and don&#x27;t trick us like they did the last time when they received hundreds of billions of dollars, but giving them regional monopolies just means we&#x27;ll go through this again in 10-15 years, when we&#x27;ll need to upgrade to quantum Internet or whatever.<p>The solution is to let companies fight it out, not give them special privileges&#x2F;monopoly in order to &quot;bring something&quot; to a community.