Customer Acquisition vs Retention Costs: 2025 Benchmarks ...

Executive Summary: This article breaks down the core debate in growth strategy: is it better to acquire new customers or retain existing ones? We'll cover the hard data, including the fact that acquisition is 5-25x more expensive than retention, and a 5% boost in retention can increase profits by 25-95%. You'll get current industry benchmarks for CAC and retention rates, plus 10 actionable strategies (5 for acquisition, 5 for retention) to improve your cost-effectiveness and drive sustainable growth.

Learn more in our guide: How To Craft An E-commerce Growth Marketing Strategy.

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) includes all expenses a business incurs to gain a new customer. This covers everything from marketing and advertising campaigns to sales team salaries and the tools they use.

CAC Elements and Calculation

CAC includes several expenses, such as:

• Marketing: Advertising, content creation, and events.
• Sales: Team salaries and CRM tools.
• Technical: Implementation systems.
• Creative: Design and campaign development.

The formula to calculate CAC is:

CAC = Total Sales and Marketing Investment / Number of New Customers

For instance, if your company spends $90,000 on acquisition efforts and brings in 1,000 new customers, the CAC would be $90 per customer.

Related: 7 Customer Activation Metrics Every SaaS Must Track.

What is Customer Retention Cost (CRC)?

Customer Retention Cost (CRC) covers all expenses related to keeping your existing customers happy and engaged. This includes customer support, success teams, loyalty programs, and engagement tools.

CRC Elements and Calculation

CRC covers costs related to:

• Customer success: Support staff and training programs.
• Account management: Client meetings and check-ins.
• Loyalty programs: Rewards and special offers.
• Engagement tools: Help desk systems and other retention tools.

The formula for CRC is:

CRC = Total Retention Costs / Number of Active Customers

For example, if a company spends $100,000 on retention for 2,500 customers, the CRC would be $40 per customer. By managing CRC effectively, businesses can strengthen customer loyalty and boost long-term profits.

Related: How to do conversion rate optimization for ecommerce.

The 5:1 Rule: It Costs 5x More to Acquire a New Customer Than Retain One

The most cited statistic in this discussion is that acquiring a new customer costs 5 times more than retaining an existing one. This highlights the fundamental economic advantage of a retention-focused strategy. While 44% of businesses still prioritize acquisition, the data shows that this focus is often misplaced.

Key Statistics: Acquisition vs. Retention Costs in 2026

Recent data underscores the growing gap between the cost and effectiveness of acquisition versus retention.

Dive deeper into 5 Ways to Reduce SaaS Customer Churn in 2025.

• Success Rates: You have a 60-70% chance of successfully selling to an existing customer, while the success rate for selling to a new prospect is only 5-20%.
• Spending Habits: Returning customers spend 67% more than new customers and are 5x more likely to make repeat purchases.
• Profit Impact: A 5% increase in retention spending can lead to a profit increase of 25% to 95%.
• Company Growth: Retention-focused companies grow 2.5x faster than those prioritizing acquisition.

Metric	Customer Acquisition	Customer Retention
Average Cost Multiplier	5-25x higher than retention	Baseline cost
Sales Success Rate	5-20% with new prospects	60-70% with existing customers
Revenue Generation	35% of total revenue from new customers	65% of total revenue
New Product Adoption	Less likely to adopt	50% more likely to try
Impact on Profits	Variable	A 5% boost can increase profits by 25-95%

Industry Benchmarks: What's a Good CAC and Retention Rate?

Costs and retention rates vary significantly by industry. Understanding these benchmarks helps you gauge your own performance.

Get data-driven insights with our retention calculator.

Average CAC by Industry:

• Fintech: $1,450 (most expensive)
• Real Estate: $791
• Financial Services: $784
• Software Development: $720
• SaaS: $702
• B2B (General): $536
• eCommerce: $70 (least expensive)

Average Retention Rate by Industry:

• Media & Professional Services: 84%
• SaaS & Technology: 75%
• Retail & eCommerce: 63%
• Hospitality & Travel: 55%

For SaaS companies, a good target is a Customer Lifetime Value (CLV) to CAC ratio of 3:1 and a retention rate of 90% or higher.

Why is Customer Retention More Cost-Effective?

Retention is cheaper and more profitable for several reasons:

1. Lower Marketing & Sales Costs: You don't need to spend heavily on ads or sales commissions for existing customers.
2. Higher Purchase Value: Loyal customers trust your brand and are willing to spend more over time.
3. Increased Likelihood of Upsells: Existing customers are 50% more likely to try new products or upgrade their plans.
4. Word-of-Mouth Marketing: Happy, loyal customers become brand advocates, providing free, high-quality referrals.

Try our CAC calculator to see your potential impact.

5 Strategies to Lower Customer Acquisition Costs

1. Implement AI-Powered Targeting: Use AI tools to automate audience segmentation and ad placement, which can cut acquisition costs by up to 50%.
2. Optimize Your Conversion Funnel: Streamline your website and sales process to ensure a smooth journey from prospect to customer. A clear funnel reduces drop-off and shortens the sales cycle.
3. Develop a Strong Referral Program: Incentivize your existing customers to refer new ones. Referral leads are often the highest quality and lowest cost.
4. Focus on Content Marketing: Create valuable blog posts, guides, and tools that attract your ideal customer organically, reducing reliance on paid ads.
5. Improve Lead Qualification: Ensure your sales team is only spending time on high-quality leads that are likely to convert.

5 Strategies to Improve Customer Retention

1. Enhance Customer Experience: 89% of companies identify customer experience as critical to loyalty and retention. Invest in excellent, proactive customer support.
2. Launch a Loyalty Program: Reward repeat customers with discounts, early access to new features, or exclusive content.
3. Leverage Self-Service Options: Create a comprehensive knowledge base or use AI-driven chatbots to empower customers to find answers quickly and independently.
4. Personalize Communication: Use customer data to send personalized email campaigns, offers, and recommendations.
5. Regularly Collect Feedback: Actively listen to your customers through surveys and feedback forms, and act on their suggestions to show you value their input.

Conclusion: A Balanced Approach is Key

While the data clearly shows that retention is more cost-effective, a healthy business needs a balanced approach. The most successful companies build a powerful retention engine to maximize the value of every customer they acquire. Use these benchmarks and strategies to audit your own efforts and find the right balance for sustainable growth.

FAQ: Common Questions About Acquisition and Retention

How do you calculate customer acquisition cost?

To calculate CAC, divide your total sales and marketing spend over a specific period by the number of new customers acquired in that same period. For example, if you spend $10,000 and acquire 100 customers, your CAC is $100.

What is a good customer retention rate?

This varies by industry, but for SaaS businesses, a retention rate of 90% or higher is considered excellent. For e-commerce, a rate above 60% is strong. The goal is to keep as many customers as possible, as even small improvements have a large impact on profit.

Does improving retention really increase profits?

Yes, absolutely. According to research by Bain & Company, increasing customer retention rates by just 5% increases profits by 25% to 95%. This is because retained customers buy more, cost less to serve, and refer other customers.

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Related reading

• 7 Customer Activation Metrics Every SaaS Must Track
• How to Build a SaaS Pricing Strategy That Converts
• Freemium vs Premium: Choosing the Right SaaS Model
• How to do conversion rate optimization for ecommerce
• How to hire a growth marketing expert

Useful tools & services

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