The Economics of Recovering Existing Customers
Recovering an old customer is not automatically cheaper than acquiring a new one.
Sometimes it is.
Sometimes the customer is so cold, discount-dependent or difficult to reach that recovery economics are poor.
So compare the two properly.
Cost per incremental recovered customer
Formula:
recovery program cost ÷ incremental recovered customers
If:
Program cost:
$10,000
Incremental recovered customers:
400
Cost:
$25 each.
Now compare with:
new customer acquisition cost:
$70.
Interesting.
But not enough.
Add future value
Recovered customers may:
- have higher average order value,
- buy again,
- require lower education.
Or:
- return only once with a discount.
Measure downstream behaviour.
Add margin
A recovery customer acquired through 30% discount may produce weaker contribution than a full-price new customer.
Do not compare only cost per order.
Frequently asked questions
Is it cheaper to retain customers than acquire new ones?
Often, but not universally. The right comparison is incremental contribution after the full cost of the intervention.
How do I calculate customer-recovery return on investment?
Compare incremental contribution generated with the cost of the recovery program.
The principle
Customer recovery should win the budget because the economics are better.
Not because retention sounds virtuous.