Final answer:
The cost of acquiring a new member is typically higher than retaining an existing one, due to expenses tied up in acquisition strategies. Retention uses established relationships, often resulting in lower costs with higher ROI. The dynamic between these costs has tangible parallels in scenarios like business responses to union wage demands and Netflix's price hikes.
Step-by-step explanation:
The cost of acquiring a new member can vary greatly depending on the methods employed, but it is generally acknowledged to be higher than the cost needed to retain an existing member. For instance, the original text describes significant expenses such as payments to committee chairmen, lobbyists, congressmen, and others, which can all be interpreted as costs associated with acquiring or retaining legislative support, paralleling the concept of customer acquisition and retention in a business context. In modern business, expenses such as advertising, promotional offers, and investment in sales personnel, are all part of the costs of acquiring new customers.
Moreover, customer retention often involves less expense as it relies on established relationships and can utilize more cost-effective marketing strategies such as email campaigns, loyalty programs, or improved customer service. Therefore, companies may see a greater return on investment by focusing on retention. This is exemplified by scenarios like Netflix's 60% price hike, which can cause existing customers to consider leaving, potentially increasing the costs of retention to levels nearer to, or even exceeding those of acquisition in extreme cases.
Furthermore, the discussion of unions and higher wages leading to increased investment in machinery, thus requiring fewer workers, reflects a similar principle in cost management decisions. When it comes to customer acquisition versus retention, businesses must balance the costs and benefits of each approach. Retention strategies might include providing enhanced service or benefits to existing customers (akin to the 'machinery' or capital improvements) that improve customer satisfaction and loyalty.