Final answer:
It is true that retaining an existing customer is generally easier and less costly than acquiring a new one, due to lower marketing and trust-building costs. Repeat purchases and word-of-mouth referrals from satisfied customers can further reduce costs and increase profitability.
Step-by-step explanation:
It is generally true that it is easier and cheaper to retain an existing customer than to acquire a new one. This fact is rooted in the costs associated with customer acquisition versus customer retention. Acquiring a new customer involves marketing expenses, sales efforts, and the time required to establish trust and a relationship. In contrast, keeping an existing customer may only require maintaining the quality of products or services, offering reasonable pricing, and ensuring customer satisfaction.
Moreover, existing customers may lead to repeat purchases and are more likely to try new products or services from a business they trust. Word-of-mouth referrals also play a crucial role as satisfied customers recommend the business to others, further reducing the need for expensive marketing campaigns. Businesses with better or cheaper products can leverage this to increase their profits and ensure their employees earn more income, solidifying the idea that fostering a good reputation and prioritizing existing customers can lead to a cycle of success.