Where "5x cheaper" came from
I tried to trace who actually measured that number. It felt a bit like tracking down an urban legend.
The five-times figure first shows up in the 1980s with a US research firm called TARP. In 1990, Harvard Business Review repeated it, noting that "most industry experts agree." No study cited. In 2014, HBR added an upper bound: acquiring a customer is "anywhere from five to 25 times more expensive than retaining an existing one," depending "on which study you believe." Which study, the article doesn't say.
The other famous line, that a 5% increase in retention lifts profits by 25% to 95%, comes from Fred Reichheld of Bain & Company. In the original 1990 article, it rested on a handful of client examples with no published methodology. Byron Sharp of Australia's Ehrenberg-Bass Institute later called it "merely a thought experiment," one that assumes higher retention costs nothing.
To be fair: retention really does pay. An existing customer knows you, trusts you, and doesn't need everything explained from scratch. It's just not the miracle lever the conferences promise. #justsaying
Acquisition is expensive. And getting more so
Now the worse news. While everyone talks about retention, acquisition is quietly getting pricier.
In 2022, the US company SimplicityDX calculated that online stores lose an average of $29 on every new customer. In 2013 it was $9. That's a 222% rise in eight years. It's one vendor's analysis, so treat it as a signal, not a law. But the direction fits: according to WordStream, cost per click on Google ads kept rising in 2025, and more companies than ever are fighting for attention on social media.
And yet companies still spend the most on acquisition. According to Gartner, 62% of media budgets in 2025 went to awareness and conversion, and less than 15% to loyalty and retention.
Foolish? No. It's survival logic. Retention protects what you have. Acquisition brings what you'll have. Without new customers, your base slowly erodes, because some people always leave: they move, change jobs, or simply stop needing what you sell. Without kids, there are no parents.
The Pareto principle: closer to 50/20 than 80/20
Here's the one you know from every management course. The Pareto principle: 20% of customers bring in 80% of revenue. Italian economist Vilfredo Pareto noticed in the late 19th century that 80% of the land in Italy was owned by 20% of the people. US consultant Joseph Juran later turned it into a principle.
In marketing it became a mantra: look after your best 20%, the rest is noise. But when Byron Sharp and Jenni Romaniuk of Ehrenberg-Bass measured it across real brands, they found something different. A brand's heaviest 20% of buyers typically bring in only a little more than half of its sales. Other studies land between 50/20 and 65/20. Almost half of revenue comes from people who buy rarely and occasionally.
What that means in practice:
- Look after only your top 20% and you ignore almost half your money.
- You won't hold on to occasional buyers with a loyalty program. You have to keep reminding them you exist. That's the job of brand and acquisition, not CRM.
- Brands grow mainly by winning new and occasional buyers. Sharp calls it penetration. Loyalty follows size, not the other way around. Small brands have fewer customers, and those customers are slightly less loyal too (known as double jeopardy).
To be fair here too: in iGaming, I saw the 80/20 rule hold for years. There are industries where a small group of very active customers really does make up most of the revenue. Sharp's numbers come mainly from everyday consumer goods, where almost everyone buys and few buy a lot. So run the ratio on your own data. Just don't assume 80/20 because it sounds neat.
So Pareto holds. It's just usually a lot more democratic in marketing than we thought.
The psychological trick visible at first glance
I promised you the second thing in that ad. It's the strip at the bottom: "3,250 CZK → 490 CZK · 85% OFF."
In 1974, psychologists Amos Tversky and Daniel Kahneman ran a famous experiment. They spun a wheel of fortune that stopped at either 10 or 65. Then they asked people what percentage of African countries were in the United Nations. Those who saw 10 guessed 25% on average. Those who saw 65 guessed 45%. A random number on a wheel shifted the estimate by 20 percentage points. That's called anchoring: the first number you see becomes the yardstick for everything after it.
Prices work the same way. Your brain doesn't judge whether 490 CZK is a good price. It judges that it just saved 2,760 CZK. The crossed-out price is the anchor.
To be fair: I don't know what the product used to sell for, and I'm not saying anything is wrong with that ad. Just a reminder that since 2023, the EU's Omnibus directive has required anyone advertising a discount in the Czech Republic to calculate it from the lowest price of the previous 30 days. In the US, the FTC's guidance on "former price" comparisons points the same way. An anchor is a legitimate tool. A made-up anchor isn't.
And here's the nice part. An ad about acquisition does textbook acquisition itself: a strong anchor, a big discount, one button. If you sell cold-calling, you'd better know how to sell. This one does. :-D
Companies are making the same mistake with people
That line about juniors and seniors in my comment wasn't just a figure of speech. Companies are now cutting junior hiring because "AI can do it." In August 2025, Stanford economists (Erik Brynjolfsson and colleagues), using payroll data from the largest US payroll software provider, found that employment of 22-to-25-year-olds in the occupations most exposed to AI fell by about 13% in relative terms. Older colleagues in the same occupations didn't see the same drop.
In the short term it makes sense, just like cutting acquisition and betting everything on retention. But ten years from now, these companies will look around and find no one to promote. Seniors don't fall from the sky. They're former juniors someone gave a chance. Without juniors there are no seniors, just as without acquisition there's no retention. I'll come back to this one in its own article.
How much for acquisition, how much for retention?
So the right question isn't "acquisition or retention?" It's "in what ratio, and when do you shift it?" The Don Marketer calculator works on the same logic:
| Company age | Acquisition | Retention | Why |
|---|
| 0–1 year | 80–90% | 10–20% | There's no one to retain yet |
| 2–3 years | 65–70% | 30–35% | You start building CRM and a database |
| 4–6 years | 55–60% | 40–45% | The base is big enough for care to pay off |
| 7+ years | around 45% | around 55% | Keeping an established base beats constantly replacing it |
Even at the oldest company, acquisition stays at almost half. Not for growth at any cost, but because some customers always leave, and Pareto reminds you that half your revenue comes from people you have to reach again and again.
For a hair salon: a loyalty card with the tenth haircut free is nice. But if four regular clients move away in a year and no new ones walk in, the cards won't help. A sign by the road or a "bring a friend and you both get a discount" offer is acquisition that costs next to nothing. And watch out for that loyal 20%: half her revenue comes from clients who drop by twice a year. They need a reminder that she exists, not a points program.
For a corporation in Miami: when the CRM team celebrates rising loyalty while new customer numbers fall, that's not success. It's slow aging. Track both side by side: how many customers you keep, and how many you add every month.
Expert perspective: "Retention is a great investment. But only in what you already have. A company that stops hunting for new customers doesn't make more money. It just dies more slowly. Pareto holds, just not the same everywhere. Run it on your own data before you split your budget by it," says Michal Krčmář, founder of Don Marketer and a CMO with nearly two decades of experience in global marketing.
The takeaway
Next time someone tells you keeping a customer is five times cheaper, nod. Then ask how many new customers the company won this year. Retention and acquisition aren't rivals. They're two legs. You can stand on one for a while, but you won't get anywhere.
And my comment under that ad still stands. Without kids, there are no fathers and mothers. Without juniors, there are no seniors. And without acquisition, there's no retention.
If you want to know how much of your budget should go to new customers and how much to existing ones, the Don Marketer calculator works it out for your company's age in 2 minutes.
Sources: Ainora: Is a New Customer Really 5 to 25 Times More Expensive? Every Source (origin trace: TARP, HBR 1990, A. Gallo, HBR 2014, F. Reichheld and W. E. Sasser, HBR 1990); Marketing Dive: Brands losing a record $29 for each new customer acquired (SimplicityDX, 2022); MediaPost: Acquisition outpaces retention (Gartner CMO Spend Survey 2025); The Daily Star: 80/20 rule is over (Sharp, Romaniuk, Ehrenberg-Bass Institute); Stanford SIEPR: Canaries in the Coal Mine? Six Facts about the Recent Employment Effects of Artificial Intelligence (Brynjolfsson, Chandar, Chen, August 2025); Wikipedia: Anchoring effect (Tversky & Kahneman, Science, 1974); Lupa.cz: New rules for displaying discounts (Omnibus); the author's own experience.
