An extremely important question for the digital marketing industry is whether they should be focusing on customer acquisition or customer retention. It is important to look into each of these terms in detail to make sense of this puzzle. Only then can you decide which aspect is more important to focus on.
Like what you're reading?
Join the informed eCommerce crowd!
Stay connected to what’s hot in eCommerce.
We will never bug you with irrelevant info.
By clicking the Button, you confirm that you agree with our Terms and Conditions.
What Is Customer Acquisition?
This term is used to describe the process of attracting new customers. It includes various processes through which customers can be added to the lead generation process to convert them into paying customers. The process of acquiring new customers has increased by almost 50% in the last few months. Whether you have a small business or a big one, this process is mandatory. Ultimately acquiring new customers will help your business to:
- Higher ROI: Earn money to fulfill operational costs and invest in other business ventures to improve growth.
- Improved Business Outlook: Provide evidence of business growth to stakeholders and earn their confidence.
Improving customer acquisition of your business is not easy or cheap. However, there are plenty of ways through which businesses can lower the cost of customer acquisition and use your old and loyal customers to improve your lead generation process. The key to building a good customer acquisition strategy is to build one that is agile and can hold the line against any changing trends.
If your business can attract customers and successfully convert new ones, it is a win-win for both investors and your company as well. Moreover, it is a sign of a healthy and growing business. But, hold on, there are many if’s and but’s to this statement. First and foremost, one needs to understand the customer journey, and we are here to break it down for you.
The customer journey is broken down into a funnel in which the buying process is seen with the customer mindset. Once the customer becomes aware of your business, they will allow the service or product to come within their consideration, and the third step is to decide on purchasing the product.
Another perspective is to think of lead generation as the first process, followed by lead acquisition, and then lead conversion is the last bit. This step is when the customer has finally decided to purchase the project. Moreover, the whole journey, on the whole, is referred to as customer acquisition. Business owners and CEO’s are constantly stressing on the need to acquire new customers and successfully convert them into paying customers.
As marketers, it can become quite stressful to be able to acquire new customers constantly, but that is how the market works. A business will never be able to grow unless it has a specified number of new customers. If your business is struggling to acquire new customers, you can connect with the relevant Digital Marketing Services that can guide you in the process. As organizations improve their customer acquisition, it becomes even easier to retain customers in the long run. However, we will be discussing that in detail in the next section that follows.
What is Customer Retention?
Customer acquisition sounds like a very important process, no? Wait till you hear about what customer retention is! Customer retention is a process that takes place right after customer acquisition. This process is equally important because, as a business, it is imperative to keep your existing customers on board as well. This is exactly what customer retention is. Naturally, adding new customers to your business will be great if you want to grow your business, but what if you are also thinking in terms of long-term sustainability.
This is where customer retention comes in. To increase the worth of your brand, you will have to work in a way that you retain your old customers too. Increasing customer retention in your organization can help you increase profits by up to 95%! Moreover, you have a higher chance of selling your product or services which have already been purchased with you as they are already halfway through their customer journey.
Retaining a customer not only has short-term advantages, but it also has long-term advantages, which are not exactly easy for business owners to see and then. You are not just retaining a customer, you will be retaining revenue, and eventually, you will be developing a source of revenue that is recurring.
Recurring revenue enables organizations to plan out in a better way and be able to divide their resources in a better way. Being able to forecast the changes in an organization accurately is one of the best ways to improve the decision-making process, and that means – greater returns and increased profitability.
Customer retention also has a benefit that is not directly related to what businesses are generally aiming for, but somehow it becomes part of the cycle. We are talking about the positive impact on the employees. When your team is aware of the fact that there will be a certain number of returning customers on a monthly or annual basis, it gives them the freedom to make more effective plans.
This eventually leads to well-informed decisions as organizations can allocate their resources where they are needed and plan accordingly. It is a huge plus for businesses to be able to plan according to the demand and the main reason why business models that support recurring revenue are becoming more and more popular over the past few years. For a lot of organizations, it is easier and more cost-effective to hire or outsource people to help them out with certain business operations.
Become a Master of Retention!
Know, predict & accelerate your customers’ moves!
Customer Acquisition vs. Customer Retention
As a business owner, you have a marketing budget. We can argue about the importance of both the business processes that we discussed above (i.e., customer acquisition and retention ), but it all comes down to one thing – how much is it costing you and whether one of them is costing you more than the other. Therefore, it is always good to understand which one of the two will give you a better outcome before you make your decision to focus on either of them.
It can be different for every market around the world but what we have picked on from different places is that customer acquisition will be more costly; it will cost you almost 5 times more than retaining your existing customers! How surprising is that? You must be wondering why there is such a huge difference between two processes, which in principle sound similar to each other.
Let’s look at it this way. When you are acquiring a new customer, you are starting from ground level. The customer is at the beginning of the sales funnel, and you have to walk them through the entire cycle to convert them into a lead. They know nothing about your brand; you have to engage them, pursue them, and make them develop trust for your products.
For a recurring customer, they already know what kind of services you are providing. There will be no hurdles through the customer journey as they are already convinced! They have gone through the entire cycle once, most people even know exactly what they need to order, and that’s all.
Due to the many barriers that the sales team has to go through to convert a customer, the relationship with a new customer is earning profits in the beginning. Once the customer has been converted and has visited the business a couple of times, only then does he become profitable for the business.
Which is why it is important to focus on a strong strategy that will play a significant role in enhancing customer relations and improve the rate of retention. Your customer will become more and more valuable to your company as time passes. A customer that is happy with your business will refer you to their close friends and family circle, which means more customers for you who are already convinced that they should be buying from you.
In fact, referrals from friends, family, and acquaintances are one of the most trustworthy forms of referrals in the corporate market. If you look at a bigger perspective, customer retention will eventually feed the customer acquisition process, and you won’t have to spend a lot of money there. So it’s a win-win for your business!
Like what you're reading?
Join the informed eCommerce crowd!
Stay connected to what’s hot in eCommerce.
We will never bug you with irrelevant info.
By clicking the Button, you confirm that you agree with our Terms and Conditions.
Key Takeaways
In a nutshell, both customer acquisition and retention are important in terms of business growth and stability. It only makes sense – as a successful business, you should be able to retain old customers and, at the same time, be focused on attracting new ones as well. A realistic market strategy can help you both acquire customers and retain them as well without draining too much of your finances and using the resources already available. A good rule of thumb is to focus on whichever strategy aligns with your marketing goals at that time. Keeping a balance between the two can surely improve your marketing efforts and make them more fruitful in the coming years.
Author Bio:
Myrah Abrar is a computer science graduate with a passion for web development and digital marketing. She writes blog articles for Dynamologic Solutions.
