Both retention and acquisition are important to business growth and sustainability, each in its way. However, traditionally businesses have tended to lean more on the acquisition of new customers while relegating the old to the completed task category. If only they knew the implications of their neglect!
You see, retention is not only less costly but also brings in a higher ROI on marketing spend in comparison to the acquisition effort. What are the characteristics of the two models and how does a business leverage the benefits?
Retention and acquisition defined
Retention and acquisition serve the same objective for the organization, except one comes after the other. Customer acquisition comes first and involves the active process of winning new customers for the brand. The acquisition follows comprehensive research and aggressive campaigns to create brand awareness in an exercise that requires substantial funding.
Customer retention, on the other hand, is the effort that goes into sustaining the acquired customer and is less costly with higher yields. Once you install the reliable Prolifiq’s relationship mapping tools native in Salesforce with CRM analytics, you get excellent insights into customer care and experience to enhance retention.
Retention and acquisition’s twin role in growth
Acquisition is the mustard seed from which the business grows, drawing in more prospects and expanding the customer base. Without customers, a business is dead before launch and that is why organizations pump huge sums of dollars into the marketing campaigns to drive acquisition.
Once the business is up and running, the focus shifts to customers’ lifetime value (LTV) to sustain the growth. Customer retention ensures a steady flow of return business and a predictable value projection of customers. In this context, both retention and acquisition complement each other: one grows the customer base and the other sustains.
Where do you invest most?
Marketing strategy objectives may have the best answer to this question since both retention and acquisition are vital to growth. You could choose to invest modestly in acquisition to gain a critical core of customers to set you off and then shift focus to retention.
Here you will balance your resources to cover the two to the extent of achieving your marketing goals. You are better off with 50 returning customers than you are with five hundred one-time customers. You will spend less on CX for the 50 than the acquisition cost for the five hundred.
Pro bono benefits
In acquisition, you have to pay to gain a customer, whereas, in retention, you gain new customers through existing ones by word of mouth. Consumer traits observations have shown that many prospects will trust the referral of an acquaintance more than they would trust advertisements.
Outstanding customer experience in your service ensures loyalty and generates more referrals at no further cost to your marketing effort. With a little effort and minimal cost on retention, you magically feed into acquisition and increase brand awareness courtesy of the loyal customer base.
Which way is marketing going?
Perhaps the type of your business will dictate what option to focus on more. On the face of it, the acquisition has better metrics and what appear faster demonstrable results, but this can be transient. Customer retention, on the other hand, takes longer to manifest as you forge a deeper relationship with your clients.
However, there is a catch, one feeds the other, and both have a bearing on the trajectory your business will take. Prioritize both as you deem fit, but if you are on a shoestring budget, place emphasis on customer retention for stability, sustainability, and growth.