Customer Acquisition and Retention

No business can exist without a stable interaction with its target audience. Businesses’ revenues and competitiveness on the market depend on customers, their reach and loyalty.

Thus, «customer acquisition» and «retention» come as two key terms for running a successful business. In order to ensure stable growth in the market segment, businesses should perfectly understand these terms and know how to use them to manage consumer behavior. This is exactly what we’re going to discuss in the article, to explore strategies and the benefits of both approaches.

Difference Between Acquisition and Retention

To begin with, let’s clarify the essence of customer acquisition and customer retention. Both terms stand for two different marketing processes and should never be confused.

«Customer acquisition» is a process of attracting a customer’s attention and leading him to a purchase. It’s a set of measures that marketers take to convert a potential client into a lead and encourage him to buy a product or service.

«Customer retention» is a set of measures aimed at retaining leads (customers who already made purchases) and making them loyal consumers. That is, this process is targeted at clients who already made a purchase.

That is, both terms serve to ensure a stable influx of clients to the business. However, client acquisition and retention concentrate on different categories of consumers. While an acquisition is targeted at new clients, retention focuses on existing customers.

Why Both Acquisition and Retention Are Important

Acquisition and retention are interconnected. Both terms act in favor of companies and have the same global objective – raise profit and ensure regular income. Yet, this goal is achieved through different means. For instance, ads are used to attract clients, while loyalty programs are developed for their retention.

Note that in most cases, it’s cheaper to retain an existing client than acquire a new one. Although the acquisition cost varies, depending on the industry, in most cases, it’s 5 times higher than the expenses spent on retaining existing consumers.

Why is the difference so high? There are several reasons. Firstly, note that when you deal with new consumers, you should go the entire path of a sales funnel from scratch. New clients have no previous experience with your brand, meaning that they do not know whether your company deserves to trust. Furthermore, marketers need more time, effort, and money to pass potential leads through all stages of the funnel until they make the purchase. That is, marketers face more barriers when working with new clients.

On the contrary, customer retention is cheaper than customer acquisition due to the awareness of clients of your brand, high loyalty, and self-assessment of the provided services or products. Retention is characterized by the following benefits for the business:

1. It has a higher ROI. Taking into account some research, an increase in the retention rate by 5% leads to an increase in revenues by 95%.
2. Happy customers contribute to word of mouth (WOM). Word of Mouth comes as the most effective form of advertising. Some polls approved that 92% of consumers trust friends’ referrals and recommendations. If you retain current consumers by delivering exceptional service, they’re likely to be pleased. Pleased customers also recommend services or goods. Moreover, it’s cheap advertising.

Yet, the best strategy for a successful business is to combine both terms, building a stable relationship with a target audience and providing exceptional perks for loyal consumers.

Customer Acquisition Strategies

When it comes to attracting new clients, the marketing sphere uses several strategies that help expand the reach of the target audience and build fruitful interaction with potential leads. The most common strategies include:

1. Digital marketing. This is the promotion of products, services, or a brand in the online environment using a wide variety of digital channels and tools. This strategy implies the use of a wide list of tools, such as interaction via social media (SMM), SEO optimization, content marketing, ads, multi-channel presence, paid ads in social networks, etc. Digital marketing embraces diverse tools that help interact with potential clients with the Web and gadgets.
2. Content marketing. It’s a part of digital marketing. The strategy implies reaching a target audience and attracting new clients through SEO optimization of texts, articles, guidelines, etc. In the modern world, every company has a website, through which services or goods are promoted. Texts and articles are optimized to search queries by saturating them with keywords. It means that once a customer enters a search query in a browser, the article with this keyword is provided to him by the search engine.
3. Advertising campaigns. Marketers develop ads to lure potential consumers. Nowadays, ads are mainly digital. Ads on social media, messengers, and websites are used to expand the reach of the target audience. Ads on Instagram help increase the flow of customers by 25%.

Note that the combination of these methods helps develop a successful marketing strategy that allows for building a stable interaction with the target audience. However, remember to measure the ROI of customer acquisition efforts to make sure that the developed strategy is working and effective. Regular monitoring allows for identifying the strengths and weaknesses of the marketing campaign and eliminating shortcomings promptly. Thus, it’s important to not only develop a strategy but monitor its execution and effectiveness regularly.

When dealing with user acquisition and retention, modern technologies offer special software for quick and easy data storage and analysis. CRM is used for data processing and segmentation. CRM software is designed to become a business assistant that copes with routine tasks and streamlines the workflow. By integrating CRM software, users can optimize their work routines, improve effectiveness, and achieve higher loyalty. After all, it simplifies customer onboarding.

Customer Retention Strategies

Customer retention is no less important. Once you get a customer, it’s necessary to retain him. Otherwise, competitors will entice him. If we consider strategies used to retain existing clients, marketers widely use the next solutions:

1. Personalization. It’s an approach to promoting products and services, in which a company prepares personalized offers for different categories of clients based on their individual needs. Unlike the standard approach to marketing, this method takes into account the characteristics of consumers, including their interests, habits, behavior, and experience of interacting with the brand. If a company usually sends the same letters to all clients, with personalization, it divides them into groups according to certain characteristics and creates a separate offer for each of them.
2. Loyalty programs. These are systems that provide extra perks for regular clients to stimulate further purchases. For example, companies usually give points for purchases, upon accumulating which clients can buy something for them. Increased cashback relative to the number of purchases is frequently used. Discounts and bonuses are provided to loyal customers.
3. High-quality customer service. Reputable companies offer 24/7 support via different channels. It’s important to ensure prompt support at any time to improve customer loyalty and trust. Moreover, by providing personnel managers or priority in support, companies show dedication to loyal clients.

The application of these retention strategies helps improve customer loyalty and ensure satisfaction, which inevitably affects conversion rates and metrics. Xiaomi, Apple, eBay, and other well-known companies are examples of businesses that implement customer retention strategies successfully.

Now you know all the details about customer acquisition and retention strategy. To sum up the information discussed above, note that customer retention requires less effort and expenses. But, if you want to develop a successful marketing strategy for long-term business success and stable growth, you need to consider both terms. It’s important to seek the balance between customer acquisition and retention for long-term prosperity. This strategy allows for improving the business lifetime and ensuring positive customer experiences when interacting with your company.