For a customer to feel loyalty to a specific brand, that customer must have been brand new to the store or establishment at one point. But, how do businesses go about convincing people to give their brand a chance, and from there, how do they keep customers coming back? Through customer acquisition and retention, of course.
Keep reading to learn about what customer acquisition and customer retention are, as well as how each of these phases works to help businesses grow and brand reputations to become more and more positive.
This article will cover customer acquisition vs retention, the differences between the two, and a brief explanation of how business leaders can determine which phase is most important to them.
What is Customer Acquisition?
Customer acquisition is the achievement a business makes when it gains a new customer, which can occur through the implementation of several unique and engaging business strategies. For example, a business might attract new customers by offering promotional discounts for an individual’s first purchase.
The success of the strategies and techniques a business uses to secure new customers will depend on the planning involved, the quality that went into the endeavor, and whether the potential customer feels seen and understood by the business in question.
To simplify, please see the summary below:
The customer acquisition strategies launched >> Audience members interact with the strategic content >> a potential customer visits the company’s website >> the lead makes a purchase and becomes a customer >> customer acquisition was successful
What is Customer Retention?
Unlike the focus that customer acquisition has on bringing new individuals to the business, customer retention aims to keep a company’s current customers satisfied. This process is used to encourage more purchases from current customers and foster a long-term relationship between the brand and its customers.
Ideal routes businesses can follow in order to retain their customer bases involves enhancing the customer’s value to the company as a whole, as well as enhancing the company’s value to the consumer. This may involve special offers for current customers, stellar customer support tactics, and the continuous provision of high-quality products and services.
Continuing from customer acquisition, the overall process might look like this:
Customer is acquired >> the brand attempts to maintain engagement by offering the customer a coupon for their next purchase >> the customer makes an additional purchase >> the customer reaches out to customer support for help with a product >> the customer support professionals resolve the issue, then offer the customer an additional coupon for convenience >> the customer continues to make purchases in the future >> the customer has been retained
Customer Retention vs Acquisition
Acquisition and retention are both critical components of a company’s potential for success, but each of these phases takes place at different times and requires somewhat different approaches.
However, it’s worth expressing that, in order for a business to be profitable, developing strategies that flesh out each of these two phases is a must. Businesses should strive to maintain effective customer acquisition strategies as well as high-quality customer retention plans. For a brand to secure repeat customers, that brand must first acquire new customers. For brands to keep customers coming back to their stores, the customer acquisition process needs to be effective enough to result in a purchase.
Key Marketing Differences: Customer Retention vs Acquisition
Let’s take a closer look at some of the business components that typically produce somewhat different strategies and outcomes depending on whether customer acquisition or customer retention is the main objective.
Growth of the Consumer Base
For growing a company’s customer base, acquisition is going to be more of a key player than retention. While retention is ideal, the beginning of a company’s growth journey will require a steadily increasing pool of customers. The more customers a company can convert, the more chances it has to keep those same customers engaged and satisfied with their patronage.
Implementation Costs
Often, customer acquisition costs businesses more money than customer retention. This is due to the fact that convincing potential customers to make a purchase will usually require an approach that’s new and compelling. With customer retention, the company already has a loyal base that they simply need to nurture.
Customer Retention vs Acquisition in Terms of ROI
Businesses typically generate better ROI metrics when engaging in customer retention efforts. This is because as the customer becomes more loyal to the business, the relationship benefits both parties involved. It’s usually easier to convince a customer to repeat an action that generated positive results the first time than it is to get someone to commit to a new choice.
Long-Term Value
Retention is often the goal if a business leader is thinking about which of these two strategies presents the most secure long-term possibilities. Loyal customers are much more likely to continue buying products from brands they like than complete strangers are to make a purchase with the same brand for the first time.
Word-of-Mouth Efficacy
Word-of-mouth marketing efforts are really only successful when there are enough satisfied customers available to praise the business in question. Very few people will trust customers who have made one purchase over customers who have frequented the same company for years. As such, WOM marketing is more effective with customer retention already in place than it is for companies that are just starting to attract potential buyers.
Customer Retention vs Acquisition for Business Success
It’s easier to make a sale to an individual who already has experience with the brand. While the success rate for these sales is usually between 60 and 70%, the success rate for selling to a brand-new customer is usually only 20% at best.
The Values of Each Phase
Both customer acquisition and customer retention are important phases in overall business success, but the value that one presents may be greater than the value of the other in certain circumstances.
For example, if a business operates on mostly a subscription basis or a continuous system, it’s usually better to focus on customer retention efforts. This is because once those customers have been secured, the business model is designed to keep them engaged with the brand indefinitely. That is if the company in question nurtures and values its customers effectively.
Other business types, like those that sell a product or service an individual will only need once in a while (such as plumbing repair, furniture retailers, or car dealerships), acquiring new customers makes more sense. This is because, no matter how great a business operates and no matter how well the staff treats its customers, people are not going to purchase an extra couch, car, or expensive repair service when they’ve already satisfied that need during their initial purchase.
Plenty of businesses exist between these two categories, though, so for them, acquisition FOLLOWED BY retention is a smart strategy to adopt. As with any business, the goals are unique and the approach to customer acquisition and retention will be as well.
That said, if you’re looking for ways to attract new customers, retain current customers, or both, reach out to Content Cucumber at your convenience. Book a demo and discover what we can do to help you take your business to the next level.