The process every company has is customer acquisition, conversion, retention, and repeat. Among those three, there are two main strategies that every business needs to focus on to get new customers (customer acquisition) and the strategy of keeping your existing customers happy and coming back (customer retention).
The methods, strategies, and programs that companies use for these two concepts are quite different, yet similar. Sometimes, you might be confused about their relationships.
Let’s discuss what are customer acquisition and retention’s meanings, and see what is the right choice for your business.
Customer acquisition and retention's meaning
What Is Customer Acquisition?
Customer acquisition means to gain new consumers. New users acquisition involves persuading consumers to purchase a company’s products or services. Brands, companies, and businesses consider the cost of customer acquisition as an important measure in evaluating how much value customers bring to their businesses.
Some successful customer acquisition strategies include promotions such as referrals, reward or advertising campaigns, etc. Customer acquisition management requires a set of several methodologies and systems for managing customer prospects and inquiries.
Customer acquisition also needs forethought and strategies to get the right clients. That’s why the first step of a customer acquisition plan is to identify quality potential customers. This can be done through call centers and mailing lists. Customer acquisition allows you to determine which individuals express interest in or already use products similar to those of yours.
Many customer acquisition programs now include establishing a relationship as well. With prospects to identify current customers' needs, this can help determine how the products should be offered that can relate to those needs, and apply to the new customers.
What Is Customer Retention?
Customer retention refers to the activities and actions for winning back customers who were at least once converted. The main goal of customer retention programs is to help businesses retain as many customers as possible. The methods are often through customer loyalty and programs. To some businesses, customer retention proves to be more important and beneficial than customer acquisition.
Customer loyalty programs are there to help with current customer engagement and reward customers for their continued loyalty. The more they shop and interact with your business, the more they're rewarded.
One of the most typical strategies is to build a point system within your eCommerce website. You now can do that easily with the help of extensions, like Reward Points for Magento 2. Your customers will be encouraged to shop more to earn more points which later will be their rewards, discounts, etc.
Customers are happy for getting more from the experience than just your product or service. They will want to stay longer as your customers. From this, you have blocked a group of fixed profits for your company.
Advantages Of Customer Acquisition And Retention
Customer Acquisition Increases Your Customer Base
The more, the merrier, right? It's also true with business in terms of the customer base. Not to mention, customers are the reason why businesses exist in the first place. Therefore, the more customers a business has, the better. Customer acquisition allows you to grow your customer base and obtain more opportunities for conversion and retention.
Using appropriate strategies helps companies to cost-effectively acquire the right customers. Customer acquisition campaigns are quick to show results. In contrast with customer retention, acquisition campaigns offer quick and easy measurements of success.
Retaining Happier Customers Can Boost Word Of Mouth
Word of mouth (or WOM) marketing is one of the most effective methods in advertising a product or service. Happy customers surely will voluntarily tell their friends and family to buy your products. What makes their WOM special is that they already did experience your business so their references will be more reliable.
Their words have more power in eliminating the anxiety in your potential customers who might take an interest in trying your products but still have some doubts.
Disadvantages Of Customer Acquisition And Retention
Customer Acquisition Is More Expensive
Statistics vary from industry to industry, but many have indicated that customer acquisition is way more expensive than retention. According to Invesp, it costs 5 times more to get a new customer than to keep an existing one.
Why such a huge difference? When it comes to new customers, remember that you are starting from scratch. They have almost no prior experience with your brand, and may not allow themselves to trust your company. It takes time, effort, and financial support to interest them in your product, and even more than those to convince them to purchase from you. With current customers, you don't have to fight against as many barriers to the transaction.
Customer Retention Is More Competitive Than You Think
Besides being a long-term process, which means the results that may take a long time to be seen, customer retention also requires a lot of hard work. It’s true that acquiring and retaining customers both need time to work. However, with current customers who are already familiar with what you have up your sleeves, it takes a fascinating retention strategy to attract them back to your business.
Loyalty programs are nothing new. Businesses in the same industry have created thousands of programs that look alike to customers. This makes it harder for businesses to generate excitement, yet, unique and distinguishable for their customer loyalty programs.
You can check out these 11 Effective customer retention strategies to retain your customers.
Which one should you choose?
Now that you know about the advantages and disadvantages of both client acquisition and retention, have you made your mind about which one to choose?
Customer acquisition and retention are like two sides of a coin in business, one cannot exist without the other. Surely that you will need both to make a profit in a long time. So the real question is, which one should your business focus on right now, in a case focusing on both is too much for your company?
Ideally, a company should focus on both. There is no customer retention without customers to offer a loyalty program to, right? You need a customer base first before thinking of customer retention. Thus, you will need to expand your customer base with customer acquisition as well. These two, when done properly, will work perfectly in keeping the customer’s journey going and your business profit rising.
If you are start-ups or your business is at a very early stage, then you will need to pay more attention to customer acquisition. A new business has a lot of things to do to be on the surface, to be familiar with the customers. In a word, you need to improve your business awareness to grow your customer base.
If your budget for marketing is very constrained, then the best solution is to spend it on customer retention. As we mentioned above, customer retention costs less compared to customer acquisition. If you are an established company, to grow most effectively, you should find ways to retain customers.
We hope this article can help you shape a framework so that you can make the best decision for your business.
Whether you choose one between customer acquisition and retention or both, you need to execute the customer acquisition and retention strategies well to fully gain benefits from them. And don’t forget that the core value of your business still lies in your products and services. That’s what truly draws customers to and back.