A downturn in the market and businesses rush towards customer retention–foregoing all efforts of acquisition.
However, as soon the cycle turns, customer acquisition takes the front seat, while retention strategies are put on the back burner.
The question looms: which is more important–customer acquisition or retention? The problem is–we are asking the wrong questions. Both customer retention and acquisition are non-negotiable elements of long-term, sustainable growth. The answer, therefore, lies in striking the right balance.
Let’s delve deeper into this comprehensive guide on customer retention and acquisition (plus six strategies to improve both):
Customer Acquisition Vs. Retention
Let’s begin with defining the main characters of our articles:
Customer Acquisition: The process of bringing in new customers through marketing and sales outreaches.
Customer Retention: Everything you do to keep the existing customers with customer success and support team.
Acquiring new customers can cost five to twenty-five times more than retaining an old one. A loyal customer is 5X times as likely to repurchase, 7X as likely to try new offerings, 4X times as likely to refer, and 5X as forgiving.
Looking at the stats, it’s apparent that investing in customer retention gives you much–much–better results. But it’s not as simple. 50% of customers churn naturally every five years. This means that by focusing only on customer retention, the business growth will keep going down.
Therefore, you need to allocate at least some part of your budget to customer acquisition. Plus, investing only in retention is a luxury when you have users to retain. It is certainly not an option for young businesses that allocate 100% of their marketing budget to customer acquisition.
For new companies with zero customers and brand recognition–every penny must be dedicated to getting the brand name out there and gaining new customers. The same goes when an established company enters a new market. For example, if your company is well-known in California, it doesn’t mean prospects know you in Arizona.
Even after eliminating these exceptional cases–a portion of your marketing efforts should be directed toward customer acquisition–no matter how large you are. Even Nike regularly launches new product lines and partners with athletes to reach new buyers.
The Customer Journey
In businesses, we typically visualize the customer journey as a funnel–highlighting the stages of the buying process. The top half of this funnel is dedicated to customer acquisition, while the bottom–especially the post-purchase experience–is more keen on retention.
Each consumer follows a similar journey. They:
- Gain awareness about your brand and products
- Add your offerings to their consideration pool
- Decide to become a paying customer
- They like your product and post-purchase experience, thus becoming a repeat customer
The customer acquisition strategies apply to the first three stages of this journey. The product quality, customer support, user experience, loyalty programs, and more factors decide if you’ll retain these clients.
Now, with that clear, here are six smart customer acquisition and retention strategies.
3 Customer Acquisition Strategies
Define your Customer Acquisition Channels
Businesses use different platforms to promote their brands and products to new audiences. These include:
- Organic searches: keyword research, high-quality backlinking, and technical SEO
- Paid searches: High-intent transaction keywords, A/B ad companies, and retargeting
- Organic social media: Engaging content, community engagement, and consistency
- Paid social media: Audience targeting, video ads, and eye-catching visuals
- Emails: Lead magnets, welcome series, and promotions
- Referrals
Identify where your audience spends most of their time and tailor your approach for each platform. Remember, personalization is key–irrespective of the channel. Therefore, personalize your customer experience through dynamic pricing on every platform to ensure your pricing resonates with the specific customer segment.
Ideally, a healthy mix of different channels works best to target larger audience segments. Each channel works differently and plays specific roles in a broader strategy. However, start small with a few channels, track the ROI, and adapt as the market trends shift.
Focus on Brand Awareness
Brand awareness is the cornerstone for gaining leads and converting them into paying users. And brands who know how to leverage digital media for this ace the race.
A strong brand awareness ensures that your brand is the first one your customers think of when they need a solution. In cut-throat competitive markets, this helps you outshine others even when they offer similar products. And, of course, the higher the brand awareness, the easier the conversion.
So, start with giving your social presence some personality. Stand out from the crowd with engaging content, stimulating visuals, and a one-of-a-kind voice. Ensure all your channels follow similar branding visuals, tone, and messaging.
Look out for strategic collaboration with other brands and influencers to tap into their audience base. Engage with the prospects through comments, community posts, and in real-time through social media lives.
And most importantly–show up consistently. Post at least several times a week, reach out to leads, and be active to ensure the audience doesn’t forget you.
Market Customer Success
People believe people. That’s why UGC and influencer collaborations offer such great ROI over branded posts. And the king of this domain is customer success stories-–since they put real-world results in the spotlight.
Therefore, to capture a new audience–market your biggest customer wins. Gather testimonials from current and past happy customers. Reach out to the existing user base. Encourage them to write and share reviews through videos, written testimonials, and star ratings on platforms like Google, Yelp, and Trustpilot.
In-depth case studies are another great element to mix. However, ensure it focuses more on the customers than the product. Even better if you can add quantifiable results–say, increased productivity by 40%.
Run UGC campaigns and highlight them on Instagram stories, posts, and website galleries. Partner with influencers. You can even create a “Wall of Love,” a digital wall dedicated to customer feedback and accolades.
3 Customer Retention Strategies
Acknowledge and Appreciate
Your customer retention strategy should kick in the moment the client checks out. They’ve played the part. Now it’s your turn to revere them for choosing your brand.
Here, a simple Thank You can go a long way. After all, they are investing their trust and cash in your business. Start small with a simple appreciation email for their recent purchase. Amp it up by educating the customer about your product.
Include a product onboarding tutorial in your B2B email campaign. Create easy-to-follow guides, videos, and FAQs. Even better if you can delight them with a small complimentary gift–exclusive e-books, personalized video messages, or free trials.
Follow up with satisfaction surveys. Incentivize it with small rewards like discounts or entry into a giveaway–this will encourage them while also strengthening their relationship with your brand.
Build Trust with Stellar Customer Support
When it comes to customer retention, how users feel after the purchase and even during it makes all the difference. Therefore, empower your customer support team to build trust. This means focusing on the human agent’s interaction.
Build a fast and effective support system that shows the users you really do care. Invest in multi-channel support through live chats, emails, phone, and social media. As your customer base grows, empower your team with the right tools, like a cloud contact center platform, to provide fast, efficient, and personalized assistance at scale. This will help centralize all the customers’ touchpoints–emails, phone, chats, and social media–giving them a seamless and cohesive experience.
And even if you are not able to resolve every issue, quick responses count. So, leverage AI chatbots to take some load off your support team while also providing patrons with quick replies.
Cross-Sells and Upsells
Upselling encourages customers to upgrade to higher-tier products or services. For example, a customer has chosen basic plans for your software solution. Here, you showcase the added benefits of a premium plan with advanced features.
Whereas in cross-selling, you urge the customers to add complementary products or services to their original purchase. Both are powerful techniques to not only boost retention–but also increase review through new leads. The strategy works wonders because it leverages the trust that’s already established with the customers–giving them personalized solutions.
The key here is to approach the customers at the right time. This includes recommending relevant products or upgrades when they are already in a buying mindset. Other effective approaches include post-purchase follow-up, bundle offers, and renewal opportunities with discount offers.
Answering the Big Question: Acquisition Vs. Retention
There’s no cookie-cutter solution to this question. Where you should invest a majority of your resources will depend on your business’s current stage and goals. There will be times when gaining new customers should be a priority. And the other times when keeping the already closed deals around will take over–it’s all part of a company’s unique venture.
Customer retention has a slight advantage because investing in keeping your paying users often opens a gateway to new customers. Through referral, word-of-mouth, and loyalty programs, your retainers will bring more business. Plus, it’s also more cost-effective.
Here’s a more clear view on:
When to Invest in Customer Acquisition
- If you are a new business or entering a new market.
- New products that target new customers. For example, when Microsoft launched Azure AI for startups.
- Aggressively competitive markets require constant acquisition efforts–since it’s very easy for consumers to find a plethora of other alternatives.
When to Invest in Customer Retention
- An economic downturn often leads to constrained budgets–for both companies and customers. Here, keeping existing customers is a better financial bet.
- When you have hit the jackpot of a solid customer base, it’s important to focus on increasing their Customer Lifetime Value.
- Lastly, when acquiring new customers is breaking the bank.
Striking the Right Balance
Customers are the lifeblood of every business. No matter what your business demands right now, you’ll need both–an acquisition and retention strategy–for sustainable growth.
Hopefully, this article has helped clear some fog for you. Implement the above expert strategies for your business, keep experimenting with new ones, and always be ready to mold–because the market is forever changing.
