Multiple research studies have shown that existing customers are your most critical asset for your business especially in difficult economic times when leads are hard to come by. However, it is also important to recognize that customer acquisition plays a significant role in growing your business. They are both important but how do you know the optimal time to invest and dedicate the necessary resources in order to achieve your growth objectives. There are a number of variables to consider such as actual customer acquisition cost, your long-term business goals, your overall business model, and customer churn. Customer retention vs customer acquisition is a hearty debate in progress and the answer can be somewhat complex. There are various schools of thought and both come with their own costs, challenges, and opportunities. Consider this. Without the acquisition, there will be no new customers and hence nobody to retain. Without retention, the cost of conducting business will escalate as companies are forced to spend money acquiring new customers to replace those who leave. To keep your business up and running profitably, you need a healthy mix of each, as well as a strategic plan that maps out costs and tactics to achieve this goal.
According to Ali Cudby, who is CEO of Your Iconic Brand, a marketing firm based in Indianapolis, that works with customers to improve customer retention. “It’s never either/or,” says Cudby, who is also the author of the upcoming book Keep Your Customers and adjunct professor of entrepreneurship at Purdue University. Rather, she says, both need to be priorities.
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What Is Customer Acquisition?
Customer acquisition is the process of acquiring new customers or convincing people to buy your products. The process involves acquiring as many new customers as possible at a lesser cost, who utilizes new business channels. Acquiring a new customer depends on how businesses effectively use the following points and if they can develop a good relationship with their customers.
- Know your customers and then introduce them to your products.
- Try to find out how customers react to technology, media, and business culture.
- Analyze your customers’ behavior when they are purchasing a particular product and what influences their buying decision?
- Implement the best strategies for acquiring new customers and keep upgrading your marketing campaigns.
The technique involved in customer acquisition solutions changes with technological advancement. Incorporating new methods to convince your customers is essential to stay ahead of the game.
Attracting new customers and maintaining a healthy relationship increases the revenue of your business as they prefer to buy more from your company. Having a concrete acquisition strategy is, therefore, important for any business to grow. To begin, identify which channel is ideal for scaling your business.
Finding the Right Acquisition Channel
Customer acquisition channels are where you meet your customers the first time; it is the platform through which you grow your customer base for your business. Which one will be your effective customer acquisition channel for your business depends on your buyers’ behavior and where they spend most of their time. Understanding your customers’ personas will help you easily target them.
Before experimenting to discover the right acquisition channel for your business, you should be clear about your goals as it will help you understand which channel is effective for your business and compare the success.
Read on to know some of the commonly used methods of acquiring new customers.
Irrespective of what line of business you are in, content marketing is an effective method for acquiring new customers. By creating unique, interesting and engaging content which answer the questions that your customers have in their mind, you can win their hearts and make them visit your website.
Content marketing is a sure-fire way to quickly acquire new customers and grow your business by leaps and bounds. Undoubtedly, it is the biggest customer acquisition source and is more cost-effective than advertising.
Video changes the game for customer acquisition as the magic lies in the phrase, ‘Seeing is believing.’ Customers are more interested in visual learning than reading text. Video content educates customers about a product and it is an effective tool for traffic generation as well.
Statistics show that the percentage of businesses spending on video content has increased from 63% to 81% in 2019. Video marketing helps businesses easily develop and maintain a relationship with their customers at the acquisition stage. This is why your content for the video should be relevant to your readers with a clear call-to-action.
Creating interesting or educational videos and sharing them on social media platforms and your website will help you achieve your objective.
Search marketing can be organic or paid, it is also known as search engine optimization (SEO). Search engine optimization takes your content marketing efforts to a next level by optimizing your content, which increases the visibility of your content and is found easily by your target audience.
When you, for example, Google something, you usually click on the first result and you do not go past the first page to complete your search. Considering this fact, SEO increases the ranking of your content and makes users click on the same. Unarguably, SEO is a proven strategy that improves the ranking of content.
Let’s examine some numbers according to research conducted by Invesp:
- Acquiring a new customer is five times as expensive as retaining an existing customer.
- 44% of companies admit they, “have a greater focus” on the acquisition, while 18% focus on retention (the rest claim to have an equal focus).
- The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.
- Increasing customer retention rates by 5% increase profits by 25-95%.
The reality is both are equally significant and require different strategies but customer retention accelerates revenue growth and profitability. New customer acquisition can be very costly whereas retention focuses on already acquired customers who, if they are satisfied with a brand’s products and services, will spend more per transaction and conduct more frequent shopping transactions. Loyal customers will also refer family, friends, and colleagues which makes customer retention even more important as this comes at no new customer acquisition cost for the brand or retailer. Your current customers are more familiar with your products, trust you, and are 50% more likely to try new products and spend 31% more. Also, providing exceptional customer service to your existing customers is much more certain than investing scarce marketing and sales resources with the hope of acquiring new customers. This does not mean stop investing in marketing and sales to acquire new customers, this simply means be sure and dedicate the right amount of resources to retain your most valuable and profitable customers as an ongoing and prioritized business strategy.
As a matter of fact, acquisition grows your customer base and retention grows your customer’s lifetime value (CLTV). A strong customer retention program will maximize CLTV. In order to retain your most valuable customers, you must establish trust by delivering great customer service and high-quality products. This is only the foundation for your business and you must establish a very strategic and cohesive loyalty program that is experiential in nature and provides high perceived value. If you do this, then your most valuable customers will become brand evangelists and advocate for your brand wherever they go. Also, and equally important, when something goes wrong (and something will, at some point, definitely go wrong), these loyal customers are much more forgiving.
To evaluate which approach is best for you, ask yourself these questions based on your current strategy:
- What is your acquisition strategy?
- What is your customer retention strategy?
- What metrics are you following for customer acquisition & retention?
- Do you know who your most valuable customers are?
- Have you performed the right level of customer segmentation?
- Do you have a strategic loyalty solution?
- Have you assessed your Customer Lifetime Value (CLTV)?
- What can you do to improve your customer acquisition funnel?
- What are you doing to improve your customer retention funnel?
- What are some popular customer acquisition tactics and strategies?
- Have you established the best channels for customer retention?
- What are some of the best customer retention ideas and tactics?
- Have you assessed your costs on acquisition and retention?
- How can you track and lower your acquisition costs?
- How can you improve your retention costs?
New businesses should invest in acquiring new customers as a means to build a solid and reliable customer base. Once your business has a significant number of customers and you have been able to gather insightful data, this is where customer retention comes in. Implementing a customer segmentation strategy is one of the best ways to meet your customers’ needs and provide them with more personalized and engaging customer experiences. Identifying your most valuable and profitable customers is essential. Do some research and data mining to understand how to turn customers into loyal customers who recognize and appreciate the value they receive from the brand and in return, will be pleased to spend more and engage more with your brand.
It is also crucial to keep providing your customers with positive brand experiences, meaningful content, and high perceived value. This will leave more customers feeling very satisfied and delighted with your brand thus making them your most loyal and valuable customers. Once your company gains more awareness with a strong customer base, it will likely become easier and less costly to acquire more new customers.