Published By - Brian Curtis

Acquisition vs. Retention: Where Should Brands Focus?

Acquisition vs. Retention

Introduction

Marketers are often caught in the dilemma of putting their effort and resources between Acquisition (getting new customers) and Retention (retaining of existing customers). While both are considered important and crucial for business growth, studies and statistic shows that brands are investing much more on acquiring new customers over retaining the existing customers. So is focusing on Acquisition the answer to the dilemma?

Why marketers focus on Acquisition over Retention

Here are the most common reasons why:

  1. It’s easier to acquire than retain: Retention is a lot of work
  2. It is the fastest way to grow and, and the quickest way to boost short-term revenue, is to win some more customers.
  3. ROI is fast and measurable, report of such keeps shareholders happy.

The problem, though, is that without retention, acquisition cost increases as the pressure on acquisition increases to fill in for the customers who leave.

Why Retention trumps Acquisition

  1. A 5% reduction in the customer defection rate can increase profits by 25-29%.
  2. A 2% increase in customer retention has the same effect as decreasing cost by 10%
  3. Existing customers are 60-70% likely to buy while the probability of selling to new prospect is only 5-20%.
  4. 80% of your future profits will come from just 20% of your existing customers.
  5. A 10% increase in customer retention level results in a 30% increase in the value of the company.
  6. It is 6 to 7 times more expensive to acquire new customers that it is to keep a current one.
  7. Customer profitability tends to increase over the life of a retained customer.

Focusing on retention by delivering a great customer experience means that companies need to spend less on expensive marketing initiatives.

Conclusion

Make no mistake. Both retention and Acquisition will always be important. Companies need to work on both. Retention need Acquisition to have customers to retain, acquisition needs retention to control its cost. So there needs to be a better balance between both without a disproportionate focus on one, along with a strategy for how to do just that. The customer life cycle should be considered carefully to reconsider a balanced distribution of resources and attention.

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