The Truth Behind Acquisition Marketing Versus Retention Marketing

September 13, 2016 2:03 am // Author: David Moceri

As technology and demand have grown over the years, marketing itself has evolved into a much better perspective that almost all small business owners, startups and marketers have already consistently engaged and understood its benefits. The facts all about the basic approach in acquisition and retention marketing is all over the web. True. But in order for you to fully grasp the logic behind it, you also need to understand how its transitionworked and have evolved, modified and became very effective for most marketers. And it might also help you grow your own business by understand and applying what marketing strategy suits you.

Did you know that it costs five times as much to attract a new customer, then to keep an existing one? The first rule of any business is to retain customers and build a loyal relationship with them, and thereby avoid customer acquisition costs. It’s a well-established fact that 44% of companies have a greater focus on customer acquisition vs. 18% that focus on retention. Also, it’s true that only 40% of companies and 30% of agencies have an equal focus on acquisition and retention. Check out our infographic, ‘Customer Acquisition Vs. Retention Costs – Statistics and Trends’ for more such interesting and relevant facts.

Via – Customer Acquisition Vs.Retention Costs – Statistics And Trends

The basic fact that a marketer should always remember is that retention is cheaper and it is very attainable. It is the general rule of customer retention that winning a regular or returning customer would cost much cheaper than acquiring new customers. But on the other hand, you would want your customers to grow so you will have to acquire new customers and hope to retain them later on. The down fall is this; acquisition growth will become too expensive in the long run without a solid retention strategy to back you up. That makes choosing between acquisition and retention marketing crucial and difficult.

BALANCING CUSTOMER ACQUISITION COST & RETENTION COST

Every business needs to balance acquisition and retention costs. Acquisition is important to draw in new consumers and expand the base. Retention is normally less costly and builds loyalty and the brand. Retention also often relies on far less price sensitivity from customers so that the long-term costs are recouped through sales. It is essential to track the ROI for both customer acquisition and customer retention. Poor ratios in either area are strong indicators that more research is necessary to see what is changing in the market or what is happening within the business.

Via – Customer Acquisition vs. Retention Costs

Monthly Revenue = (# of New Customers Acquired in the Month x Avg. Spend Per New Customer) + (# of Returning Customers in the Month x Avg. Spend Per Returning Customer) + (# of Resurrected Customers in the Month x Avg. Spend Per Resurrected Customer)

To simplify, this equation says your store’s monthly revenue is driven every month by new customers, returning customers, and won back (or resurrected) customers.

Via – Customer Acquisition vs. Retention: Which One Should You Choose?