When it comes to yearly revenue, two sources are the big focus: client retention and customer acquisition. But which matters more for your bottom line and the overall success of your company?
We all know that it’s important to diversify your marketing efforts, and that includes not just your deliverables but your desired outcomes.
But the how and why behind each focus matters a lot — and it’s important to understand the differences between the two.
In this article, we’ll do a deep dive into the differences between client retention and customer acquisition, including why you need to set your sights on both if you want to meet (and maybe even exceed) your marketing and sales expectations.
What is Customer Acquisition?
Customer acquisition should definitely be one of your 2021 marketing goals. It’s the active process of gaining new customers for your brand, or more specifically, converting leads and prospects into paying customers.
Of course, the goal with customer acquisition isn’t just to find new customers but to find new brand loyalists. A customer who makes one decent sized purchase and then disappears isn’t nearly as valuable as a customer who makes continuous purchases, even if those purchases themselves are smaller. As such, effective customer acquisition methods have to be multi-faceted to pull in the most qualified leads and bolster brand integrity from the get-go.
What is Client Retention?
Client retention refers to marketing practices that are optimized to engage with existing customers and drive them toward additional conversions. It’s estimated that 65 percent of an organization’s profits come from existing customers. If you’re not prioritizing client retention in your marketing efforts, you’re losing out on an enormous chunk of profit potential and business growth.
The value of your relationship with a client is almost equal to the value of their purchase history. Clients who feel appreciated, understood, and supported by brands they work with are more likely to go on and share that enthusiasm with others. The result is a pool of clients who do some of your marketing for you and who are more likely to return to you again and again.
Client Retention vs. Client Acquisition
Much like the chicken and the egg scenario, the value of client retention and client acquisition can come down to which comes first.
Sure, client retention has more value potential and costs five times less per customer than acquisition. However, regardless of the benefits of retention, you can’t retain clients if you don’t get them in the first place.
In practice, we often see a lot more strategizing going toward customer acquisition than client retention. In fact, 44 percent of companies place a strong focus on customer acquisition compared to just 18 percent of companies that do the same for retention. And we get it: more customers equal more success, right? Sure, but it’s not that simple.
If we’re going to place more value on one over another, the truth is that neither is more important. You’re going to need to focus on both if you want to maintain a steady flow of revenue and meet your bottom-line goals.
Fortunately, many of the techniques optimized toward one or the other strategy do double duty. For example, automated email marketing can be used to engage and re-engage with prospects, but it can also be used to send out coordinated drip campaigns that keep your existing clients connected and in the loop. Likewise, a good SEO strategy is going to be just as effective at getting your name out in front of potential new customers as it is at keeping you top of mind with those who have already converted into a sale.
What it comes down to isn’t so much acquisition vs. retention but the customer experience. A good experience, starting at stage one of the buyer’s journey and cycling through to the post-sale period, will always be a critical factor in your marketing and sales performance. And it all starts with understanding your brand’s value and communicating that value to your customers, both new and existing.
Existing customers spend 31 percent more and are 50 percent more likely to try new products, but you need to get them in the door first. Always aim for variety when putting together your marketing plan and think of as many ways as possible to grow your customer pool and increase the value of your existing pool. When you focus on both, you ensure you connect all of the dots you need to hit your plan out of the park.
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