Customer retention or customer acquisition?
This question can be pretty misleading because both are important in their way for a business to thrive. But, wait! Did you know it takes longer and involves a lot more costs to create new customers than retain an existing one, sometimes up to 5 times the latter?
Oh? Is it the case always? That’s expensive!
Not always.
The 5x rule is based on mass-produced goods and business models focused on pushy sales tactics. However, in focusing on this cost of acquiring a new customer, businesses lose out on what’s the core of retention – connecting with and delivering value to the customer. trying to sell more of what you have on offer will not attract and keep the buyer coming back, but guiding them through and helping to select what suits them the best would!
After all, customers are not the results of a business. They are a part of the business process.
Before getting into whether customer acquisition or retention should be your focus, let’s take some time and evaluate both in detail to make appropriate decisions that will, in turn, help your business sustain and growth. Diving deep into each of these terms will make sense of this puzzle.
What is customer acquisition?
Customer acquisition is the process of gaining new customers, which involves attracting new customers to your business and influencing a purchase deal. Simply put, winning over a potential audience and making them buy what you have on offer is called customer acquisition.
This can be done via a variety of marketing tactics, digital channels, and strategies. It often involves a mix of cross-channel marketing campaigns, which could include:
- Visual Advertisements
- Email marketing
- Search-Engine Optimized Marketing
- Affiliate Marketing
- Social Media Marketing
For any customer acquisition strategy to be effective, it must evolve with ever-changing consumer behavior and preferences.
Why is customer acquisition important for your business?
When you start a business, the toughest challenge is getting your first customer and that is because your business does not have a brand reputation yet. Customers may hesitate to buy your products or services since they either haven’t known the company or you are a complete newbie on the bloc.
Regardless of how good it is, a business has strategies and activities aimed at acquiring new clients. Any business without clients gets diminishing profits, and that is why they tend to spend a good amount of time and effort on effective marketing and promotion of the services they offer.
The first customers lay the foundation of a business. What they pay for, expect, and appreciate provides essential insights into how the revenue model should be and what the general notion about your brand is.
In the case of startups, it is always advisable to give attention to the acquisition, focusing on what helps find the right first-time customer in the early stage. Setting a good foundation for the initial customers will always make acquisition easier later on when needed.
Consumer acquisition forms the backbone of a business for several reasons.
- Helps find the ideal customer: The first step towards customer acquisition is to understand your customer base. There will always be a group of people who will be ready to take up your product as the solution to their problem. The mechanics of customer acquisition helps learn whether you are a product-market fit and determine ideal customers to set the correct marketing goals. It also points out competitors in the same area and what your strengths and shortcomings are over them. This gives a better idea of how you should further process your acquisition strategy.
- Best Word of Mouth marketing tool: Word of mouth (WOM) marketing is one of the most effective forms of advertising, especially if you are a startup. Your current customers are a great acquisition tool because people trust recommendations from their friends and family more than they do from brands or any form of promotional activities by the business itself.
According to a study by Nielson, 92% of global consumers trust the referral of a friend or a family. If you can satisfy your current customers by delivering quality service on time, they will advocate for your company to others.
- Helps choose the right acquisition channels: Identifying your ideal customers is a great start in creating an effective strategy, but that’s only the beginning. The next step is to pick the right channels for engaging the potential audience you’ve identified in the process of attracting your initial customers and turning them into buyers.
- Directs traffic to your website: When a person comes to know about your brand, the first thing they will do is look up your website. This is considered a benchmark for building a good brand. Sticking to a simple and user-friendly framework will get them into wanting to find out more.
Customer acquisition is not a one-day job. You need meticulous planning and execution. You need to deliberate the best ways to drive and convert visitors into customers on your website.
Now that we have a clearer idea of what customer acquisition means and why it is important regardless of the type of business you are in, let’s delve deeper into the process and see how to be in the good books of your audience and make them stay!
What is customer retention?
Customer retention is the ability to hold on to the customers you have already won over. It is the process of engaging existing customers and winning over their trust to continue availing of your products and services. This is an indispensable part of ensuring smooth operations and gaining confidence in the market.
Both acquisition and retention of customers are the key drivers of growth. While setting up a new business, you always need new customers. Those initial customers act as fuel to help the business start running, but the capability of retaining the new customers helps the business sustain. So acquisition and retention are equally important.
How can consumer retention help your business grow?
Many businesses consider themselves profitable and do not value custom retention, forgetting the fact that the most important part of brand-building is to retain customers and build a credible relationship.
According to the research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score), depending on what industry you’re in, acquiring a new customer might be up to 25 times more expensive than retaining an existing one.
But how does this help your business? Here are a few things to note.
- Improves your brand image: Everything you do impacts the decision of a customer to return to the business. Focusing on some efficient strategies will help gain more value from your marketing budget.
Customers should always feel like they’re getting the same care and attention whether you’re talking to them on the phone, via email, or on a live messaging service. Routing the right agents to the right customers by assessing their needs and assigning the agent most skilled in that area is essential to make them keep coming back.
- Communicate effectively with customers: Retaining a customer depends on the relationship, and effective communication is the key. Constant interaction with your customers through their preferred channel not just helps retain their trust, but also puts to their doubts and queries about the kind of services offered by your brand. Engage customers with messages. Even though social media is very popular, email is still the customer’s preferred communication tool.
- Hire the right people: In the process of customer retention, building a customer support team, so that the workflow is not impacted and the client’s issues get to the right department is of prime importance. Once this streamlining of employees is set up in your company you can speed up the problem-solving process and thereby retain more customers.
- Gather constructive feedback: Feedback from the customers is a powerful guide that can give insights and chart a path forward for any business. It can be anything from appreciation to issues and insights and is unequivocally needed for the growth of your company. Customers can act as great transformers of operations once constructive criticism is incorporated back into the brand. And if you are all ears to your customer, you are sure to retain them for life.
Now comes the question of what should be your priority? Attracting new customers or retaining their loyalty? Let’s find out!
Customer retention vs Customer Acquisition: what should be your focus?
Ideally, any and every business should focus on both acquiring customers and retaining them, However, a general inference on how what you should put first and when depends on how long you are in business.
Your prime focus should be acquiring customers first if you are a startup! Without the acquisition, the question of retention does not arise and for a business that’s completely new to the market, it is essential to gain confidence by building a user base. The peerless groundwork here lies in terms of acquisition strategies such as great content marketing, social media presence, a powerfully designed and user-friendly website, and attractive offers on first purchase.
But, the tip above all?
Never lose your credibility! Deliver on what you promise else don’t make assurances of what you won’t be able to live up to. If your first customer is not able to retain the faith, it’s a complete red flag for your business!
A company that has been in operation for a couple of years should find a middle ground between acquisition and retention. Since you aren’t new to how the market works, your focus should be on building loyalty and trust in your brand name. This involves delivering on your promises, retaining the people who already have faith in your service, and working towards acquiring a stronger and more diverse range of buyers.
A relatively older company should focus on retaining existing customers since they will generate leads through recommendations. Here, your existing customers act as acquisition partners, and your focus should be on containing the trust and delivering consistent results. It is the time for you to focus on building a great product that your existing audience finds attractive and ends up advertising to their acquaintances.
So, what are the ways to get and hold on to your customers? Forbes has put together 6 tips for acquiring new customers:
- Networking: partner with older companies interested in your products because sometimes your partner isn’t directly related to what you do, but has an audience similar to yours.
- Generate goodwill: tie-up with and donate to charitable trusts, since they can be a source of people knowing your brand via booths/sponsor banners at their events
- Giveaways: freebies are instant attractors and direct more traffic to your website
- In-person events: interaction with and informing people of who you are and what your business does
- Maximize word of mouth marketing: offer extra discounts to existing customers on recommending your services to a friend via redeemable codes/coupons.
- Be distinctive: stand out in colors, patterns, and designs for easy recognition and remembrance
Additionally, billboard advertisements effectively planned audio-visuals and social media promotion are great tools for acquiring new attention! These are effective tools for customer retention as well since it keeps them up to date with your brainstorming innovation. Here are 6 ways in which you can retain customers:
- Encourage two-way interaction by asking for feedback, reviews, and ratings, holding contests, etc. If you haven’t heard from frequent customers in a while, don’t be afraid to reach out to them. Even if your efforts don’t result in immediate sales, they’ll go a long way toward keeping your brand first in your customers’ minds.
- Make optimal use of social media by using it for just marketing. Share the humane side of your business with behind stories about when and how you started, team introductions, etc. that show your values and help monitor consumers opinion, interests and motivation. This will help do away with negative perceptions and get people hooked on it.
- Offer personalization options and a space where consumers can create the product they like per their choice. This makes them want to keep coming back.
- Listen to your customer and understand and provide effective solutions to their doubts and queries. If they have complaints regarding a particular product, take immediate action and provide replacements and gifts, while taking up the matter with your team. This will retain buyer confidence.
- Be accountable and build your reputation by incorporating constructive feedback into your brand through correction of errors made along the production process. This asserts your authenticity to the consumer.
- Make sure your customer support actions are consistent with the brand image you convey. If you market a product or service to improve system performance, for instance, don’t take too long to respond to customer dilemmas.
Need more help with your business?
Worry not! Our experts at Everything Design have got you covered. From helping choose the right market framework to great customer acquisition and retention ideas, you’re just one click away from unlocking the brand of your dreams. WhatsApp/drop us an email today!
