Customer Retention vs. Acquisition: What Should Be Your Main Focus?

There’s plenty of business advice on the internet. 

From marketing to sales, you can read just about everything, but most of them miss a piece of critical information. 

They fail to mention that everything is revolved around customers. 

Because whatever you do, you do it for the customers. 

I am sure we all can agree to this, right? 

Constantly acquiring new customers and retaining the existing ones is the way to keep your business up and running. 

That said, if you are only focusing on acquiring new customers, then you are likely to find it difficult for your business to survive. 

Alas! Not many people understand the mistake they are committed to solely focusing on customer acquisition. 

According to statistics, 44 percent of companies have a greater focus on customer acquisition vs. 18 percent that focuses on retention. 

Customer Retention

And that’s why so many businesses fail. 

To maximize your profits, you need to maintain a perfect balance between both customer acquisitor and customer retention.  

But your main focus should be on retaining your existing customers. 

And in this article, you will know why. 

Let’s jump in and see why you should choose customer retention over customer acquisition. 

Why Customer Retention Matters? 

1. Customer Retention is Usually Cheaper Than Customer Acquisition 

For most of the bootstrapped startups and small to medium-sized businesses, shelling out big bucks for lead generation and acquiring new customers is not easy. 

And customer acquisition is a lot more pricey than customer retention. 

In fact, according to a research report by Invesp, customer acquisition costs five times more than customer retention. 

Customer-Retention is cheaper

Even though it is pretty much obvious why approaching a new customer is costlier than the existing one, let me still break it down for you.

For one, you spend a substantial amount of time getting your message across to the new customers using various marketing techniques. From content marketing to social media marketing, is there anything that you don’t try your hand at? 

And after putting in all these resources, time, energy, and so forth, you finally acquire a handful of customers. 

Yes, this is the stark reality of customer acquisition. 

Now, on the other hand, if you fail to retain your customers and ignore them in the favor of acquiring new customers you are simply heading for a disaster. 

Can you even begin to imagine all the opportunities and resources that you will be draining out? 

Because customers that are already familiar with your business just need a little nudge and nurturing from your end. Just focus on catering to them, making them happy, and you will be able to retain for a lifetime — or at least for a really long time. 

2. Customer Retention Is Less Time-Consuming  

We are stating the obvious here, but providing stellar customer support to your existing customers is a lot less time consuming than following through the complete sales cycle to acquire a new customer. 

Have a look at this telling graphic by a famous cartoonist Ted Goff: 

customer-retention cartoon

Now, this is not to say that you should completely do away with customer acquisition. 

Customer acquisition is also necessary to grow your business, but not at the expense of customer retention. 

Also, you have to make your retention strategy strong before putting your focus on acquisition. 

Because again, you end up spending a lot of money and time on acquiring new customers and if they don’t stick around for long, you have to start the whole acquisition cycle all over again. 

So, I would say it again: Don’t overlook customer retention in the favor of customer acquisition (as so many businesses tend to do). 

If you stop trying to woo your existing customers, they are bound to feel left out and won’t think twice before turning to your competitors. 

Hope you know that most customers leave a company because they start feeling that you no longer care about them. 

customer-retention vs acquisition

You don’t have to be Sherlock Holmes to know that you need to keep on serving your customers in order to gain their lifelong loyalty. You simply can’t get away with selling them a product once and expect them to keep purchasing from you or availing your services for a lifetime. 

3. Customer Retention Leads To Higher Revenue (Through Methods Such As Up-selling)

Your existing customer obviously trusts you more than the new lead you are trying to acquire. 

I am sure you don’t have any doubt about that. 

And since your existing customers are already using your services, it gets easier to persuade them to try out even a higher package or more of your products through methods up-selling and cross-selling. 

According to GartnerGroup,, 80 percent of your future profits will come from just 20 percent of your existing customers. 

Customer-Retention

Moreover, in the book Marketing Metrics, the author claims that the probability of selling to a new prospect is 5-20 percent. The probability of selling to an existing customer is 60-70 percent. 

Customer-retention(6)

(Image Source)

That’s an enormous gap! 

And why are we even surprised? 

Wouldn’t you rather buy from a company you already trust than the one you have never dealt with before? 

Why Customer Acquisition Is Important?

1. It Drives Businesses

When I say that customer acquisition drives businesses, what I mean is that customer acquisition is the ultimate driving force behind any business.

After all, you don’t start to retain customers in the beginning, do you?

Initially, you start by acquiring new customers and then you follow through the customer retention process. Also, it is pretty straightforward, the more customers you have, the better chances you will have to grow your brand. And that’s the reason why inbound marketing is so popular amid the marketers. More customers again mean more ROI.

So, questioning the importance of customer acquisition is quite absurd.

2. Increase In Referral Channel

Referral marketing and customer acquisition are intertwined with one another. You can’t have one without the another — and both are imperative to grow your business.

It’s a given, right? The more customers you have, the more word will spread around about your brand. And once you have a large enough database of customers, you will also realize that acquiring new customers have become decidedly easy due to referral marketing. Because people tend to trust other people while buying something new.

According to a research report by Nielsen, 43% of consumers are more likely to buy a new product when learning about it from friends on social media.

Referral-marketing

 

Moreover, even referral marketing tactics such as word-of-mouth marketing get a lot easier when you have a large number of customers.

For instance, take Crocs’ word-of-mouth campaign. Crocs recently run a campaign by leveraging user-generated content under the hashtag #comeasyouare grabbed eyeballs and the campaign turned into a worldwide success. 

Crocs-user-generated-content

Now, this campaign would have never turned into the massive success as it did if Crocs didn’t have the number of customers that it has.

So, don’t shy away from approaching new customers and expanding your horizons. But in the midst, don’t forget about your existing customers as well.

Also Read: How To Use Word Of Mouth Marketing Techniques To Grow Your B2B Business

Balance Both To Build A Strong Business 

In the whole article, I have constantly stressed upon one point — both customer retention and customer acquisition go hand in hand. 

You cannot choose one side. That said, your focus should not wane away from retention. At the same time, you must not forget that you won’t have any customers to retain if you don’t acquire them in the first place. 

While customer acquisition drives business, at the same time, customer retention takes it forward. However, it goes without saying that the latter serves to be more profitable. It consumes a lesser amount of time, requires low overhead and resources, and generates more revenue. 

That said, you won’t have any customers to retain if don’t acquire them in the first place.

Parting Words 

This debate about customer acquisition vs customer retention is perennial — it is unlikely to ever come to an end. 

However, how you balance it out is up to you. You can approach it by first analyzing where you are lagging behind. 

If it turns out that you are failing in customer retention, then pause your customer acquisitor activities for a while and fix your customer retention problems. Once you are steadfast in your belief that your customer retention strategy is finally on the right path and is bearing fruit, then you can spend time and resources on acquiring new customers. 

The key is to find harmony between both customer acquisition and customer retention. 

Our Reader Score
[Total: 0 Average: 0]

About Deepti Jain

Deepti is a senior content writer with AeroLeads. She spends a lot of time brainstorming ideas and writing marketing and sales content. She also has a knack for writing and reading about politics and prevalent social issues and regularly pens letters to the Editor of The Hindu newspaper. When she is not working, you’ll find her socializing with friends or binge-watching Netflix. (And devouring sushi).

Leave a Reply

Your email address will not be published. Required fields are marked *

Post Navigation