Customer Acquisition vs Retention: Which is More Important?

When you're creating a new strategy for your business, thinking about both your potential and existing customer bases are essential for your long-term success.

On one hand, you've got to find a way to reach new potential customers, while also taking steps to ensure that your loyal customers are always kept happy and returning.

At Northsail, we understand the value in both customer acquisition and retention. We're able to retain many of our ongoing clients, because we always deliver projects on-time, on-spec, and on-budget. But for new businesses, the challenges of maintaining both customer acquisition strategies, as well as improving your customer retention rate, can feel overwhelming.

With that in mind, we've put together some useful tips on creating a balanced marketing strategy plan, but before we jump into those, let's discuss what these two terms mean, and the benefits of creating a well-balanced plan-of-action.

Customer acquisition can mean a lot of different things, depending on what type of strategy you're using, but its basic premise is any means through which your business reaches new customers that make at least a single purchase from you.

For instance, an online PPC ad campaign may get a customer's attention, so they head to your website to read more about what you're offering or visit you in-store to ask questions.

All the pieces of contact throughout that customer's path-to-purchase are all part of what could be considered your customer acquisition strategy.

This isn't to be confused with your customer acquisition costs. Customer acquisition costs are any expenses that your business needs to pay for, in order to put all the necessary pieces in place to implement your strategy.

In the example we just discussed, the paid advertising costs, website educational resources/in-store sales assistance would be considered customer acquisition costs.

Customer retention rate is the rate at which you can turn prospective customers into loyal consumers that return to you in the future, as a percentage.

In order for a customer to be considered retained, they must return to purchase from you again within a certain period of time. Understanding what's bringing satisfied customers back is a crucial part of developing long-term strategies that keep your current customer base happy.

That's why direct or indirect communication with consumers is often a vital part of building these long-term customer relationships.

It not only shows them that you're willing to listen to the good (and bad) things they see in your current business model, and in turn, you can use these insights to improve your future plans and internal operational processes.

Bringing in new customers is great, but it only benefits you in the long-term if these consumers continue to return to your business for their needs in the future.

Conversely, retaining existing customers is also great, but only focusing on the customer experience that you're creating for your loyalists will stifle any growth or scalability plans that you may have in the works.

There's no single strategy that's definitively more valuable between acquisition vs customer retention. They both bring major benefits to the table for your organization, but if you want the most effective results that increase profits and continue expanding your customer base, you have to strike a balance.

Leaning to one side or the other, without taking the opposing needs into consideration, could lead to wasted marketing costs, which can begin to have a huge negative impact on your marketing budget.

1.) Get Customer Feedback Whenever Possible

There are few things more valuable for you as a business owner than being able to access honest customer feedback.

Whether this is through surveys that you provide in-store or online, or if you're running email marketing campaigns to request more lengthy information from customers, as long as you're giving your consumers an opportunity to offer you feedback, a percentage of customers are sure to take you up on that.

Open, honest communication is a key factor in any strong relationship. Offering up this opportunity to interact with your business directly is a great way to improve your customer acquisition efforts. It will also limit your customer churn rate, because any dissatisfied customers will have the chance to address issues with you directly.

A bit of communication can go a long way; sometimes even turning frustrations into positive experiences in the end.

2.) Create a Tiered Loyalty Program

You've probably read about some of the benefits of a loyalty program with us before, but we can't stress how valuable these programs can be for both acquisition and customer retention efforts.

By creating a tiered program, you can offer a number of different benefits, depending on how seriously a consumer is using the program.

For example, offering new sign-ups (usually new customers, unless the program is just launching), some kind of sign-up bonus, such as a small discount, helps focus on customer acquisition.

However, providing a yearly birthday bonus or bigger, more valuable prizes in exchange for repeat business and long-term spending (usually done in a points system) could be part of your customer retention efforts.

All-in-all, your loyalty program is a great way to improve both your acquisition and retention at the same time.

3.) Connect with Customers on Social Media

Social media marketing is one of the most effective ways to improve your customer engagement.

People who aren't sure about your brand are more likely to spend time checking out what you're offering through social media, especially if these prospective customers have friends and family that are already in your network.

Offering some kind of referral bonus for your existing consumers can not only lead to an increase in customer retention (everyone likes free stuff), as well as improve the success rate of any social media strategies that you might be implementing.

Don't forget, if you want more visibility on social media sites, it's a good idea to consider using hashtags to help create excitement and engagement around your brand or current contests/promotions.

Bonus points if you can get your target audience to start using them too - then you can really start spreading the word.

4.) Create an Impeccable Customer Experience In-Store & Online

Neither new customers nor existing loyal ones want to deal with a poor customer experience. This means that your website design needs to be clean, easy-to-navigate, visually appealing, and a clear path down the sales funnel.

It's a good idea to talk to customers through your social media channels and your email campaigns to see what they like/don't like about your website. These insights can be key to running a successful business online.

Conversely, your in-store sales teams need to be ready and eager to answer any and all questions that customers may throw at them when they choose to come visit you at your physical locations.

In many cases, this is because the questions that they are asking are more complicated than the educational resources on your site can easily resolve.

Consider doing 'role-playing' exercises with your sales teams. This way, they can practice walking through some of the challenging conversations that you expect they'll face. Even if they don't react perfectly during these practices, it gives you the opportunity to coach in the moment and better prepare them for real situations when they arise.

5.) Reach Out to Customers Before You Fall Off Their Radar

Remember how we mentioned customer churn rates earlier? Well, taking the time to reach out to one-time customers that haven't chosen to come back to you, can help reduce your customer churn rate.

People want to feel appreciated when they give their business to someone. Even if they've only purchased from you a single time, it's a good idea to take the time to thank them. Then, while you've got their attention, casually mention any new or exciting things you've got going on that might interest them.

On the other hand, loyal customers that have stopped coming around as often can sometimes also use a nudge or a bit of extra attention; particularly, if your staff are familiar with them when they come into the store.

Train your team to casually bring up that they haven't seen them in a while, and to ask how life has been. This little bit of personal attention (and acknowledgement of their former visits) can make someone feel seen and appreciated. It makes sales staff feel like friends, rather than customer service associates.

Taking the time to give customers a bit of extra attention will not only improve the revenue they bring in over their customer lifetime, but it equates to excellent customer service, which is what you always want to be providing everyone you serve.

6.) Make Your Business a Seasonal Shopping Destination

Most people get excited anytime they have the opportunity to celebrate something. Are you taking steps to help establish your business as a holiday shopping destination?

If not, you could be missing out on some major conversions during the winter season. Also, it's not just about accommodating Christmas or New Years events. Think outside the box.

Do something special for Halloween - make it silly and fun. Consider running a Valentine's Day promo with free dinner vouchers for the winner and a guest. Pass out lime soda on St. Patrick's Day. It doesn't necessarily have to be super relevant to your industry, as long as it's fun for your customers.

There are a limitless number of ways that you can capitalize on all the major social events that take place around you every year. And if you choose to ignore one, because you feel like it's too much work, then you're leaving the door open for a competitor to snatch up those conversions.

The choice is up to you.

7.) Re-Evaluate Your Calendar for Contests & Promotions

Once you've tried all these tactics, it might be time to sit back and take a serious look at your calendar for contests and promotional events for the next few quarters.

A big part of maintaining consistent growth and a competitive edge against other major competitors is taking the time to shake things up. You can't just keep doing the same contest and promotions each year, on the same cycles.

Not only does that take all the excitement out of these events when you announce them, but they start to fade into the background for your loyal customers that have seen them before.

You need to introduce a steady stream of new and refreshing ideas to try and keep things interesting, while holding onto the contests/promotions (or parts of them) that did the best when they were running.

If you think you'll see the same massive success running the exact same promo again, you'll probably be in for a bit of an unpleasant surprise.