Customer acquisition is the process of getting new clients for your business or converting existing prospects into clients. While customer retention is the ability to keep customers over a long period. These two factors are important aspects of marketing. Generating quality leads is the first step to both retention and acquisition. See how you can generate quality leads.
Here is a side-by-side analysis of both using the following metrics.
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Costs - Many experts argue that customer acquisition costs more than customer retention. This has been proven to be true because customers tend to respond more quickly to sales adverts from their regular store than from an unfamiliar one. It has been estimated that the success rate of selling to an existing customer is 3 times higher than selling to a new customer. So, customer acquisition costs much more than customer retention. See how to estimate costs in marketing. https://craft.io/resources/glossary/what-is-a-marketing-cost-analysis/
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Marketing goals - The goal of customer acquisition is to increase revenue, by converting prospects to clients. It should be the major focus of a startup. Customer retention aims to maximize profit potential by increasing customer loyalty. Each entrepreneur would decide which (customer acquisition or retention) best aligns with his company's current goals.
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Return on Investment (ROI) - ROI is a measure of sales growth and accruing profit from an investment. ROI helps to determine the effectiveness of a marketing campaign. The ROI for customer acquisition depends on the cost of execution, some market analysts have estimated the average ROI for a 5% input to be between 25-35%, while a 5% increase in customer retention can yield revenue increase between 25-95%. Learn how to calculate ROI for your business. https://www.investopedia.com/articles/basics/10/guide-to-calculating-roi.asp
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Planning - Many people agree that customer acquisition requires more effort than customer retention. More resources and labour are required. Customer retention can be planned and carried out using existing personnel. It could simply be an increase in employee commitment to consistently provide high-quality service delivery. Look up how you can use SMS to get repeat customers. https://smartsmssolutions.com/blog/111-products-and-services/bulk-sms/1643-use-sms-to-get-repeat-customers
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Market trend - Today many businesses are focusing on customer retention because they believe that it is easier to convince an existing client to try a new product than a prospect. About 89% of businesses have noted that a positive customer experience is a key factor in customer retention.
Other effective ways to customer retention are e-mail marketing and content creation. Some companies have also tracked the lifetime value of customers both through customer acquisition and retention, the results show that customer retention yields higher results and existing clients are more likely to refer their friends or acquaintances to these companies.
Startups would need to focus on customer acquisition before switching to customer retention or maintaining the status quo.
A combination of customer acquisition and retention is a sure recipe for success. You should consider the factors listed above to know which you want to give top priority to. Please note that the figures/values presented in this article are mere forecasts and may not necessarily reflect your market reality.
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