It’s not uncommon for companies nowadays to strive for customer loyalty while also expanding their reach to attract new customers. Both strategies have distinct advantages that ultimately affect your business’s bottom line. This begs the question: Is customer acquisition better than retention — or the other way around?
Before we dive into the similarities and differences between customer acquisition vs retention, we need to define each:
- Customer acquisition is the process of acquiring new customers for a business. It generally involves a series of steps, from identifying your target audience to carrying out marketing strategies, such as email marketing, social media marketing, and running ads. An important part of customer acquisition is making sure that people actually become interested in your business.
- Customer retention, on the other hand, focuses on generating repeat purchases. In other words, it prioritizes building long-term relationships with them. That said, a business should aim to create positive experiences through different means. For instance, they can offer rewards and incentives and provide exceptional customer service. Customer retention is key to sustainable growth.
Customer Acquisition vs Retention: How Are They Similar?
Now that you know the meaning of customer acquisition and retention, we’ll explore their similarities in terms of what they try to accomplish. You will realize that somehow both approaches are interconnected. Here’s what we mean:
A focus on delighting customers
Whether it’s attracting prospects or keeping existing customers, one thing is for sure — a business needs to provide products and services that people will love. Doing this allows them to build a good reputation, generating positive word-of-mouth, which in turn supports both acquisition and retention efforts.
🙋🏻For instance, Eline van Maanen, founder of Van Maanen Holiday Homes, offers luxury chalets for dog owners and their dogs. She used UpViral to get the word out about her business, which resulted in increased bookings and a publicity boost. Check out the case study!
Your value proposition is the primary reason why customers would want to do business with you. It explains how your solutions help fulfill their needs — for instance, Slack’s value proposition of simplifying work and making it more pleasant and productive — and how you’re better than the competition.
It doesn’t matter if you’re reaching new prospects or keeping your current customers. As a business, you must clearly communicate the value they get from using your products and services. When they understand this, they’re more likely to make a purchase.
Customer Acquisition vs Retention: How Are They Different?
Acquisition and retention are similar in that they ensure customer satisfaction and communicate a business’s value proposition.
As for their differences, retaining customers is generally more cost-effective for a couple of reasons (which we’ll discuss shortly) and involves promoting ongoing loyalty. Their marketing strategies can also vary.
Customer retention is often considered cheaper
There’s truth in the saying that it’s more cost-effective to retain customers than to attract new ones. Research shows that return customers tend to buy more from a company over time. This makes perfect sense given that existing customers have already established a level of trust with a brand.
What’s also worth mentioning is that loyal and satisfied customers become your brand advocates. They share their amazing experiences with your product with others, increasing your number of referrals.
🙋🏻Pro Tip: Incentivize your repeat customers to share your business with their friends. Like what Terry Mitchell does to generate up to 4,000 new leads each month, do a monthly giveaway where they can win one of your products.
Getting the initial sale versus repeat business
The primary focus of customer acquisition is getting that initial sale, whereas retention focuses on motivating customers to buy again.
Companies that value retention actively work toward increasing trust among first-time customers, which takes time, and through different tactics. This leads us to the next section.
Below is a comparison of the marketing tactics involved in customer retention and acquisition:
- Loyalty programs: This can include discounts, exclusive offers, and points that people will be able to use for future purchases. A popular example is Starbucks rewarding members with one star per $1 spent.
- Personalized communication: This can include sending emails that reflect their demographic information, buying habits, preferences, and level of engagement. Businesses that personalize also recommend special offers to certain customers.
- Surveys and feedback: In a previous article, we discussed how feedback can be so important for creating stronger relationships with your customers. Collecting feedback regularly will help you understand their needs and expectations, which may change over time.
- Content marketing: This can include writing blog posts that lead people to your website. When writing these posts, it’s important to address your target audience’s problems, which makes them interested in trying your product or service.
- Targeted advertising: Besides content marketing, running paid ads is also effective for increasing people’s awareness about your business. Thankfully, there are plenty of advertising channels to get the word out — social media (Facebook, Instagram, etc.) and search engine results pages (SERPs).
Should Your Business Focus on Acquisition or Retention?
The reality is that both are important to increase your success and long-term growth. However, in some instances, a business may focus more on acquisition over retention — or the other way around — depending on different factors.
Here’s what we mean:
For instance, let’s say that you’re still in your early stages or entering a new market. In that regard, it makes more sense to prioritize customer acquisition. As soon as you develop a solid customer base, you can slowly shift your focus on keeping customers.
At the end of the day, it’s best to follow a balanced approach! 🙌🏻
Using UpViral Giveaways to Boost Acquisition and Retention
We’ve already discussed the importance of customer acquisition and retention, as well as provided you with customer acquisition vs retention examples. Whether you should favor one over the other is something you need to carefully think about based on your current goals.
The good news is that UpViral can be used to achieve both! With an enticing giveaway, you’ll be able to encourage social sharing and refer friends to your campaign.
An important part of the giveaway process is collecting email addresses, which you’ll use for future marketing efforts. UpViral also allows you to incorporate gamification elements, such as milestones and other Custom Actions (like answering a survey or following you on social media), which helps strengthen the customer relationship.