One of the major marketing goals that every business focuses on is to acquire new customers. As much as it is difficult to acquire new customers, it is exceptionally tough to manage customer acquisition as well. To survive in the competitive market, the struggle to grab the customer and retain them is a challenge. Once the businesses acquire customers, the aim is to nurture and retain the customers for achieving success and growth. Customer Retention Vs Customer Acquisition goes hand in hand as a part of every marketing campaign including email marketing for building brand awareness or to redefine your customer engagement strategies . Let us discuss in detail customer retention and customer acquisition.
Customer acquisition refers to attaining new customers for purchasing the brand’s products and services. Acquiring new customers involves a lot of costs, marketing efforts, and time that is required to grow the business. The marketers adopt certain strategies to generate a lead, attract prospects and add new buyers. Acquisition of customers involves various attracting techniques and methodologies such as advertising, referrals, offers, promo codes, email, social media, videos, reviews, testimonials, and more such programs.
The process of customer acquisition includes developing a relationship and identifying the requirements of the prospects in order to analyze how the product or service that is offered shall fulfill those needs. The first thing is to identify the needs of the prospects, connect with them and offer the product or services that can add value to the buyer.
The advantage of customer acquisition is to help organizations to survive and grow. Startups and newly established organizations must acquire more customers. Acquisition of customers is also required to cover the cost incurred on advertising and marketing for creating a relationship with the prospects and generating leads.
Businesses are born out of acquiring customers and without any customers; there is no reason for the company to exist in the first place. Acquiring a few customers allows you to launch your business but being able to continue looking for opportunities all while increasing your existing base will allow you to grow as an entrepreneur.
Once the brand acquires the customers, the next step involves retaining as many customers without customer defections. Most companies and organizations want to have happy customers who will come back for more. A company’s customer retention efforts are often focused on encouraging brand loyalty through positive experiences with the business, but there is a lot of work that goes into retaining customers from the beginning. For instance, when someone first meets your team or talks to you about their needs in person or over the phone, it can influence them positively towards future interactions as well as prompt referrals if they are satisfied enough by what they experience at this point. While effective customer service can make all these things easier down the line because people enjoy doing repeat business with those who were helpful before – sometimes just one good interaction does wonders too.
Benefits of customer retention
It is often more cost-effective to focus on retaining customers rather than converting new ones. On average, it costs seven times less for a company to retain an existing customer as opposed to acquiring one through marketing or advertising campaigns. It can be challenging and expensive for companies without any prior knowledge of their target market segments in order to attract potential buyers by running ads that are not targeted towards them. Retaining current clients allows the business owner a better understanding of what drives his/her best audience’s habits which makes future advertisements much more successful when they do run again with this particular client base in mind. While most companies traditionally spend more money on customer acquisition because they view it as a quick and effective way of increasing revenue.
Why is customer retention more important than customer acquisition?
Organizations are being more customer-centric and focus on client retention regularly. Organizations are advertising and marketing to customers who impressed with the products or services already. Retention of customers is a better approach to expand and grow the business. If we go by the statistics based on the study done recently by a renowned company, the results state that an increase in customer retention by 5 percent increases the profits by 25 percent – 95 percent. Besides, there is a possibility that the existing customer will repeat the purchase by 60 percent to 70 percent. At the same time, the chances of conversion of new leads go up to 5 percent to 20 percent.
When we talk about Customer Retention Vs Customer Acquisition, the main reasons why businesses are focusing on retention of the customers more than the acquisition of the customers are mentioned below.
Every business grows by somehow saving on the cost or expenses while maximizing the profits. The cost of acquiring new customers is higher than the cost of maintaining and retaining the existing customers. So much so that the cost of acquiring new customers in certain industries is more than 5 times the cost of retaining the customers.
This huge difference in cost occurs when you are under the process and pressure of acquiring customers. The procedure of acquiring customers begins from ground zero where the marketers need to frame the strategies. Certainly, the acquisition of new customers takes not just time but a lot of marketing costs are involved too. More than that, it takes a lot of marketing expenditure on attracting and convincing new customers. And in the case of customer retention, you need not fight in the competitive market to overcome several hurdles and transactions, unlike customer acquisition.
2.Increased Return on Investment
Attracting new customers and acquiring them requires a lot of strategies to make fruitful customer relationships so that the prospects will make the buying decision. Acquiring the customer may take months or years initially, but the retention process requires lesser time comparatively. In case of customer retention, already a relationship exists between the brand and the customer. Moreover, after using the brand once, the customer comes to know the benefits and the value they received from the products or services, they would prefer to stick with the brand, provided the company uses strong marketing programs for retaining customers for a longer time.
3.Loyal Customer Base
As customers use the products repeatedly owing to the influence of retention programs and policies, they tend to become more aware of the plus points of the brand and why it is better than the other brands selling similar products and services in the market. With the regular marketing tactics, when the customer is retained and becomes your loyal customer, once they find quality in a particular brand, then they will become your potential referees as they may refer, and recommend the brand to the others in their circle who can be potential buyers by trusting the word of mouth. More than this, the loyal customers have 5 times higher chances of repurchasing the brand and 4 times the likelihood of referring it to others. The brand should focus on increasing the brand loyalty through email marketing.
4.Know your customer
Once you acquire and retain the customers you get to understand their pains, expectations, and how to fulfill them. The brand knows exactly what the customers want and puts in all the efforts to create a better version of the existing products by improvisation. When the brand understands the choice and preference of the customers, then accordingly they can make the variation in the existing products or services or enhance the product to meet the expectations and preferences of the customers. In USA, customer switching causes approx. $136.8 million loss in an year, therefore, retaining the customer is better than losing them.
As the brand retains the customer through several efforts, such retained customers become the marketers and word of mouth advertisers on their own, that too free of cost. Consider it as a priceless blessing for your business as only the satisfied and happy customers would talk about the brand. It is only if your customers will feel valued, while their issues are resolved, and they are attended to well that they will prefer to market and suggest the brand to others. At the same time, the brand can derive the benefit of not just consistently retained customers but will also acquire more customers. The brand will also be showered with positive reviews, testimonials, ratings, and feedback with others.
How to retain customers? The brands can follow certain tactics and strategies for retaining customers that include email marketing, customer appreciation programs, contests, rewards, loyalty points, referrals, engaging customers, seasonal discounts, etc.
Acquiring new customers is necessary for the growth, maintaining long term relationships and loyalty of customers will help the business to expand, increase sales, lower cost on advertising, as well as giving a competitive edge in the tough market.