Which one is more important to you: acquire new customers or retain existing customers? We all know that customer acquisition is an essential part of any business growth. Still, if you run a subscription-based or re-consumption-based business, then customer retention is also significant.
When formulating a growth strategy, how do you know where to focus more energy?
The answer is complicated and subjective, involving various variables, such as customer acquisition costs, long-term business goals, business models, etc.
To answer this question, we must develop deeper content and provide help on how each strategy can benefit or harm your business.
Which Strategy Is More Suitable For You?
Because this is a complex subject and many things need to be consider, we need to disassemble each method and better understand how each strategy affects your business today and how it will affect your future business. We dig deep.
Customer Acquisition: The Basics
Let’s start with the obvious: Without new customers, we don’t have everything behind. It is especially true for startups and growing small businesses. When you create a new business, developing the first few customers seems like a huge challenge.
You want to build a brand reputation, but our brand is not convincing due to a lack of customers. You can advertise, but potential customers will hesitate to trust our brand.
Usually, the company’s first customer is the relationship account of the business leader. Later, as the customer base grows, and brand awareness increases, customer acquisition becomes easier.
Your sales strategy on how to acquire customers depends mostly on your business model and goals.
Customer Acquisition: Potential Pitfalls
We all agree that to grow your business. You need to acquire new customers. However, many companies make the mistake of investing too many resources to reach customers, not enough to retain customers.
Suppose you acquire a new customer but do not take appropriate steps to ensure that they successfully use your product or service. You will likely lose them soon.
From the beginning, good customer experience is vital. It reduces customer churn and improves customer satisfaction.
Keep in mind the cost of customer acquisition. According to invesp, the cost of acquiring new customers is 5 to 10 times that of retaining existing customers. So, when you reach a new customer, this is your chance to consolidate trust and care.
If you sign a new customer and then leave it alone, you will have unsatisfied customers, and they are likely to choose your competitors.
Customer Retention: Basic
Customer retention is an essential but often overlooked variable in business success or failure. Retaining existing customers is not as difficult as it seems.
The bottom line is how to provide a good customer experience to please customers. Here are some essential tips for retaining existing customers:
- From the right perspective, ensure that new customers can use your product as soon as possible.
- Provide customers with content to solve everyday problems. It will build trust and make you an authority in your industry.
- Regularly contact customers to understand the situation and understand their current needs.
- Through training or guidance, customers can fully understand and enjoy your products.
- Focus on solving customer problems. The right way is to use a dedicated customer service team.
Customer Retention: Profit Without Harm
Focusing on customer retention is profitable and harmless. There are plenty of statistics to support this. For example:
- Loyal, long-term customers spend more than new customers.
- On average, 80% of a company’s revenue will come from 20% of its existing customer base.
- Increase the customer retention rate by 5%, and the profit will increase from 25% to 95%.
- A 2% increase in customer retention rate can reduce the company’s total cost by 10%.
On the other hand, satisfied and loyal customers with you for a long time will make your performance more stable and allow you to make more accurate revenue forecasts.
In addition, you can develop and cultivate close relationships with customers to build trust, thereby ensuring that customers remain satisfied and loyal for a long time. It is the business foundation on which every successful company depends.
So, what is the conclusion here? Should you focus more on customer acquisition or customer retention?
New businesses need to focus on customer acquisition, but customer retention becomes extremely important once new customers are acquired.
If you have established a satisfactory customer group with a specific scale, you will have a reputation, and potential customers will start to find you proactively.
According to the “Corporate Vision” report, about 80% of companies spend more than 70% of their marketing budget on generating new customers, and less than 30% on customer retention plans.
We recommend turning this point upside down and spending at least 50% of your marketing budget on customer retention strategies.
It is the best long-term business growth strategy in almost all situations. Whether your current focus is customer acquisition or customer retention, Mountainise can match your sales and service strategy. Please register below and share your plan with us.
Check out also our digital marketing free review. We are providing this free because we know how startups are struggling to perform in corvid. We don’t want you to miss this offer.