Customer Acquisition vs. Customer Retention

Philippe Pavillet

Nov 19, 2020

Acquiring customers is good. Keeping them is better!

"They got married and lived happily ever after."

We heard the full story of how "they" got there, but what really happened next? Is this sequence of events, stated as self-evident, so obvious that it is not worth telling?

Same thing in business life! We bring out the champagne to celebrate the closing of a major deal, but do we still raise the glasses when we have kept the client for several years?

Our entire personal and professional culture is infused with the idea that prospecting is more interesting than retention. Yet the process of retaining a customer, especially in B2B, is a VERY profitable investment that every company should make.

You have probably heard the numbers before:

  • Keeping a customer costs 5-10 times less than recruiting a new one
  • The probability of selling to a prospect is 5% to 20%, while it is 60% to 70% when selling to a customer

Despite this, there is a multitude of solutions for prospecting, but preciously few for customer retention, other than loyalty programs.

So what is the difference between acquisition and retention?

The first difference lies in the very existence of these respective strategies. While almost all companies have set clear customer acquisition goals and implemented suitable processes and tools to achieve them, the retention strategy is all too often absent.

Customer Acquisition vs Customer Retention : methods

In terms of methods, the strategy is almost the opposite:

Acquisition aims to identify leads likely to be interested in the offer, then to "warm them up" until they become customers.

Retention, on the other hand, starts from a situation where the customer is (at least partially) familiar with the offer. It will focus on strengthening the already existing link, with objectives that depend on where each customer stands:

  • Keeping active customers warm, generating upsell and referral business with them
  • Preventing at-risk customers from going cold
  • Reheating lost customers

Customer Acquisition vs Customer Retention : KPIs

What is a strategy without KPIs? On the acquisition side, they are clearly defined:

  • Number of new customers
  • Conversion rate from one stage of the acquisition funnel to another
  • Cost of Customer Acquisition (the infamous “COCA”)
  • Revenue driven by new customers

On the retention side, they include the following indicators:

  • % of revenue generated by repeat customers
  • Attrition (or churn) rate over a given period
  • Percentage of repeat/at risk/lost customers
  • Customer lifetime value (often referred to as "LTV": the revenue generated with the customer over its entire lifetime)

As a side note, tracking these retention metrics by acquisition channel will help improve the effectiveness of acquisition campaigns.

A good retention strategy allows you to optimize your acquisition strategy. The circle is complete!

Customer Acquisition vs Customer Retention : tools

A large part of the tools (often a combination of CRM + marketing automation) are the same, however they are used in different ways:

Acquisition tools aim to get the word out about the company, its products and services to the right people. Hence their high cost, linked to the use of advertising. It's hard to get the attention of complete strangers!

Retention tools are there to help you better know your customers, to let them know that you care about them and to offer them the right services at the right time. Since the already know you, they will tend to lend you their attention a lot more easily.

In the end, it is not about choosing between acquisition and retention: what this comparison shows is that they complement each other! Acquiring customers without trying to retain them is like filling a leaky basket.

What have you put in place at your company? Are you focusing as much energy and money on maximizing value out of your existing customers as you are on acquiring them?

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