on January 3, 2022 (last modified on May 18, 2022) • 19 minute read
We’ve all heard the statistics about how it is cheaper to retain an existing customer than it is to acquire a new one.
Anytime you hear a best practice like this it doesn’t mean that you should blindly assume this is the best thing for you. Like with all things in marketing, it depends on your specific business’s goals and current needs.
So, we reached out to 97 marketers across a wide range of businesses (from marketing agencies and professional service firms to eCommerce and SaaS businesses) to find out whether acquisition or retention marketing was more important to them.
Let’s dive in.
It shouldn’t come as a surprise that the vast majority of agencies we spoke to view retention marketing as more important. “Far and away, we focus more so on retention marketing,” says Jonathan Zacharias of GR0. “The primary reason: retention is more sustainable and has a greater financial upside. Indeed, whether you are seeking new customers for a B2C eCommerce business, or new clients for a service-based company, obtaining new users is difficult. Digital ads are expensive, cold outreach is time-consuming, and conversion is usually low. With more client/customer retention, however, there will be less pressure on garnering new leads. Increase your client base gradually, maintain your pre-existing clientele, and watch your bottom line grow.”
Kyle Arnold of Hyperweb says, “Retention has a substantially more significant return on ad expenditure and is frequently more cost-effective than the other option. The predicted value of a customer’s lifetime value (or LTV) is calculated throughout the term of his engagement with your organization. It’s no secret that loyal clients who buy from you on a regular basis are far more critical to your business than one-time purchases. A great customer retention plan allows you to optimize your customers’ lifetime value by encouraging them to return to you again and again. This is why I prioritize Retention marketing.”
Scott Keever adds, “I focus on retention marketing due to the following reasons:
Increased frequency of customer visits leads to a greater amount of money being spent in our store.
Analyzing customer experience helps us better determine which products our customers frequently purchase which helps us drive increased profit margin.”
This is particularly true for marketing agencies with a retainer business model.
“The vast majority of our clients come as a result of referrals from happy customers,” says Kevin Miller. “Therefore, I focus more on retention marketing because it is cheaper and easier to retain customers than to acquire them with traditional methods of prospecting, cold outreach, sales processes, etc. Acquiring customers takes time, effort, and energy that could be spent on other things. Retaining customers is about creating a loyal customer base rather than attracting new customers.”
Amber Reed-Johnson of Giraffe Social Media adds,” As a marketing agency, our priority is keeping our clients happy and retaining customers for as long as possible. However, our focus is generally more towards acquisition marketing, as client retention is rooted within our service, freeing up capacity in marketing towards gaining new customers.”
As Reed-Johnson alluded to, many marketing agencies would benefit from focusing on both acquisition and retention marketing.
“Personally, I don’t think you can have one without the other,” says Andrew Becks of 301 Digital Media. “The best and most successful marketing efforts are those that balance all the elements of the conversion funnel, from new customer acquisition to customer retention and beyond. The “beyond”, in this case, is converting retained customers into brand evangelists.”
Alex Birkett adds, “Neither are more important universally; it depends what stage of growth you’re at and which point in the system has the biggest leverage and opportunity for improvement. That said, “retention marketing” doesn’t really matter if you’re not bringing in enough users/customers in the first place, and “retention marketing” is going to be a slog if your acquisition team and product marketers are attracting the wrong type of customers in the first place. Email automation and churn reduction tactics are marginal if you don’t get the customer fit right in the first place. So I’ll say acquisition marketing is, in most cases, more important.”
David Hoos of The Outloud Group agrees, “When you are just starting out, acquisition marketing can be the better priority because you’re still aiming to verify product-market-fit, messaging, and the like. However, once you know you have a winning product, it’s important to quickly turn to retention marketing to help you scale. Acquiring a new customer can cost up to five times more than retaining an existing customer. Essentially, with acquisition marketing, you can have customers leaving as quickly as they arrive which can deplete your cash more quickly. If instead, you prioritize retention marketing you can ensure that the cash flow that your returning customers bring can help you acquire new customers.”
Like with all things in an agency, there are exceptions to the rule. If you sell a one-time service in your marketing agency, then you should focus primarily on acquisition marketing.
For example, Ali Saeed says, “My business mainly provides one-time services instead of a monthly contractual relationship. These are B2B services related to branding, SEO optimization, and crafting design solutions. As you can see, these are one-time client solutions. Hence, I focus on acquisition marketing with the goal to keep receiving new leads consistently.”
And, if you are a new business or in hyper-growth mode, then focusing on acquisition marketing is essential.
“For most companies, the focus needs to be acquisition,” explains Kristen Wilson of Authentic Brand. “They need to show growth and expansion to their board or investors. Older, established companies can be more focused on retention after they have significant market penetration, have a very small pool of target customers (like defense contractors trying to sell to the DoD), or if the cost of customer acquisition is really high.”
You can monitor acquisition metrics in Google Analytics like traffic by source, sessions by social network, top paid keywords by sessions, sessions by organic traffic, bounce rate, and more, to quickly identify how are people finding your website, what your most profitable traffic sources are, and how successful specific marketing campaigns are in attracting website visitors.
Keep in mind though, the amount of channels, dimensions, and demographics you can sort by in GA is one of the easiest things you can overcomplicate.
To better understand how your website performs in terms of acquisition and conversion, we built this Google Analytics dashboard template that contains all the essential metrics for understanding how successful you are at attracting visitors from different channels.
With this Google Analytics Acquisition Snapshot dashboard, you can quickly identify how users arrive at your website, and details such as:
You can easily set it up in just a few clicks – no coding required.
To set up the dashboard, follow these 3 simple steps:
Step 1: Get the template
Step 2: Connect your Google Analytics account with Databox.
Step 3: Watch your dashboard populate in seconds.
Similar to marketing agencies, the majority of professional service businesses we surveyed also prioritized retention marketing.
“Retention marketing – This is like hitting 2 birds in one go,” says Daisy Jing of Banish.“Acquiring new customers means spending more to make people fall in love with the brand. Whereas with retention marketing, the loyalty of the customer can never be bought and there’s a chance in every purchase he has, the probability of a fall out (of love) is minimum. The more he buys something, the more chances we have in keeping him. As long as we maintain the relationship/engagement and we reward them for their loyalty, we’re good for sure”
For example, Jared Kuruzovich of NIST International School explains, “As an international school in Thailand, we may differ from many industries in that retention marketing is by far more important. Enrolling children in an international school often represents one of the most significant investments parents will make, and they often conduct extensive research before making a choice. That process includes not only visiting websites, but also reaching out to family, friends, and colleagues for recommendations, or seeking out other parents who can give them insights. This makes retention marketing, and in turn word of mouth, crucial factors for long-term growth. Approximately 90% of families cite word of mouth as a key reason for choosing our school, a figure that has enabled us to grow this past year despite most international schools worldwide dropping in enrollment.”
Shawn Plummer of The Annuity Expert agrees, “I focus more on retention marketing as positioning ourselves as trusted advisors for our clients when it comes to annuities, life insurance, and retirement planning is important. We have a variety of related products that meets their retirement planning needs so a large portion of our revenue comes from retention marketing. On the other hand, we have a blog that generates leads for our acquisition marketing strategy and it works well for us while building trust. All the articles we have posted rank well and we consistently generate a steady stream of leads. Hence most of our focus is on our retention marketing to serve our current clients better.”
Just like with agencies, some services are designed to be bought infrequently, like life insurance or weight loss services.
For example, Kelly Maxwell of Seniors Mutual explains, “While you don’t really need to choose between the two, acquisition is much more important for Seniors Mutual because our revenue is all insurance sales related. While we do receive a lot of referrals from existing clients, we would not be anywhere close to our goals if we did not work every day to obtain new clients.”
David Kranker of Ideal You Health Center agrees, “We personally focus on acquisition marketing over retention marketing. We’re a weight loss company that offers 40-day programs. Customers can and do come back for encore rounds of our 40-day program, but we offer encore rounds at a discount and many of our customers hit their goal weight within their first 40 days round. We earn significantly more bringing in new customers than we do re-selling to past customers. For this reason, we put far more effort into acquisition marketing.”
And, many professional service businesses end up fluctuating between focusing more on acquisition vs. retention marketing depending on their current goals.
“Customer acquisition and retention are significant growth drivers, but we prioritize acquisition more than retention for our organization,” explains Matt Bigach of Nexus Homebuyers. “The reasons are that customer acquisition strategies result in increased website traffic, which can be funneled into possible sales, resulting in a boost of revenue. Customer acquisition is a reasonably short-termed process, where results are evident much sooner. You can measure the number of new users as a metric of success for your strategy by getting real-time feedback so that you can make adjustments and go again.”
In SaaS, you hear about the concept of negative churn, or when revenue from existing customers is more than all downgrades or churn. In order to achieve negative churn, retention marketing has to be a priority.
“When it comes to software, the focus is on retention marketing,” says Karl Hughes of Draft.dev. “Many software companies have switched to a subscription model which means that it’s important to retain old customers and keep them using your software. Although acquisition marketing is still necessary, it’s important to retain customers long-term for the best results.”
Ryan O’Donnell of Replyify says, “Years of experience in growing a SaaS company taught me how customer retention will sustain my business. Aside from driving more revenue from it, upsells from existing customers also take less time and cost to profit. While acquisition, on the other hand, is also important and is oftentimes given more attention and budget to, we always find ways in fostering what we already have because they are far more willing to purchase from a company they already trust than people who have no idea what we have to offer. Though these two concepts tend to always outweigh each other, there’s a better way to look into it. Companies can provide a great onboarding experience that drives acquisition initiatives to successful customer retention. Bear in mind that you’re not spending for customer acquisition only to let them go.”
Trina Moitra of Convert.com adds, “This has been a debate for a while. And I personally am inclined to say retention, since it is 3x to 5x more likely to yield higher revenue at lower costs.
However, there is a way to step back and support both acquisition and retention and that is through brand marketing. Understand what your purpose is, pinpoint the customer struggles your app can mitigate as the “natural choice” for that segment (this is why understanding your purpose is key, because it can also dictate the features set you to invest in), flesh out your strategic narrative (the old game vs the new game and how your product helps) and then produce brand-focused content that shakes people out of the tendency to automatically tune out B2B messaging since it is mostly boring and generic.
When you occupy mindshare with prospects and customers – most marketing tactics generate better results, including efforts and campaigns geared towards retention & acquisition.”
While you’d be hard-pressed to find a SaaS company that doesn’t focus on churn prevention, it doesn’t mean you should neglect customer acquisition.
“There should be a balanced mix between acquisition and retention,” says Olivian-Claudiu Stoica of 123 Form Builder. “For a SaaS, retaining customers is essential. There’s a lot of room to improve your relationship with people already accustomed to your services and product. Not to mention that your customer base helps you improve your services through constant feedback. In eCommerce, your existing customers will come back 90% of the time if they had a positive experience in the buyer’s journey.
However, focusing on retention alone is not a strong strategy in the long run for your business. At some point, you’ll want to scale and improve your revenue growth. That’s where acquisition comes in handy. Because you’re bringing in more customers, that leads to a more extensive customer base and more repeated sales.
To get the most out of your acquisition marketing, you’ll need a strong retention marketing strategy. It’s one thing to get the person buy from you once, and it’s a total another thing when the same person returns to do more business. And that’s what businesses should do – focusing on the customer, delivering solutions.
So, if you’re only focusing on acquisition, it’s not enough. The same if you’re focusing only on retention. But if you mix acquisition and retention, you’ll achieve better results for your business.”
Nate Tsang of WallStreetZen agrees, “Acquisition, by a small margin. We find that the product itself is our best means of retaining customers—provide a service they can’t see themselves living without, and they’ll stay subscribed. In SaaS getting them to sign up is the harder part, which is why acquisition marketing wins out.”
Jered Martin of OnePitch adds, “We place more of an emphasis on our marketing efforts to acquire new users, however, retaining them is equally as important. Much of our marketing is unpaid which results in a lower CAC. Most of our retention marketing is automated which reduces the time commitment from team members and allows us to devote more time to sales and marketing.”
For example, if you are a brand new SaaS startup, then acquisition marketing is the number one focus (at least until you get a few customers).
“At this stage of our company development (went out of stealth mode some 8 months ago), we’re placing more emphasis on finding new user acquisition channels with an extra focus on inbound acquisition,” says Michael Tomaszewski of Storydoc. “The main reason for that is to take some pressure off our sales team. Ever since we launched a self-serve version of the product and a no-touch funnel, acquiring those kinds of users is the number one priority for scaling our business. Obviously, user retention is also very important to us, but what matters more now is having a steadily growing flow of new customers. Even if we fail to retain some of them, we’ll gain unique, invaluable insights to help further improve our product.”
Another reason to focus more on acquisition marketing is if you are looking to grab as much market share as quickly as possible.
For example, Summer Romasco of Ad Hoc Labs adds, “As more and more people are looking to protect their privacy and data, it’s a must for communication software brands like us to focus on acquiring as many leads as possible. And by creating content that answers as many questions as we can surrounding privacy awareness and solutions, we’re addressing any concerns customers may have and inspiring confidence in our products. While, at the same time, we’re establishing ourselves as thought leaders in the industry, which builds trust in our brand. This strategy encourages prospects to download our app and sign up for a subscription. It’s a seamless acquisition marketing funnel.”
While SaaS, marketing agencies, and professional services skew towards retention marketing, there is less of a consensus among eCommerce businesses.
Eric Mills of Pro Support Accessories says, “In the early days of my business, we prioritized acquisition marketing to grow our brand and reach as many customers as possible. Today, our marketing budget is largely allocated to retention strategies. One of the reasons for this is that the bulk of our sales comes from referrals, and as long as our customers stay loyal to our brand, they will keep referring our products to their friends and acquaintances. Both strategies are important, but I would say acquisition marketing is better for growing businesses whereas retention is necessary for mature brands/businesses.”
Leszek Dudkiewicz of Passport Photo Online adds, “The question, “Acquire new customers or retain the ones you already have?” is a bit like “Which came first: the hen or the egg?”. Customer acquisition is a necessary part of generating business opportunities in any company. Without new customers, it would be impossible to run a business and grow it. But customer retention is also vitally important to be successful and profitable.
To determine which to focus on more, I always ask myself, “Would I rather have 40 new customers each year who leave quickly or 20 customers who stay forever?” The answer is obvious.”
Many other eCommerce companies share Dudkiewicz’s views around customer loyalty and retention.
Damien Enderle of Adult Diapers 365 says “For me, personally, I have a goal of growing my business, which is why I prefer retention marketing as compared to acquisition. My viewpoint is that if a company focuses on building everlasting relations with their existing employees, not only do they ensure a higher customer lifetime value but it can also lead to word-of-mouth marketing and positive reviews. This subsequently leads to acquisition marketing naturally, without the need to invest heavy financial muscle into it! So, my tip to businesses would be to focus on long-term growth through retention marketing, because it will organically lead to acquisition marketing! Focusing on both simultaneously is bound to drain your finances and as we all know, “You can’t wear two hats at the same time”
Jen Haley of Editor’s Pick agrees, “We have found that retention marketing has been very successful for us, and what we have chosen to focus on. Thirty percent of our repeat customer purchases are directly attributed to our loyalty rewards program, so for us, this is the most powerful medium for customer retention. Our biggest focus is turning new customers into lifetime fans, thereby decreasing our overall cost per acquisition.”
Shaunak Amin of SnackMagic adds, “We take great pride in our customer satisfaction score. Our customers are typically B2B, specifically B2B2C. These include gift-givers such as event professionals, senior-level executives, and HR managers who give swag to global teams, business partners, or event attendees. We send customers to our G2 reviews page, an industry standard for software companies to collect reviews for prospects to compare and contrast products/services. The reviews are all credible and honest, and other interested B2B prospects will come across them when they Google corporate promotional gifts. It’s an easy way for any business to measure the Roi of their customer experience. We can also use this information to adjust our product offerings or service if the metric is low. Additionally, this metric provides insight into customer retention strategies, helping us to increase brand loyalty.”
However, it is possible to over-index on retention strategies, especially if you are a newer business or sell a commodity.
Acquisition and retention marketing isn’t really about business type or industry. Instead, the two key factors to think about are how established is your business and what are your marketing goals.Then, whichever option you choose, make sure to select your north star KPI and measure your marketing efforts regularly using a marketing dashboard software. This will allow you to see what is and isn’t working, so you can course correct it.
Looking to set up your own acquisition or retention marketing dashboard to track your marketing efforts? Get started with Databox for free.
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