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Customer Acquisition vs. Customer Retention: The Difference Between Both and How to Develop a Strategy
On a very basic level, every business needs to focus on two main strategies to help them grow and thrive. Simply put, the strategy to getting new customers and the strategy to keeping your existing customers happy and coming back. In marketing terms, these are customer acquisition marketing and customer retention marketing.
In this article, we’ll outline the differences between each strategy and give you the tips you need to start developing your own acquisition marketing strategy or retention marketing strategy.
What Is Customer Acquisition?
Basically, customer acquisition is converting any leads or prospects for a business into paying customers. This is of key importance for any new business that is looking to create a customer base. The key to customer acquisition is to be able to show a positive return on investment (ROI) from what it costs to acquire the customer to the amount the customer spends over the business relationship.
The key to successful customer acquisition is to be able to identify a need and offer a product or service to fulfill that need at a price that is attractive and competitive in the marketplace.
Customer acquisition is a unique science because sometimes there isn’t even a marketplace when a new technology arises. For example, 30 years ago there was a very limited market for cellphones and the other ancillary products and services that come from that. Now, the competition to acquire new customers is fierce and robust. From the actual phones themselves, to apps, accessories and carriers, there’s a constant battle of customer acquisition strategies for a marketplace virtually non-existent three decades ago.
Sometimes, world events can create a strategy for new customer acquisition. The COVID-19 crisis for example, has created customer acquisition opportunities for companies offering masks, latex gloves, and hand sanitizer.
Customer acquisition is essential for any new business to help get off the ground. Later in this article, we will show some customer acquisition strategies that can help companies get prospects and convert them into new customers.
What Is Customer Retention?
Customer retention is when a business engages in strategies to help keep their existing customers from defecting and increase the value of the customers by having them spend more. There are many initiatives that can include upselling, cross-selling, loyalty programs, upgrades, and more.
Marketing to existing customers is a much different process and has to be a completely different strategy than customer acquisition because you are marketing to someone who has already spent money with you and knows a lot about your company and your product or service.
Customer retention is essential for growing a business and taking it to the next level. Marketing to these customers can help any company take a big leap from being a simple startup to a well-established business. Later on in this article, we’ll reveal the customer retention strategies that can work for your business.
How Do You Acquire Customers via Customer Acquisition Marketing?
Customer acquisition marketing strategies can encompass a wide array of media including prospecting, cold calling, referrals, joint ventures, sponsorships, TV advertising, radio advertising, print advertising, display advertising, direct mail, and digital advertising (which has its own sub-categories like display, search, programmatic, video, email and more).
The key is to properly identify your customer, or your market, so that you aren’t wasting your efforts marketing to a segment that has little to no interest in your company. For example, a company selling steak might want to stay away from advertising in a magazine aimed at vegans.
Alternatively, you also want to avoid marketing in an oversaturated market where there is too much competition. The only exception to this is if you are offering a product or service that offers something unique and innovative (your Unique Selling Proposition or USP) that stands out from the competition.
There are many strategies for different mediums.
To acquire new customers using direct mail advertising, the key is to first use a mailing list broker, like Macromark, to find customer databases that match the demographic of the customer your business is looking for. Sometimes it takes “out-of-the-box” thinking to identify potential customers. You need an agency like Macromark to help you drill down to identify potential customers you might never have thought would be interested in your business but are prime to become your customer.
The main thing to remember is the ROI. Don’t be afraid to spend money on getting a customer if you know that the cost of acquisition is far less than the revenue generated by that customer. For example, if it costs you $500 in advertising spend to get one customer who will wind up spending $2,000 with you over the course of the business relationship, then that’s money well spent. On the flipside, if they are only spending $200 with you, then you need to either get your acquisition costs down or increase the customers spend.
How Do You Retain Customers via Customer Retention Marketing?
Customer retention is a different ballgame to customer acquisition because you’re not coming into contact with a cold lead. You are marketing to people who have already made a transaction with you and you’re looking to keep them happy, have them continue being a paid customer, get them to increase their spending with you, and keep them from defecting, losing their business, and their revenue.
The key to customer retention is understand your customers’ needs and wants and then fulfilling those needs. If you have a subscription-based kind of business (recurring charges to your customers on a regularly scheduled basis), you want to keep them happy primarily by giving them a quality service or product that they see value in. It doesn’t have to be the cheapest price. It has to have value to the customer. That’s the biggest hurdle. You don’t necessarily have to be the cheapest. If your existing customers love you and don’t mind paying you, then you’ve already done most of the heavy lifting when it comes to customer retention.
But sometimes, that’s not good enough, especially in a competitive market. You need to offer more value like bonuses, loyalty programs, special customer perks and more to keep your customers happy. You can also increase the value of a customer by upselling them with premium features, cross-selling them with similar products and yes, even lowering prices or increasing deliverables in the cases where it looks like they’re going to leave. Any one of these strategies can help you retain your existing customers to help you grow your business.
If you’re looking to grow your business through direct marketing, including direct mail, digital marketing, print media (ie. newspaper ads), then Macromark can help you develop a full-scale customer acquisition and customer retention strategy that suits your business. For more information, contact us at 1-(845)-230-6300.