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Customer Acquisition Vs Retention is a topic that can be debatable. We need to consider both customer acquisition and retention to run a profitable business. It is always tempting to focus more on new customer acquisition and letting the current customers stay where they are.
However, both customer acquisition and retention are vital to a business as they both help the business to achieve its goals.
When it comes to business goals, customer acquisition is the first step that a business takes to obtain a new customer base. However, retention is what most businesses focus on, and rightly so! Retention is much more important than acquisition as it helps to foster a strong customer relationship.
Read on how acquisition and retention can work together towards your business goals.
Customer acquisition is the process of bringing new customers or users to your business.
Happy, loyal customers are the lifeblood of every successful business, but every customer has to start somewhere.
Every customer starts as a lead. When a lead becomes a customer, that’s customer acquisition.
Acquiring customers is one of the most important functions any business can perform, and it’s especially important for small businesses to invest in effective customer acquisition strategies.
Customer acquisition can be achieved through a variety of marketing channels, including content, email, search engines, and social media platforms.
While customer acquisition is often used as a blanket term to describe the process of acquiring customers, it’s also important to note that there are many different types of customer acquisition. They include:
Customer acquisition is the process of enticing new customers to buy a business’s goods or services. Businesses may use several customer acquisition strategies to reach new potential customers, including:
Customer acquisition should be a top priority for businesses, as it helps grow revenue and expand the customer base.
For example, if a company acquires 500 new customers in a month and each pays $100 for its goods or services, then the company has increased its revenue by $50,000 without having to increase marketing costs.
Customer acquisition can also improve a business’s bottom line by reducing the cost per acquisition (CPA) — how much a business must spend on sales and marketing to acquire one new customer.
If a business spends $1 million on sales and marketing each month and acquires 10,000 new customers, then the CPA is $100 ($1 million divided by 10,000).
If the business spends the same amount but acquires 15,000 new customers instead of 10,000, the CPA decreases to $66.67. The lower the CPA is compared to the average lifetime value (ALV) of a customer (how much they spend over time), the more profitable the business will be.
Customer acquisition costs (CAC) are the total costs associated with acquiring a new customer. These costs can include salaries, commissions, and benefits paid to salespeople and marketing staff, and advertising and marketing expenses.
The customer acquisition cost formula is used to calculate the average amount of money a company spends to acquire a new customer. The goal of the calculation is to determine how much a company can spend on acquiring new customers without losing money.
The calculation can be based on a single channel or an entire marketing campaign.
Customer Acquisition Cost Formula – The formula for calculating customer acquisition cost is as follows:
CAC = Total marketing and sales spend / number of new customers acquired
For example, if a company spends $10000 on marketing in a year and acquires 2000 customers in the same year, their customer acquisition cost is $5.
This metric is essential for evaluating your company’s marketing efforts and for measuring how much you can spend to acquire new customers.
The customer acquisition cost formula does not take into consideration, however, how long each customer remains a paying customer for your business.
Total Marketing and Sales Spend
This is the amount of money spent on advertising, marketing, and sales. It includes:
There are two main parts of customer acquisition:
Customer acquisition is an important part of business and a key focus for many companies. That’s because a business can’t grow without customers. And without growth, it’s hard to stay in business.
The best way to learn how to do customer acquisition is to look at examples of how other companies have done it. There are several strategies for acquiring new customers:
Dropbox is an excellent example of a company that uses a successful referral system to acquire new customers. Dropbox offers extra storage space to users who referrer friends to the service. This incentive convinces users to actively promote Dropbox to their friends, leading to more signups.
Amazon is well-known for its successful personalized email campaigns. When a customer visits Amazon, the website remembers the items they viewed and offers related products as suggestions. Amazon also recommends products based on past purchases. This level of personalization entices customers to return to Amazon and makes them more likely to buy something.
Different companies have had great success with PPC advertising. It optimized the PPC campaign starting from the headline. Their CTA is also great and well-positioned. It is sure to make users take action.
As part of the effort to promote brand recognition, a bulleted list of benefits is provided as well as additional values in gray. The CTA “Get Started Now!” appears at the top right, so it sticks out as the last text scanned by the eye.
Customer retention refers to the activities and actions companies and organizations take to reduce the number of customer defections.
Customer retention is typically considered in relation to customer churn rate or the rate at which customers stop doing business with an entity. The higher a company’s retention rate, the lower its churn, and vice versa.
Customer retention is one of the primary goals of customer relationship management (CRM). It is often less expensive to retain an existing customer than to acquire a new one, so it follows that retaining customers should be a priority.
The success of any company depends on its ability to create and maintain satisfied customers.
When organizations are successful in retaining customers, they increase their profitability, enhance their reputation, and improve their brand equity.
There are two key metrics for measuring customer retention:
Customer Retention Rate (CRR) is the percentage of customers at the beginning of a period who continue to be customers at the end of the period. It is calculated by dividing the number of customers who remain with a company at the end of a period by the total number of customers at the beginning of that period and multiplying by 100%.
This is calculated by:
(Number of customers retained in a time period / Number of customers at the beginning of that period) X 100 = Customer Retention Rate
For example, if you started a month with 1,000 customers and 900 came back the next month, your CRR would be 0.9, or 90%.
A high retention rate means that you’re keeping your existing customer base happy — which is great! However, this metric doesn’t show how many new customers are coming into your business. It also doesn’t tell you whether those retained customers are growing their spend with you over time.
Retention rates are usually calculated using monthly cohorts so that you can see how your business is doing on an ongoing basis and make changes as needed. For example, if you calculate your CRR for January, you will be able to see what percentage of your customers in January are still customers in February. You can then repeat this process for each month to see if your numbers are improving or getting worse.
Customer Churn Rate (CCR), on the other hand, calculates the percentage of customers who left your company during a given period. It is calculated by dividing the number of customers who left in a given period by the total number of customers at the beginning of that period and multiplying by 100%.
This is calculated by:
(Number of customers who left in a given period / Number of customers at the beginning of that period) X 100
= Customer Churn Rate
For example, if you started a month with 1,000 customers and 100 left, your CCR would be 10%, or 100/1000 = .10.
A high churn rate means that you’re losing a lot of customers — and, again, this is not good news. It can mean that you’re not satisfying your customers or that they’re finding better deals elsewhere.
A churn rate should be calculated on a regular basis, such as monthly or quarterly, so you can track your progress and see if your efforts to reduce churn are working.
Customer retention strategies can be as simple as having a great product. But, it usually takes more than that.
In order to build relationships and keep customers coming back for more, brands must offer a unique experience and personalize their interactions.
Here are some customer retention examples from around the web:
Getting customers to love your brand is a great way to get them to come back. Your customers will be more loyal to your brand, mission, and vision when they feel connected to it. You can engage customers through your brand story by communicating your values clearly.
Bombas is an example of a brand that shares its story to build brand loyalty. The company openly shares their philanthropic mission, which includes donating a pair of socks for every pair they sell.
Keeping your customers in the loop about changes at your company is a must-do when it comes to retention. It shows that you care about them and want them to be a part of the journey. Send out an email, post on social media, or write a blog post announcing changes and thanking customers for their support.
Buffer is great at this, often sharing updates about their product, changes in the team, and more. Buffer’s Inside Buffer blog talks about operations and changes within the company to make customers feel they are part of the brand.
When customers are educated about how your product works, they’re more likely to use it. Helping them understand the basics (and beyond) of how your product works makes them more likely to be retained. You can share tips, tutorials, and how-to’s on your website, social media, and blog.
Canva does an amazing job of this through Canva’s Design School. They have a variety of tutorials and articles that help users learn how to use the product as well as design tips.
Customers who are happy with your product might be interested in similar products. Suggesting related products is a great way to keep customers around and increase the chances that they’ll make a purchase. You can do this through product recommendations on your website, in your app, or even in an email.
Amazon is a pro at this. They often suggest products to customers that are related to what they’ve just been looking at. This increases the chances that the customer will make a purchase.
Customer Acquisition Vs Retention
Customer acquisition and customer retention are two very different areas of business. While they may seem like the same thing, they actually entail a variety of different strategies and tactics to find and keep customers.
Here are the differences between customer acquisition vs retention:
The main difference between acquisition and retention is that acquisition is more expensive. This is because you are trying to find customers who may not be familiar with your product or brand. Retention, on the other hand, is cheaper because you are working with customers who have already bought from you.
Since retention is cheaper, it also has a better ROI. This is because you are getting more out of your current customers than you would if you were only focusing on acquisition.
When customers are happy with your product, they are more likely to talk about it with their friends and family. This is known as word-of-mouth marketing, and it can be very powerful. Happy customers are more likely to become brand ambassadors and promote your product to others.
PPC campaigns can play a significant role in customer acquisition and retention. However, it’s important to make sure that your campaigns are aligned with your overall business goals. You can leverage PPC Signal’s data to help improve and prioritize your strategy from customer acquisition and retention.
PPC Signal is an AI powered insights platform that provides data and analysis for PPC campaigns. This data can help you to improve your customer acquisition and retention strategies.
For example, you are running multiple campaigns in your account it’s hard to manage all the necessary metrics and figure out what is working and what needs to be improved. With PPC Signal, you can quickly see how each campaign is contributing to your overall acquisition and retention goals.
You can track various metrics, like clicks or conversions. Clicks can be valuable data points to track when measuring the success of your advertising campaigns. You may also get additional insights by selecting the clicks from the metrics and clicking on them.
When you click on the explore button, you will receive additional information and anomaly the oddity in your click data. From the screenshot above the tool has detected that anomaly. This implies that you’re getting clicks but not obtaining the conversions you require, which indicates you need to make adjustments in your advertising. You can also access detailed information about your data by looking at the graphical representation.
PPC Signal also allows you to analyze the data in tabular form.
This data can be helpful in determining which campaigns are more successful and require more attention. You can also use this data to determine whether your strategies are working effectively.
There are various customer acquisition metrics that can be used to measure customer acquisition. The most common is the LTV-CAC ratio, which compares the lifetime value (LTV) of a customer with how much it costs to acquire that customer (CAC). Another common metric is the CPA or cost per acquisition. This metric measures how much it costs in marketing expenses to acquire one new customer.
Several metrics can be used to measure customer retention, but the most important one is probably your Customer Retention Rate. Your Customer Retention Rate is a measure of how many customers you keep, compared to how many you started with.
Just as the customer is king in your business, customer acquisition vs retention is the key to achieving your goals.
Retention is a vital part of the equation because it keeps customers coming back, but if you don’t have any way to acquire new ones, you’ll never be able to grow.
Customer acquisition and retention often go hand in hand, and one is not necessarily more important or valuable than the other. The main takeaway here is to understand the role that each plays in helping your business reach its goals, and to make sure you’re considering both when designing your marketing strategy.
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