Don’t Spend Five Times More on Customer Acquisition, Focus on Customer Retention


Dwayne CharringtonCustomer Service Expert at ProProfs

Tuesday, October 8, 2019

Did you know that it’s more expensive to acquire a new customer than to retain existing ones? A company, new or old, big or small, finds success when it manages to acquire a large database of dedicated customers.

Article 5 Minutes
Don’t Spend Five Times More on Customer Acquisition, Focus on Customer Retention

Customer delight is a key strategy by which a company can retain not only its customers, but also acquire new ones. However, customer retention is a strategic tool that every company must adopt for customer success and business growth.

What is customer retention?

As the term implies, customer retention is the ability to retain customers long term, or for a specified period. It refers to the actions that a company takes to ensure it reduces the number of customer defections. Customer retention begins with the first interaction the customer has with the brand and it continues throughout the survival of the relationship.

One of the customer retention strategies that Costco, Amazon and others have adopted is the use of exclusive membership offers. These brands offer additional benefit to members at no extra cost. Customers prefer availing membership offers and in return, the company retains its customers.

Often, there’s an argument to be had on the benefits of customer retention versus customer acquisition. While some experts believe that customer retention is beneficial, others believe that companies must concentrate on customer acquisition. But it’s important to note that both are extremely important for business growth.

Customer acquisition vs. customer retention

What to prioritize? Customer retention or customer acquisition? Companies are often stuck when it comes to prioritizing one over the other. Understanding the difference between the two and their benefits to the company can help decide which is more important for you.

Retaining customers vs. new customers, which is a better choice?

Customer acquisition is the process of gaining a new customer, and customer retention is retaining the existing customers. Whilst acquisition focuses on attracting new customers by communicating with the target market, retention focuses on nurturing the relationship with current customers to ensure that they will continue to be loyal to the company or brand.

Amazon’s Prime Membership is an amazing example of customer retention. The online retail giant offers a lot of benefits to its prime members such as access to streaming music and videos, free delivery, membership offers, and much more. Amazon has managed to retain a large database of customers through improved services.

Customer acquisition focuses on

  • Identifying potential customers
  • Designing and implementing marketing strategies
  • Following up on possible sales
  • Measuring the success of marketing strategies

Customer retention focuses on

  • Customer service
  • Improving the quality of products and services
  • Creating a customer-friendly environment
  • Loyalty programs

Consider the Starbucks loyalty program. The Starbucks customer loyalty program makes customers eligible for free stuff, allowing them to retain customers with different incentives for different expenses.

Customer acquisition is mostly for new companies or companies with new products or services, whereas customer retention is a necessity for companies already established in the market.

Which out of the two is better mostly depends on how a company decides to balance its resources.

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Which customer retention strategies should you adopt?

The easiest way to retain your customer is to not lose them in the first place. The goal of a customer retention strategy is to adopt a program that ensures that the company retains as many customers as possible.

These strategies include the following.

A surprise motivates your customers

Offer a customer service or product surprise! Who doesn't like a surprise? You can either offer gifts or discounts or appreciate them when they least expect it. Not only will you be a step ahead in retaining them as a customer, but you’ll also get some honest feedback from them.

Consider if Hilton or another great hospitality brand offered to upgrade your room at no extra cost. Wouldn’t that surprise delight you?

Give your customers something to look forward to

To set customer expectations; you need to understand your customer better. The promise of a benefit is a great way to help retain customers. Amazon’s Black Friday sale is one amazing example of giving customers something to look forward to.

A relationship is built on trust

There are two parties in any relationship - your company and the customer. When you acquire a new customer, you give them an opportunity to trust you. Make sure your customer doesn’t lose their trust in you.

Seek help from automation

As the market and your customer base grows, it’s impossible to track your existing customers manually. Make use of a CRM integrated help desk ticketing system or customer support software to track your customers and also deal with customer-care-related issues.

Get support from KPIs

KPIs are the roadmaps that help you to visualize what the future holds. It can tell you what makes your customers happy or unhappy, and what direction you must take to retain them.

Some KPIs for effective customer retention include:

  • Response time: measuring how quickly you respond to a customer who shows interest in your product or service.
  • Conversion rate: measuring how many potential customers become paying customers. 
  • Funnel drop rate: measuring the number of potential customers who unsubscribe from your email list or disappear from your sales funnel.
  • Action per engagement: the behavioral pattern of potential customers that helps determine the number of times they need to be engaged before they take necessary action.

Leverage customer feedback

A feedback survey is a powerful tool that can help you understand what customers feel about your products and services and how you can improve on your offerings.

Frequent communication

Develop a communication calendar to keep in touch with your customers. Keeping your customers engaged through events, offers, and appreciation messages improve their level of trust and persuades them to come back to you.

Under-promise and over-deliver

Don’t make promises you can’t keep. Use the “under-promise and over-deliver” formula to retain your customers. You don’t lose anything by over-delivering, but you have a lot more to lose if you can’t keep your promise.

Many companies enter the market and fail to establish themselves as they fail to build a customer base. Growing your customer base is just as important as increasing your market share. There are several ways you can increase your market share but there are only two ways to grow your customer base; acquiring new customers and retaining old ones.

Further Reading

Dwayne Charrington

Dwayne Charrington is an expert in customer service and ongoing trends in the customer support industry. He conceptualizes and creates content for ProProfs Help Desk. He specializes in the customer support domain and has paramount experience in SaaS-based products. Several of his writings have been commended by top-notch publications. In his leisure time, he is busy with adventure sports and traveling.


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23/07/2021 Marcadisati
Thankyou for the wonderful post.