Businesses focus on customer acquisition, and with good reason: New customers are needed to grow a business. But it’s more expensive to acquire a new customer – five times more than keeping a current customer. Increasingly, business owners are turning their attention to retention – how to turn those one-time customers into loyal customers, and how to gather the low-hanging fruit from an existing customer base. With limited time and resources, it begs the questions: What’s more important – acquiring new customers or retaining them? And how can the two strategies work hand-in-hand?
Bringing in New Customers
Getting customers to make that first purchase is essential – and the good news is multiple channels exist to promote products and services and reach new prospects. Target marketing is helpful when pursuing a new segment of customers. Target marketing involves identifying the “ideal customer,” how the product/service fits their needs and determining the best ways to market to them. During that first purchase, consumers want to be treated as a most valued customer. According to a Sales Force study, 81% of consumers are more likely to give repeat business to a company after they’ve had good service.
The 80-20 rule applies to customer retention, as well. Eighty percent of a company’s future revenue will come from 20% of its existing customers. That means established companies already have a loyal customer subset that will be responsive to outreach. However, unlike customer acquisition, retention campaigns take longer to see results since it relies more on loyalty, relationship building and multiple touchpoints to cultivate engagement. Results may also be more difficult to measure since the effect is cumulative. Repeat customers are more convertible (60-70% vs. 5-20% for a new prospect), and spend 33% more than new customers.
Focus on Both Customer Acquisition and Customer Retention
The reality is that businesses need both customer acquisition and retention, yet just 40% of companies have an equal focus on both. With acquisition, new customers create an opportunity to grow them into loyal, long-term customers. And a retention program helps businesses go beyond that first encounter to garner repeat business. A solid, yet low-cost retention strategy can make the costs and resources associated with customer acquisition worthwhile.
When Acquisition and Retention Intersect
When a customer is satisfied and loyal, customer acquisition and retention can come together. A study showed that satisfied customers tell nine other people about their positive experience. The new customers might become just as loyal, providing more opportunities for growth in the future.
Another way to ensure acquisition and retention strategies work well together is by having complementary programs. For example, BirthdayPak is a national, direct marketing platform with loyal and ideal customers for many high-end businesses. By participating in a customer acquisition program such as BirthdayPak, businesses receive continual exposure to and increased traffic from new customers. Prospects are sent gift cards to local participating businesses in their BirthdayPak, and often look to these restaurants and retailers first when celebrating their birthday. The gift card recipients are encouraged to visit the participating businesses throughout the year, through the BirthdayPak digital marketing platform.
Are you interested in partnering with BirthdayPak to promote your business? Please visit BirthdayPak.com or call 888-544-3872.