Customer acquisition vs. customer retention: Which to prioritize?

Customer acquisition vs. customer retention: Which to prioritize?

Which is more important to you: acquiring new customers or retaining the ones you already have? Customer acquisition is an essential part of growing any business. We all know that. But customer retention is also critically important if you run a subscription-based business or have repeat customers.

So, they are both important. But how do you know which to focus more energy on when forming your growth strategy? The answer is complicated, subjective, and involves a variety of variables such as customer acquisition cost, your long-term business goals, your business model, and so on.

To answer this question, we must dig into the topic and shed some light on how each tactic can benefit or hurt your business.

Which is the right strategy for you?

Because this is a complex topic with many things to consider, we need to unpack each approach and gain a better understanding of how each strategy impacts your business today, and how it will impact your business in the future. Let’s dig in.

Customer acquisition: The basics

Let’s start with the obvious. You can’t run a successful business without acquiring new customers. This is particularly true for nascent startups and small, growing businesses.

Securing your first few customers can seem like a monumental challenge when you first start a new business. You must build a brand reputation, but that is quite difficult without any customers. You can advertise, but potential customers will be hesitant to trust your brand if you don’t have any customers yet.

Often, a company’s first customers will be existing contacts of the business and its stakeholders. As your customer base grows and you increase your brand awareness (increasingly through the use of social media), customer acquisition becomes exponentially easier.

How you approach your customer acquisition sales strategy depends largely on your business model and goals. But it’s an essential and necessary part of growing a business. Learn more about developing the right sales strategy for your business.

Customer acquisition: Potential pitfalls

We all agree that to grow your business you need to acquire new customers. However, many companies make the mistake of devoting too many resources to customer acquisition, and not enough to customer retention.

If you acquire a new customer but do not take the appropriate steps to ensure they are successful using your product or service, you’re likely to lose them quickly. It’s key to provide a world-class customer experience from the beginning. This reduces customer churn and increases customer satisfaction and renewal rates.

Keep in mind customer acquisition cost. According to Invesp, it costs five to ten times more to acquire a new customer than to retain an existing one.

So, when you acquire a new customer, that’s your chance to solidify their trust in your ability to support them and make them successful. If you sign a new customer and then leave them to fend for themselves, you’ll have dissatisfied customers who will likely leave you for a competitor.

When a new customer comes on board, ensure that you deliver a high-quality onboarding and training program to ensure their success. And ultimately, focus on any tactic you can implement that will increase customer satisfaction. Learn tips for maintaining world-class customer satisfaction levels.

Customer retention: The basics

Customer retention is an incredibly important but often overlooked variable in the success or failure of a business. Retaining existing customers is not as difficult as it seems. It all boils down to delivering a world-class customer experience and delighting your customers.

Here are some basic tips for retaining existing customers:

  • Start out on the right foot by ensuring new customers have everything they need to be successful from Day 1.
  • Produce content that solves common problems for your customer base. This will build trust and position you as an authority in your space.
  • Reach out to customers on a routine basis to check in and see how things are going, what they need that they don’t currently have, etc.
  • Keep customers informed of new developments, such as bug fixes, new products, personnel changes, forward-looking plans, etc.
  • Create a customer advisory board to give your customers a voice in the direction and evolution of your company.
  • Consistently calculate customer retention rates and analyze your progress over time to ensure you’re moving the needle in the right direction.
  • Focus on solving customer support problems on the first attempt to minimize the effort they must devote to resolving an issue. A great way to do this is by using dedicated help desk groups.

That’s just a small list of the many things you can do to keep customers satisfied and loyal, so they stick around longer and provide a reliable, recurring revenue source. Learn more about effective customer retention strategies.

Customer retention: Benefits, not pitfalls

There are really no drawbacks to focusing on customer retention. And there are loads of statistics that back this up. For example:

Think about this: would you rather have 40 new clients each year that leave after that year, or 20 clients that stick with you for decades? The answer seems fairly obvious. New customers require way more administration and eat up more resources. Plus, they don’t provide any type of reliable revenue.

On the other hand, satisfied, loyal customers who stick with you over the long haul give you peace of mind and allow you to make more accurate revenue predictions. Plus, you can develop and nurture closer relationships with customers to build trust, which ensures they stay satisfied and loyal over the long term.

The future of successful business relies on maintaining high levels of customer satisfaction. And doing so results in higher levels of customer retention, creates brand advocates, and does wonders for your brand reputation management efforts.


So, what’s the bottom line here? Should you focus more on customer acquisition or customer retention to grow your business and maintain a competitive edge?

New businesses need to focus on customer acquisition to build a customer base. But once a new customer is acquired, customer retention becomes incredibly important.

Once you build a foundation of loyal, satisfied customers, that news will spread by word of mouth and prospects will start to look for you. Solidify yourself as a leader and authority in your space and consumers will seek you out.

Corporate Visions reports that around 80% of companies spend more than 70% of their [marketing] budget on demand generation efforts and less than 30% on customer retention initiatives.

I recommend turning that upside down and spending at least 50% of your marketing budget on tactics to retain customers. It’s the best long-term business growth strategy in nearly every case.

Do you have insights or anecdotes you’d like to share with our readers? Please post them in the comments section below!

Try Agile CRM for FREE!
FREE for 10 Users. No credit card required.

No Comments

Leave a Comment

Tell us what you think. To comment, please fill in the required fields marked with an asterisk (*). Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.