Be it a start-up or a well settled online business both have one main question when it comes to growing their business– what is important; acquiring new customers or retaining the existing ones? Well, this can be a little tricky because both are important. Where you need new customers to grow, you also need your existing ones to be loyal. But the bigger question is which of the two is more important and why? This is a no closure debate, where every customer will have their own reason to support the either.
Well, today the companies need both acquisition & retention of customers to grow their business. If you want to sore high you need to add more customers to the existing ones, but you also need to be sure that your existing customers are happy and would come back to you when they need your services or products. If you don’t have new customers you cannot expect to see your business growing and in return, you will have no customers to retain. In order to grow and sustain in the market, one needs to have a mix of both. This can get tricky at times. So let’s understand each individually.
Importance of Customer Acquisition
Increasing the customer database is more important because it is the best way to increase your sales and the shortest way to achieve your short-term goals like getting more profits. Getting more customers will always be profitable and also spread the word around. But you also need to be a little careful to retain the existing customers too as it can be more beneficial at times than acquiring new ones. You can use some creative marketing strategies to attract more customers and get more benefits.
Importance of Customer Retention
If you leave aside the profits and want to see where you are as a company and how many of your customers rely on you then you must see the stats of your customer retention. There has been an immense growth in those companies who have focused more on retaining their existing customers.
The More Customers You are Able to Retain The More New Customers You will be Able to Grab.
As far as revenue is concerned retaining customers is highly important for long-term growth. It is far much cheaper to maintain existing customers than acquiring new ones.
Why Focus on Retaining Existing Customers than Acquiring new ones?
Selling your products or services to registered customers is much easier than selling them to the prospective ones.
A recent survey showed the difference between the two:
- Customer acquisition is 5 times more expensive than retaining the existing ones.
- 44% of companies focus more on customer acquisition while 18% focus on retaining their existing customers.
- 89% of companies believe that customer’s experience is what makes enhances their retention chances and increases their loyalty towards them.
- Selling to the same customer fetches 60-70 % more positive results while selling to new ones gets you a success rate of 5-20% only.
- If you increase customer retention even by 5% you are likely to get profits by 25-95%.
How to double your efforts to retain existing customers?
#1. Use Customer Data Base
For any business, existing customers are their most precious assets. There are many reasons for them being so important because you can get a detailed report of their activities such as
- How did the customers learn about you?
- When did they register with your store?
- What did they buy & when?
- What has been their highest value spent?
- What kind of products they buy?
- How often do they visit your store?
- Are they fond of buying online or offline?
- Do they use the offers you share with them?
All this information is vital, in retaining them. As a company, you can use this to your benefit and plan marketing activities accordingly. Let’s say you have a new range of products in make-up, so you can see the analysis of the same and see which customers have been frequent buyers of make-up and of what range. Based on this you can send e-mailers or offers to them that will entice them and bring them back as active customers.
#2. Lessen Your Expenses
Now you know that acquiring a new customer is 5 times more expensive and is one of the biggest reasons why a business should focus on retaining the old and existing customers. Why so much difference in cost is because to acquire new customers you will have to focus on attracting them by new offers, or by getting data of new and prospective customers through agencies, etc.
But retention is much cheaper and easier. Here you don’t need to pay to agencies for new data nor do you have to spend top dollars on ad campaigns. You just need to study your data and plan your offers accordingly. This way you get far better results at much lesser expense than for acquiring new ones. With retention, you can double your revenues with little investment.
The last Bit
The debate on retention and acquisition will never end. People and companies will always have their choices and difference of opinion. What is important is to balance between the two. Businesses need to focus on both to excel in their field but the efforts and money spent should be done after reconsidering every point. A plan for every action is a must.
Knowing the difference and importance of customer acquisition and customer retention is important. Both have their importance and neither can be ignored. But what is more important and why is the bigger question. You cannot focus entirely on acquiring new customers while forgetting your existing ones, and then you cannot keep focusing on retaining new customers, as you need to increase your database too. They both are interlinked and have great importance for every business.
Contributed by: http://www.MobiCommerce.net