Customer Acquisition vs. Customer Retention
Building solid relationships with clients is extremely important for every business. Regardless of whether you are starting the sales process or near the finish line, having a solid bond of trust with your client is paramount.
But which strategy is most important, retaining existing clients, or acquiring new customers?
As you may have guessed, this is a trick question, as both are equally important and crucial for sustainability and growth. You must obtain clients first and then retain them by providing quality customer service, investing in the relationships, maintaining consistent communication and continue to offer value to the relationship.
Let's dig deeper into customer acquisition and retention and examine three reasons why retaining clients is just a bit more critical for your business.
What is customer acquisition?
Customer acquisition is the process of obtaining new clients for your business. It's the result of several networking strategies, meetings, calls, and emails from the brand awareness phase (presenting your brand) until the purchasing decision.
There are several ways to gain new customers, including marketing strategies and digital channels. But for any customer acquisition strategy to be effective, it must adapt to the customer's preferences, tastes, and habits.
What is customer retention?
Customer retention is the process of servicing your clients' current needs, as well as their future growth to ensure a successful engagement. It's a series of activities or strategies a business does to increase the number of current customers and increase the profitability of each one.
Metaphorically speaking, you could say that retention is like having a garden. Watering the plants and taking care of them every day resembles retaining customers so that they grow strong by your side.
Three reasons why retaining clients is so critical
Now that we've understood the concepts of acquiring and retaining customers, we can say both are equally important for your business. But why focus on maintaining? Let's examine three fundamental reasons.
1. Acquiring clients is more expensive.
Acquiring a new customer can cost five times more than keeping an existing one. When you acquire a new customer, there are several marketing and advertising strategies that you must implement that also increase your budget.
According to a Harvard Business Review article, increasing customer retention by 5% can boost profits from 25 - 95%. Retention offers a much higher ROI on advertising spend for specific business models—and is often much more cost-effective than its counterpart.
2. It's easier to sell products to existing clients.
According to Marketing Metrics, the probability of selling to an existing customer is 60 to 70%. On the other hand, the likelihood of selling to a new prospect is only 5 to 20%.
If you have an existing client, it's probably because you've invested in building a solid long-term relationship with them. In this case, your client knows and trusts you since they have already purchased your products or services. Therefore, it will be much easier to do it again, unlike a client who does not know your brand or portfolio.
3. You won't have to start from scratch.
When it comes to new clients, remember that you are starting from scratch. They have no previous experience with your brand or portfolio and may not trust your company simply because they know nothing about it. It takes time and money to contact them, create interest in your product or service, get to know them, and convince them to work with you. With current customers, you don't have to "fight" against barriers to obtain the deal.
It's also about having information. Suppose you're aware that a current customer will need your product or service every month. In that case, you can accurately manage resources for that customer and develop an effective plan. This way, you can make more informed decisions, such as where you should invest and the resources you need.
Always prioritize both: Customer Acquisition and Customer Retention
Every business should focus on customer acquisition and retention simultaneously because, as we mentioned before, ultimately, it's a process: for your business to grow, you must add new clients and invest in maintaining them.
Make sure to include both in your marketing strategies and execute them with the resources you have. You will likely enjoy long-lasting relationships with clients that trust you and, in that matter, steady growth and sustainability for your brand.
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Lilia Chica is a bilingual (Spanish and English) specialist in corporate communications, with a degree in Communications and Journalism and a post-graduate degree in Communications Management. She has more than eight (8) years of experience with different communication functions, marketing, and organizational culture strategies. Committed, creative, highly adaptable, and results-oriented.