When faced with the decision of customer acquisition vs customer retention marketing, small business owners can often opt to focus on acquiring new customers. That’s not always the right move, says John Addessi, who is a business advisor for the Kansas Small Business Development Center. “Acquisition is sexier to them. But it's so much more expensive,” says Addessi, who is also an adjunct instructor at Johnson County Community College in Overland Park, Kansas. “The research says it’s five to six times more expensive to find a new client than it is to reactivate an old client.”
In fact, there shouldn’t be an “either/or” decision when it comes to acquisition vs retention. “They both go hand-in-hand,” says Ramon Ray, a small business expert and speaker, who founded the site Zone of Genius to help small business owners lead fulfilling lives. Customer retention and customer acquisition, says Ray, are key to a healthy, growing business.
After all, a business can depend on customers and clients to grow and succeed, so it should be considered a priority to surprise and delight existing clients, while also continually looking to acquire new clients. “Why are we in business?” Ray asks. “I’ve got two kids and a wife, so I’m speaking very personally,” he says. “We’re in business to live a better life.”
To help business leaders understand the importance of client retention and client acquisition, Ray and Addessi shared the following insights.
How Customer Acquisition Marketing Works
Customer acquisition marketing aims to gain new customers. To expand on that, Ray says that marketing acquisition is about generating awareness, bringing people into the funnel and connecting with people the business has never connected with before. “You’re not necessarily trying to delight or keep or nurture what you already have,” he says.
The benefit of acquisition marketing may seem simple and obvious, but it’s nonetheless critical: to maintain and hopefully grow your business. In doing so, you can make up for customer attrition—a common occurrence that Ray says business leaders often overlook. Customers may move to a new area, they may become dissatisfied with your business, they may find a better price elsewhere or they may no longer need your service. “That’s why it’s important to do acquisition, because attrition happens,” says Ray.
In addition, he says, customer acquisition campaigns can help fill your pipeline with potential customers by maintaining an audience of people who may one day need your service, even if they’re not ready to buy today. By marketing to new potential customers, your business can stay top of mind.
Small businesses use an array of techniques for acquisition marketing. Advertising on social media is one tool that can be a go-to for businesses of all sizes. Webinars are another popular way to reach new audiences and generate leads. And hiring influencers or micro-influencers can also be effective. Ray, who does a lot of public speaking, also encourages business leaders to connect with their local chamber of commerce about speaking opportunities.
The cost to acquire a customer can vary depending on the type of marketing at play. Speaking at a community event, for example, may not cost anything but time. Whereas sponsoring an event, producing a webinar or launching an advertising campaign can be costly. That’s why business leaders should consider being smart about it, says Ray, and work to understand who their customer is, where their customer is, what the customer’s pain point is and how their business or service can solve it. If the acquisition marketing campaign reaches the right people at the right time, he says, it can be money well spent.
“Oftentimes, we talk about expenses or not spending money,” says Ray. “But I would like to shift the mindset. Why not spend money on what you know works?”
How Customer Retention Marketing Works
Customer retention marketing aims to keep current customers happy and engaged. One important aspect of that revolves around good customer service. Ray says he was recently staying at a hotel and he got lost on the property. An employee noticed, and offered him assistance. His customer loyalty was sealed. “I’ll never forget that hotel,” he says.
While that experience was a high-touch example, Ray says that one customer retention benefit is that the marketing can be scaled with relative ease, and it doesn’t have to be costly. A business can send customers cards on their birthdays or anniversaries, as well as holiday gifts and thank you notes; in addition, a business can send customers surveys to ask for feedback, and then act on that feedback.
Another method that can help with increasing customer retention is providing customer education content through email and social media. Addessi says that content marketing can offer helpful advice to customers, and not be a sales pitch. “I don't want you to try to sell, I want you to inform and educate, entertain, inspire,” he says. “If they try to sell in an email, they won't. And if they just are like a friendly neighbor in that email, then they will sell.”
He gives the example of an email that a massage therapist could send. It could offer an array of wellness insights, such as office furnishing recommendations that help with lumbar support and circulation; nutrition and hydration advice; tips on stretching. “The acronym I’m pounding into people all the time is ‘what’s in it for me,” or WIIFM,” he says. “If they can share something that’s of use to the customer, they will make sales.”
The benefits of customer retention can be substantial. In fact, retention of customers can lead to acquisition, says Addessi: when customers love a company, they’re more likely to refer their friends, who then become new customers.
Boost Engagement With Customer Acquisition and Retention Strategies
The attention, focus and financial investment that each business owner puts into their customer acquisitionvs retention strategies can depend on many variables, including the size of the business and the marketing budget.
A smaller business, for example, may rely on social media marketing for its customer acquisition strategy. And for its customer retention strategy, the team might focus on providing stellar customer service year-round, sending out “thank you” cards via an automated system to its customers annually, and distributing a monthly or quarterly newsletter with helpful tips and engaging people through social media.
Whereas, a larger business with a growth mindset may work with a marketing team to acquire customers via various advertising campaigns, both traditional and digital. And for customer retention, that company might have an employee or even an entire department dedicated to engaging current customers, whether it’s through gifts, notes, recognition, education or all of the above.
Whatever the approach, says Ray, and whatever the size of the business, with both strategies in place, success can be within reach.
“We are always going to have challenges in our market,” he says. “The business that keeps maniacally focused on its customers, as well as on solid customer acquisition, they are going to thrive and have more success than those who don’t.”
A version of this article was originally published on November 21, 2019.
Photo: Getty Images
