customer retention and acquisition

Acquisition Fever or Retention Fix? Decoding the DNA of Business Success

Customer acquisition carries a hefty price tag, sometimes up to 25 times more expensive than retaining existing customers. 

It’s common knowledge, supported by many studies, that customer acquisition—the process of attracting new consumers—is more expensive than customer retention—fostering client loyalty, repeat buying, and cross-selling. However, many businesses tend to focus on acquisition and neglect fostering customer loyalty, severely impacting their bottom line. 

B2B companies, for example, when surveyed about their focus over the past five years when it came to customer nurturing, only 33% noted their investment in customer retention efforts, according to a 2024 global study by SaaS provider SugarCRM.

Other surveys also showed that most companies tend to center around acquisition over retention. Roughly 44% of businesses said they focused on acquisition and only 18% said retention was a priority for them. Agency clients reported a similar gap, with 58% focusing on acquisition, and only 12% focusing on retention.

Do Intangible Services Have Higher Retention Rates?

It’s important to note acquisition versus retention percentages vary greatly according to industry, business size, and strategy. For example, German research center, Statista, noted that media and professional services industries tend to have a remarkably high retention rate of 84%, mostly due to the intangible nature of business.

Similarly, Insurance, IT services, and telecom follow closely with retention rates of 83%, 81%, and 75%, respectively.

Banks tend to also have high retention rates, at around 75%; however, given the nature of the sector, most users tend not to switch banks. One study even shows the average customer lifespan with a bank at 17 years.

The Strategic Balance Between the Two

Both, acquisition and retention are essential for every business growth, regardless of scale. After all, you can’t retain clients you don’t have, nor will you be able to grow without acquiring new customers.

Moreover, acquisition is an integral part of launching new products, entering new markets, or diversification.

That said, building brand loyalty and retention needs to be an equal priority and an integral part of your growth strategy. Besides acquisition being more expensive than retention, research shows a 5% increase in customer retention can boost profits anywhere from 25% up to 95%. 

Furthermore, a report by customer loyalty software provider, Loyalty Lion, shows that roughly 68% of new business comes from existing customers.

When companies focus on retention, including upselling and repeat purchases, they can increase their customer lifetime value (CLV).

“Loyal customers spend more, become brand advocates, and are much less likely to succumb to the overtures of competitors,” Loyalty Lion noted in its research.

Grow Smart, Not Just Big

Customer retention and acquisition are both entire processes. Commonly, a potential customer will view your advertisement, your website, download your case study, and read about your products and services several times before deciding to buy. 

Maintaining a relationship and ensuring a repeat purchase, entails following with content that encourages repeat-buying, loyalty programs, customer support follow-up, and well-designed feedback loops.

While the length of each differs from one industry to another, the main concept is the same. 

The bottom line, acquiring new customers adds fuel to your growth engine, and neglecting existing relationships risks a costly fuel leak. By investing in both effective acquisition strategies and nurturing programs that foster loyalty, your business can build a sustainable customer base that drives long-term success.

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