In most cases, business owners must strike a careful balance between client acquisition and client retention. Client acquisition refers to activities that help you attract new customers to the business, like marketing, advertising, and sales. Client retention is somewhat more nuanced, since it's focused on making sure your current clients remain subscribed or loyal to your brand. It often includes strategies like customer loyalty programs and better customer service.

Each area requires investment and attention if you want your business to consistently grow, but how should you balance your budget between these two areas?

The Big Picture: Client Acquisition Versus Client Retention

Let's start by taking a look at the big picture. For most businesses, client retention is less expensive on a per-customer basis than client acquisition. Why is this the case?

You can compare this to driving a motor vehicle. It takes far more energy to accelerate a vehicle from a resting position of 0 mph to a top speed of 80 mph than it does to take a vehicle cruising at 80 mph and maintain that speed.

When you win a new customer for your brand, you've secured their attention, their interest, and in most cases, their positive opinion of your brand. Once you have those factors in place, keeping them active is a simple matter. But taking someone completely unaware of your brand and turning them into a paying customer is a much more intensive process.

That said, you can't afford to ignore client acquisition. No matter how good your client retention strategy is, you're still going to experience churn. If you want to grow, or at least avoid active customer loss, you'll need a steady stream of new customers coming to your business.

Client Retention Strategies

There are several strategies you can use to retain clients, including:

  • Add new products or features. Introduce new products or new features to keep your customers interested in your brand.
  • Improve customer service and communication. Make sure each customer has a positive experience, and make up for any bad experiences. Good communication is essential to keeping your customers invested in your brand.
  • Measure and improve customer satisfaction. Keep tabs on how your customers feel about your brand, and work to improve your areas of weakness.

Client Acquisition Strategies

By contrast, client acquisition strategies include things like:

  • Marketing. Brand awareness and reputation are critical in introducing new people to your company.
  • Advertising. You'll often need the support of paid advertising, which makes your brand more visible and calls people to action.
  • Sales and customer referrals. An active sales team, in combination with a customer referral program, can bring even more people to your brand.

The Importance of Measurement and Analysis

Even though a high-level overview implies that customer retention is more important than customer acquisition, the exact payouts will vary from business to business. It's therefore important to know the relative return on investment (ROI) you're getting from each strategy in your overall campaigns.

How much is your company spending on customer retention strategies? And how much money do you make from a customer who stays loyal to your brand? Conversely, how much is your company spending on customer acquisition strategies? What percentage of your income is coming from new customers?

Only by measuring and analyzing your own strategies and results will you be able to find the right balance for your brand.

Key Variables to Consider

When plotting the balance between your customer acquisition and customer retention strategies, you'll also need to consider things like:

  • The age of your business. New businesses don't have many active paying customers. Therefore, customer acquisition is much more important to them.
  • Your unique business model. Your industry and your goals as a business will also factor in heavily to your customer acquisition and retention balance. For example, software as a service (SaaS) companies depend heavily on customer retention, since they're able to collect monthly revenue for ongoing paid subscribers. Some companies are interested in accelerated growth, while others are content with a fixed-size customer base.
  • Your target demographics. Look at your target demographics through the lens of customer personas. Are these customers who remain loyal to brands when they have a good experience? Do they continue to spend lots of money with their favorite brands? How valuable are they, and how would they respond to various strategies you implement for your company?

Adjusting Over Time

Chances are, you won't be able to strike the perfect balance between customer acquisition and retention immediately; instead, it's something you're going to have to adjust over time. The more you learn about the strategies you execute, and the more value you see from your previous investments, the more accurately you'll be able to allocate your spending and strategic focus in the future.