Customer Acquisition or Retention: what can you improve in 2023?
What is customer acquisition and customer retention?
Customer acquisition refers to the number of new customers you get while retention refers to keeping your existing customers.
Many companies spend a lot of time on acquisition, because getting more customers guarantees the solidity of a business and future revenue. But retention is just as important, if not more so. In case of trouble, loyal customers will be able to keep on being solicited at a lower cost to renew their purchases.
So how can you run two related acquisition and retention strategies at the same time in 2023?
1- Customer acquisition is related to marketing strategy
How is customer acquisition measured ?
The cost of acquisition refers to the cost of acquiring a new customer, so you have to divide the cost of an advertising campaign by the number of new customers acquired during the period in which the advertisement was broadcast to understand what the cost ofacquisition is.
It’s called « CAC ».
The CAC amount is very important for brands because it allows you to understand how much you have to spend to acquire a customer, if it is easy or not to obtain plus on which media you have to do it to obtain interesting results.
Indeed, not all media will necessarily yield the same CAC. It is by mixing your different levers that you will succeed in building an effective marketing strategy!
Assess the effectiveness of your acquisition strategy
At the moment, you have a growth strategy in place that aims to increase your sales. First of all, ask yourself if the time and money you've invested are really helping you reach your goals in the long run:
- Is your content strategy really focused on keywords that are relevant to your business and that allow you to rank effectively against your competitors?
Do you have the right analysis tools to understand your performance or the content opportunities you need to exploit to better position yourself in the SERP?
- Is your social media strategy inline with your branding, are you publishing enough content and does your community like it? Do you notice any engagement from your followers, questions, remarks that would tend to show that the content you publish is qualitative and answers the followers' questions ?
- Is your SEA strategy relevant? Have you chosen the best media to promote your products and services? Do you know how to analyze your ads? Do you understand why client do not place orders ?
- Do you have a data acquisition strategy in place, such as emails? Do you know how to activate these e-mails, i.e. how to get a response from the recipients? Your CRM should contain a series of data that help you acquire new customers. Having an email is not an end in itself, you still need to activate that contact by creating content that catches the attention and triggers an action.
Before moving to a corrective action, you need to understand with data and with customer feedbacks if you have the possibility to collect them. What made current customers decide to buy?
Are these arguments different from the value proposition you initially put forward to prospects? If you have sales meetings with potential new customers, do you have feedback on what they want from a provider or supplier like you, for example?
Initial market research can help you build your acquisition, but you need a reality check. You also need to determine if the error is in your offering or in the way you market it. The main difficulties in acquisition lie in:
- A brand image that is poorly understood, poorlyexplained or poorly aligned with what the company really wants to offer themarket
- A value proposition that is weak, not sufficientlydifferentiated from the competition, or does not respond to the market
- An offering that does not meet the market/competitor that meets it better or has met it faster and more effectively
- A non-existent market
Losing a customer to a competitor is always hard to live with, but it is an opportunity to improve your acquisition: what did your competitor do better than you and how can you build on that success?
Take the time to analyze this data and understand it.
Correct your acquisition strategy
Once you've audited your strategy, and you've determined where your roadmap is ineffective:
- Cut budget spending on levers that have proven to be ineffective
Analyze your ads and cut the ones that are not making money or that you suspect are not making money
- If you still have doubts about the effectiveness of certain levers, it's because you haven't managed to understand your real performance. You must therefore correct the tracking ofyour performance
- Stop ineffective partnerships that don't pay off. It may be difficult to stop a business relationship that is going well, but you may be spending time and money with partners that are not bringing you the contacts and deals you want.
Take the time to end these relationships by explaining that you want to focus on other strategies but that the door is not closed to future collaboration.
- Write a real activation strategy for the sleepy leads in your CRM: what content will you use to get them interested, to make them click and make an appointment with you?
Implement an effective acquisition strategy
Since 2018, the acquisition on paid levers such as Facebook are made complex by the algorithm. At that time, CPMs, i.e. costs per 1000 displays, have skyrocketed: companies and brands had to pay more than before to display the ad 1000 times.
Logically, paying more to be seen is also paying more to be clicked, then to get a visit on the site and finally to pay. Apart from the algorithmic whims, there is simply the fact of undergoing a bidding system that is the same on Google.
Many companies are still struggling to exist on these paid levers ordo not have the internal resources to really drive these levers. In short, paid levers are difficult to implement in a viable way to activate customer acquisition and retention.
2- Customer retention is related to customer experience
How is retention measured ?
Customer retention is measured either by calculating whether a customer continues to engage with your brand orwhether they disengage.
The Customer Retention Rate(CRR) is equal to the number of customers at the end of a period minus new customers during the same period, multiplied by 100.The Customer Churn Rate (CCR) is calculated by dividing the number of customers lost in a period by the number of customers at the beginning of the period, x 100.
Very often, businesses focus on this indicator because the Churn is a huge concern.
When this figure is high, they understand that they really need to do something to keep their customers. Calculating the lifetime value of a customer also allows you to understand how retention plays a role in brand’s revenue.
Assess the efficiency of your retention strategy
You currently have a customer retention strategy:
- For example, with coupon codes :they can build loyalty but they also strenghten your marketing strategy by making the tracking easier. With coupon code you can understand where your customers are coming from (which media) and what was the most efficient message.
Companies that do not offer coupon often struggling with complex tagging plan, and that’s surely what you don’t want if you’re a small company.
- Or commercial or VIP operations that make existing customers feel special and redeem
- Or via a gamification strategy: customers can accumulate points based on their purchases and these points entitle them to privileges or new offers
Again, you need to understand if the way you are trying to retain your customers is effective:
- Why haven't customers made a new purchase despite an attractive sales offer?
- Are customers being asked enough to re-purchase, but still reasonably?
- What are competitors doing, how do you perceive their loyalty strategy?
You can also ask your customers directly to understand how to retain them.
Fixing your retention strategy
Once you understand what wasn't working in your strategy:
- Cut the retention paths that aren't working or not working enough
- Test new tools: there are many tools to retain a customer base
- Change your revenue approach
Implementing an effective retention strategy
Here again, the possibility of implementing strategies with paid levers is possible.
Especially since it is "only" entering the list of customers on Facebook and Google to activate ads to directly qualified audiences.
The advantage: talk to existing customers, recognize the advertising and can be convinced more easily.
The disadvantage: feeding the platforms with data that enriches them, a set of data from which one rarely gets a real agreement to share from the people concerned.
Uploading customer lists to the GAFA's audience storage is therefore limiting in terms of RGPD. On paper, the promise of addressing directly people who know the company and will decide more quickly (thus limiting the cost of advertising) is still interesting ... but your list must be very large to avoid exploding your marketing expenses.
Consumer loyalty must therefore be achieved through other levers than "passive" advertising; on the contrary, it is necessary to create new experiences, to make existing customers want to choose the brand.
As you can see, the two strategies are important : acquisition and retention must be a success, and only small things can be done to improve CAC and the Churn rate. Cut the inefficient, spend more on what works, choose wisely your tools and partners !