Attribution

Customer acquisition vs retention: which is best for growth in 2024?  

2nd January 2024
Carly Bell

In an environment where there is a relentless focus on revenue and growth for many brands, there is a perennial discussion on whether the focus should be on the acquisition or the retention of customers to meet the goal. 

So, where should your focus be in 2024? In a lot of ways, it is a misleading question, because as we will see in our analysis, acquisition and retention are two sides of the same equation! There isn’t an ‘outright’ best between the two – they both matter – and it is more about how you get the mix and balance right between them.  

Here we consider: 

Customer acquisition vs retention – some context  

A deeper dive on customer acquisition 

A deeper dive into customer retention 

Boosting your customer acquisition with Corvidae 

What is customer acquisition? 

Customer acquisition is the process of identifying, targeting and persuading prospects to become new customers for your brand. It covers the entire journey from the initial touchpoint with the prospect right through to purchase and typically includes a combination of sales and marketing activity designed to engage, nurture and convert to sale.    

What is customer retention? 

Customer retention, on the other hand, is concerned with maintaining and developing the relationship with customers as they come on board. The focus here is to engender loyalty by delivering a high-quality product and customer experience that locks your customers in. To help you gain repeat business and also potentially upsell within the existing relationship. 

What are the core differences? 

Before we dive into the differences between customer acquisition and retention, it is worth pointing out that the two share some core similarities including the fact that both:  

  • need careful strategic planning to ensure customers are educated, convinced and engaged right across the customer journey. 
  • are potential drivers of revenue, growth and ROI if managed effectively. 
  • can’t work in isolation from each other. Or in isolation from the other types of key marketing activities you would expect in an integrated approach. Like branding for example – which provides context and legitimacy to customers. 

So, so much for the similarities. How do acquisition and retention activities differ from each other? The table below lays them out as a direct comparison of several key variables.

 ACQUISITION RETENTION 
Cost Acquisition is a more expensive activity. One of the key elements of the mix here is marketing which can be a costly business, particularly as CPAs have increased significantly in recent times The existing relationship with the customer makes it easier to reach out and manage the relationships with them through existing channels 
Resources Is more resource intensive as it takes more time to find and engage prospects and convince what is effectively a ‘cold’ audience to consider your brand Fewer resources are typically required to retain customers who are already predisposed to your brand 
Audience receptivity No existing relationship with your brand (except potentially from some brand and awareness marketing) makes them less receptive to your communication Audience has an existing relationship with your brand and is more trusting and receptive to your communications 
ROI Discrete ROI on acquisition activity can typically be lower due to the trial-and-error nature of activity and an arms-length relationship with prospects which means a lower ‘hit’ rate with this segment A wide variety of studies have shown that the probability of selling to existing customers significantly increases your chance of success to a probability of 60-70% 
Marketing focus Is on solving customer problems and proving a fit between your product and customer need The focus turns to ensuring you don’t lose customers to the competition by giving reasons to stay like loyalty benefits, discounts for renewal etc.  
Business focus  Marketing led Customer experience led 

A deeper dive on customer acquisition 

Here we take a closer look at some key aspects of customer acquisition.  

Why do businesses focus on acquisition? 

Here are just some of the reasons that marketers and businesses might choose to focus on acquisition: 

  • In response to pressure on revenue and growth – very often the kneejerk response of marketers, when the business is looking for revenue and growth, is to push the button on acquisition which is seen as having the potential to drive revenue quickly (which is not always the case). 
  • Acquisition grows the underlying customer base – which not only drives short-term revenue but also opens up the medium-term opportunity for increases in revenue through repeat purchases and upselling. 
  • A need to show quick wins – acquisition activity can enable you to show quick measurements of success. For example, ‘leads are up’, and ‘site visits have doubled’ versus retention efforts that can be less easy to quantify, and which happen over longer timeframes.   
  • Compensation structures dictate the focus – very often the way that sales and marketing teams are remunerated has a strong bias towards acquisition targets and goals.  
  • A direct response to competitive positioning – when sales and marketing teams are asked to respond to specific aspects of sales and marketing activity by competitors  
How do you calculate the cost of acquisition? 

How you choose to do this is going to differ depending on the depth of analysis you need but there are 2 key metrics in play here:  

  • CPA (Cost Per Acquisition) – CPA is a metric that enables marketers to measure and track the cost of acquiring a lead from marketing and campaign activity. Or to track the cost to influence your target customer to perform a specific action – such as a signup or an ebook download. So, it can include conversion analysis that might not necessarily include your customer buying something. 
  • CAC (Customer Acquisition Cost) – CAC is a metric that is one step on from that and enables you to quantify what you are spending – in total – to acquire a new customer for your product or service. 

You can find out how to calculate both in our article CAC vs CPA: How to calculate the cost of customer acquisition. as d

How can you boost customer acquisition? 

Here are 4 ways you can boost your customer acquisition activity right now.  

  1. Deploying effective attribution changes the game for you – The first prerequisite for optimising your customer acquisition activity is getting a clear view of the impact of all of your marketing activity. Right across your mix.  

    One of the biggest attribution challenges with analytics solutions like Google Analytics is their reliance on cookies which do a particularly poor job of attributing complex multi-channel, multi-device journeys.

    Look for a cookieless attribution solution that leverages AI and Machine Learning for a clearer attribution picture.  
  1. Stay ahead of market changes – advertisers are still feeling the lingering impact of IOS 14.5 in terms of huge hikes in CPAs and reduced targeting capability but you need to stay ahead of the impending removal of 3rd party cookies too.  
  1. Play your media cards away from the competition – staying away from the bottom end of the funnel and leveraging lower CPAs further up the funnel will make your acquisition budget stretch further 
  1. Don’t put all of your marketing eggs in one basket – so ensure that you are not only using a range of acquisition channels but that you also know what ones are working 

Need the details on this? You can find more in our complete guide to acquisition and there are also 7 customer acquisition strategies to try in 2024. 

A deeper dive into Customer retention 

Here we take a closer look at some key aspects of customer retention.  

Why do businesses focus on retention? 

Here are 5 reasons that companies choose to focus in on customer retention:  

  1. Existing customers are more receptive to sales – according to Hubspot a brand has a 60-70% of making sales to an existing customer. But this figure drops down to 20% when you are talking to non-customers. So existing customers are a soft landing in terms of adding to your revenue flows. 
  1. Builds a base to drive revenue – retaining a healthy base of core customers opens up new revenue opportunities that go beyond the initial sale to them in terms of cross-selling and upselling other products and services to the same customer. 
  • Happy customers will pay more – one of the key aspects that drives customer retention is good customer experience and research by PWC suggests that 86% of buyers are willing to pay more for a good customer experience. 
  • They will also tell their friends – Neilsen found that 9 out of 10 consumers trust referrals from friends and family over anything else and happy customers are more likely to refer your business and add to your revenues.  
  • All of this feeds into higher ROI – by, amongst other things, reducing your overall acquisition costs and contributing to higher lifetime revenue values per customer 
How do you calculate the cost of retention? 

Customer retention cost (CRC) puts a value on how much your brand or business had to outlay to keep a customer buying your products or services over a specific period of time.  

The line items included in this calculation are likely to include costs associated with:  

  • The delivery of customer service which will include items like customer service salaries 
  • Account management of the customer including onboarding and customer success activity
  • Technology costs or fee rentals for the technology platform you use to interact with customers
  • Providing incentives or loyalty rewards designed to support retention
  • Any training connected to customer experience

In practical terms, you can use a formula like this to make the calculation: 

     Customer Retention Cost = Total Retention Costs / Active Customers 

How can you boost customer retention? 

Here are 4 ways you can do this.  

  1. Meet customers on the channel they prefer – we live in an omni-channel world and customers will have individual preferences for one channel over another. The reality is that you need to be where they are and provide a consistent customer experience across every channel. 
  1. Provide an exceptional customer experience – customer experience right across the customer journey shapes the way they feel about your products and your brand. So focus on providing a high-quality experience from the point they come into contact with you.  
  1. Listen to what they have to say – the reality is that things sometimes go wrong, and very often you are judged not on the initial problem created for the customer but on what you do to sort that problem. An overwhelming 96% of customers indicated they are ready to leave a brand or company for bad customer service. So, feedback loops and taking positive action on customer feedback means everything from dealing with customer complaints to improving your products and customer processes. 
  1. Personalise the experience – according to Accenture 91% of consumers are more likely to shop with brands that offer them offers and recommendations that are personal to them. So, make it personal. 

Boosting your customer acquisition with Corvidae 

That is a lot of food for thought but where can you start on all of this in 2024? 

There are a number of changes in the market, including the looming death of 3rd party cookies, that are forcing marketers to re-assess their options around attribution for customer acquisition. Corvidae, our patented AI-driven attribution solution, is ideally placed to meet the challenges around acquisition in what is soon to be a cookieless world.   

It enables marketers to make the limitations imposed by cookie-reliant solutions like GA and Adobe a thing of the past. And ensures they achieve new levels of marketing performance by:  

  • enabling you to see the true impact of your marketing efforts right across cross-device, cross-channel customer journeys 
  • helping you to make better-informed budget decisions by reallocating spend, reducing CPA levels and increasing campaign ROAS 
  • removing the need for cookie-based tracking and using AI and Machine Learning to deliver an average of +95% predictive data accuracy 
  • breaking down the impact of AdTech data silos by completely rebuilding your broken marketing data 
  • being GDPR compliant ‘out of the box’ 

Need to learn more? Why not discuss your acquisition and attribution challenges with one of our experts today?  

REQUEST A DEMO

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