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Acquisition Is Good, Retention Is Better.



The digital marketplace is flooded with apps and websites. All offer something different and interesting to the users and all try to grab the attention of the same set of people. The cut-throat competition and continuously rising cost of acquisition raise a very important question - whether to follow a Customer Acquisition Strategy or Customer Retention Strategy.


Findings from various research conducted by renowned agencies and universities suggest that following a Customer Retention Strategy is always beneficial in the long run. Take a look:


  • Acquiring a new customer can cost five times more than retaining an existing customer

  • Existing customers are 50% more likely to try new products and spend 31% more compared to new customers

  • Increasing customer retention by 5% can increase profits from 25-95%

  • The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%


The same is exemplified by a real-life case study. In 2017, MobiKwik launched a loyalty initiative known as 'Supercash', by which users could earn reward points at all MobiKwik merchants. The initiative ensured that MobiKwik burnt less cash compared to the competition. Within weeks of its launch, MobiKwik witnessed:

  • 28 percent growth in transactions per user

  • 32 percent improvement in customer retention

  • 17 percent growth in the number of transactions per user


Going by the above data points, one would say that it is better to hold on to the users that have already been acquired and are using the service instead of focusing on adding more.


However, it is very difficult to draw a straight line and forsake a particular strategy for the other. Rather, that would not be advisable as well. Whether old or new, any organisation needs to balance both the strategies depending upon the organisation’s need at that particular time/stage.


A new company would need to have its scale tilted towards acquisition. If it follows a pure retention strategy then who would it retain. However, it should have the retention elements ready. A retention strategy should not be a reactive measure to fight churn. Instead, the retention elements should be in place from day one to find, engage and grow loyal customers from the first batch itself. This can be taken care by offering a brilliant Customer Experience (CX) through a well planned customer onboarding and handholding process.


Similarly, an established brand with enough traffic and customer base should focus more on Customer Engagement (CE) and Retention. It would be wise to spend the marketing dollars on nurturing the existing ones instead of finding new customers. Existing customers are a huge asset to the business, so it’s crucial to maintain a strong relationship with them by offering them extra in the form of Loyalty rewards. However, all businesses face churn and therefore, new acquisition is necessary to offset churn and register positive growth.


Hence, we need to understand that spending marketing dollars on acquisition is unavoidable, but having a good retention strategy from day one is imperative. The right retention tools would not only allow holding on to the existing customers but would also guarantee higher ROI on marketing spends.


Acquisition is good. Retention is better.

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