Is Customer Acquisition or Retention More Important?

Woman about to buy from an online business

Last updated on July 16th, 2021 at 02:10 pm

One frequently debated topic of many businesses is which is more important? Customer acquisition (getting new customers) or customer retention (retaining current customers)? In order to thrive, companies need both. However, when resources are limited, business owners would like to know where they should focus their limited spending. The answer ultimately depends on your business strategy and long-term business goals.

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The Importance of Customer Acquisition

To grow a successful business, you need to acquire new customers. This is particularly true for newly formed startups and small businesses. When you first start a new business, the most difficult challenge will be to secure your first customer. This is especially hard because your business does not yet have a brand reputation. Potential customers may hesitate from buying from a company that does not have any previous customers or a good reputation.

For small businesses and startups, sometimes the first customers will be friends and family. Once your growing business gets a good foothold on a steady customer base, you can focus on increasing brand awareness, which will make acquiring new customers easier.

How to Improve Customer Acquisition

Customer service solidifying the trust of a customer in their ability to support them and ensuring their success with your products and services

Your approach to your customer acquisition sales strategy depends mainly on your business model and goals. It is an essential and necessary part of growing a business. When you gain a new customer, focus on solidifying their trust in your ability to support them and ensuring their success with your products and services. The key is providing excellent customer service experience from the very beginning to avoid losing customers. Customer service is oftentimes an indicator of customer satisfaction. High quality customer service will reduce customer attrition, or the loss of customers.

The fastest way to grow your business and achieve short-term goals, such as increasing revenue, is to increase your customer base. Keep in mind, this is just one method used to increase revenue. There are other techniques, including upselling to an existing customer.

Customer acquisition will always be a crucial driver for businesses. In order to increase your customer base, create valuable experience with your customers and provide them with relevant information. Customers should be satisfied with their interactions with your business every step of the way. Satisfied customers are likely to fuel your company’s growth. Your customers will buy again or they will be eager to share your products or services with people they know. Building trust in your brand is an ongoing process your business should continuously work on.

The Importance of Customer Retention

Customer service representative responding to a customers email

Small businesses or startups, particularly ones with tight budgets, must prioritize the cheapest method of growth that takes the shortest time to implement. In general, getting existing customers to come back and re-enticing lost customers is cheaper than customer acquisition. According to an infographic compiled by Invesp, it costs five to ten times more to acquire a new customer than it costs to retain an existing customer.

Customers who already have a positive impression of your business are easier to convert into sales than new customers who are unfamiliar with your brand. The probability of selling to an existing customer is sixty to seventy percent, while the probability of selling to a new customer is only five to twenty percent.

Customer retention is one of the best ways to measure the reliability of your company’s service. Businesses with high retention rates fare well since their customers appreciate the value they provide. Over eighty-nine percent of companies view customer experience as a key factor in driving customer loyalty and retention.

Customer retention is incredibly important to maintaining consistent growth and financial planning. Existing customers require less maintenance than new customers. Moreover, strong customer retention rates can be an excellent driver for customer acquisition, through referrals and positive reviews.

Oftentimes, businesses devote too many resources to customer acquisition and not enough resources to customer retention. In comparison to new customers, already retained customers are fifty percent more likely to try new products and spend thirty-one percent more. Increasing customer retention by five percent can increase profits from twenty-five to ninety-five percent. While customer retention is sometimes overlooked, it is a significant factor in the success or failure of a business.

How to Improve Customer Retention

Credit card exchange between customer and business

To improve your company’s customer retention, your marketing should be geared towards targeting a set of customers with a message or special offer. Your company should attempt to get their response. Sometimes this requires paying an advertising or social network to access and target a specific set of customers. This is especially true for startups that do not have a large customer base yet.

Once your business has a good number of customers in its database, your business will be able to use this data for promotions, cross selling, or upselling. For most businesses, their existing

Customer base is one of their most valuable assets. This is because it contains vital information that is crucial to the company. A customer database typically includes names, email addresses, and phone numbers. This data allows businesses an opportunity to reach their target audience. The cost of reaching out to your target audience is usually very low in comparison to advertising for new customers. Reaching out to your target audience can include customer loyalty programs, social media marketing, and email marketing.

When your business consistently offers your clients a high level of service and over delivers, your customer retention rate will significantly increase. In order to better serve your customers, implementing a customer segmentation strategy allows you to maintain and nurture customer relationships at each of the different stages. Your business will want to identify your “VIP customers.” Your “VIP customers” are customers who spend a significant amount of time and money with your business. Once your customer subgroups are identified, your business can gather insight on how to convert more customers into VIP customers. This segmented strategy achieves better results and is much more personalized than a standard, catchall marketing campaign.

To cultivate your company’s relationship with existing customers, reach out when a customer encounters difficulties or has questions regarding your products or services. Customers enjoy when companies show a genuine concern and want them to have successful experiences with their products and services. Moreover, your company will maintain a low attrition rate with more satisfied customers.


Newer businesses and startups will have to focus on customer acquisition in order to create a solid customer base. Once your business has enough customers to where you can gather insightful data from your customer base, customer retention becomes significantly more important in the growth of your company.

Implementing a customer segmentation strategy is one of the best ways to meet your customers’ needs and provide them with more personal, directed information. Identifying your VIP customers is crucial. Your business will have more insight on how to turn customers into VIP customers, who will spend a significant amount of time and money engaging with your brand.

It is crucial to keep providing your customers with positive experiences and useful information. This will leave more customers feeling satisfied with your company thereby retaining more customers. Once your brand gains its reputation, it will likely become easier to acquire new customers.

Ivi Kim is a content writer, marketer, and blogger. Ivi graduated with a Juris Doctor from Indiana University Robert H. McKinney School of Law and a Master of Business Administration from Indiana University Kelley School of Business. She has written content for websites and blogs, while increasing their SEO scores. Ivi’s passion for writing is rooted in her desire to facilitate the flow of information from businesses to consumers in a way that is beneficial and engaging.


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