Customer Acquisition & Retention

How much of the advertising budget do you allocate to customer acquisition and retention?

E-commerce and online sales have increased significantly since the start of the pandemic and so have digital marketing and measurement. It will help to revisit budget allocations to see if it’s aligned with new market opportunities and changing buying behavior.

Traditionally, most marketers focus on market penetration and customer acquisition. However, with changing consumer behavior and propensity for online ordering and sales, customer retention has gained significance. Customer acquisition and retention offer distinctive values and work best in tandem.

Customer acquisition drives long-term growth and facilitates retention through brand recall. It is prudent for big brands and CPG companies to target acquisition for gaining market share. Customer acquisition is also a fast route to market. However, the cost of acquiring new customers is higher than the cost of retaining and reselling to the existing customers.

Customer retention and selling to existing customers is cost-effective and is possibly a must-have for small and medium-size brands and e-commerce businesses. Customer retention strategies like memberships rewards, sampling, re-targeting and personalization could move customers to brand ambassadors and build precious WOM. Customer retention also helps in building first-party data, which has become important with recent privacy laws and Apple ios14 updates.

The success lies in balancing the ad spend between customer acquisition campaigns and customer retention strategies based on your product life cycle and product category. Consider if you want 10 existing customers to buy 10 products each or 100 new customers to buy 1 each in a given period? Which is more likely to happen, given your product purchase cycle, pricing, and customer buying habits? Answering the above questions is a good starting point in judiciously allocating resources between customer acquisition and retention.