Acquisition vs Retention

What is more important “acquisition” or “retention”?

None of the two yet, as the definitive answer depends mainly on the phase of business life cycle the company finds itself in and as a derivative thereof, the customer life cycle. In any event, it is a rule of thumb, that you should not be a business that loses clients “carelessly”. 


customer-lifecycle-online

Determining whether “acquisition” or “retention” is better at any given phase, depends on many factors that need to be calculated carefully, like:

  1. The phase of business life cycle the company is in. A start-up will have a different strategy than a mature business geared towards more acquisition.
  2. Is it B2C or B2B?
  3. Are you selling products or services?
  4. Service or product life time: once per month or once per 5 years?
  5. Market competition: how fiercely do you have to fight for customers?
  6. Necessity of acquisition; do you actually have to acquire customers intensively or do they choose you willingly?
  7. Necessity of retention; Do you have to retain customers or do they come back every time “voluntarily”?
  8. The type of product or service you’re selling in terms of high-loyalty products, luxury products, basic products, FMCG etc.
  9. Market micro-economics: like purchase-power & competition.
  10. Business sector: a B2C translation agency for only certified translations of official papers (diploma’s and ID’s) may choose to concentrate on acquisition and word-of-mouth marketing, since repeat purchase is unchangeably low for this specific service.

Most experts would put retention higher on the importance-list than acquisition, taking all pro’s and con’s into consideration, for reasons related to the researched fact that the cost of acquisition is 2,5 times the cost of client retention in relation to ROI. Although this percentage fluctuates regularly, sometimes claiming that retention’s ROI is 3 times that of acquisition, it has always had a non-variable & consistent advantage in favour of retention.

ROI Marketing

It basically means that it costs much more to attract new customers (without necessarily converting them into buyers) than to actually invest in current customers who already performed a first purchase. Furthermore, your existent client base is the livelihood of your business at less cost, while acquisition is like taking a wild guess in terms of expected ROI, but a certain loss in terms expenditure.

retention-versus-acquisition

Others would argue that no retention is possible without acquisition preceding it, in the first place. How could you retain a “client” that you haven’t acquired yet? That client is non-existent and you should acquire him/her first.

It’s your say based on a more detailed and subjective approach, that leaved little space to philosophy and more to factual data and market research findings.

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Does culture play a role in drafting CRM strategy?

 

I will try to answer with an illustration.

Birthday congrats via CRM system database

Some CRM experts may devise a CRM strategy and system as such to send automatic, yet personalized, birthday congratulation emails to customers (even to B2B customer’s contact persons if deemed appropriate). Such e-mails may carry an incentive, a special, a coupon or a digital gift. This is a brilliant idea if it is not privacy breaching & in accordance with opt-in & op-out regulations in some countries  (like West European and North American countries)

CRM-happy-birthday

However, in Middle Eastern & Far Eastern countries, people may have a different notion of birthday congratulations and/or celebrations for adults. For instance, and according to my experience as a former manager of a full-registration based digital business aimed at international freelance linguists, Asians of the Far East (Japan, Korea and China), specifically females, prefer not to enter their birthday dates on online forms at all. I actually had to change the birthday form-field into “voluntary” instead of “compulsory”, to allow some members to register their full professional information with ease and a peace of mind!

Also, birthdays are not widely celebrated in the GCC (Gulf Cooperation Council) area among native inhabitants of countries such as Saudi Arabia or the UAE, due to religious motives. So, would sending such a “thoughtful” e-mail gesture be applauded or would it rather backfire and be viewed as offensive?

I would go about it safely and say “ yes”,  in some area’s, culture does play a role. One must be wary of such sensitivities.