Customer Retention vs Customer Acquisition: The Key to Focus on

Last Updated:
February 22, 2022

Customer Retention vs Customer Acquistion

So many businesses looking to increase their revenue look for a quick solution. Often this means they focus on acquiring new customers instead of focusing on their current customer base. However, this may not be the best solution. Below we investigate customer retention vs customer acquisition and which is best for your business.

It Takes Time to Build a Business

Building a business doesn’t happen overnight, and it can take time to see financial results. One study analyzed the costs and revenue of customers throughout the purchasing lifecycle. This study shows that in every industry, the high cost of acquiring new customers often leaves business unprofitable in the first few years. If a business can sustain itself through this period, the cost of loyal customers begins to fall and the volume of their purchases rises. In fact, by increasing customer retention by 5% each year, businesses can see a minimum of 25% increase in profits. Often 80% of future profits will come from just 20% of your current customers. This means acquiring new customers as a strategy, will take time to work effectively.


Now, many marketers don’t focus on customer retention due to how long it takes to see results. However, when you publish a lead generation advertisement, you can easily see and measure the results in just a few days. This can make customer acquisition much more appealing to businesses, as they like to see instant results. However, for long-term success, customer retention is key.

Ease of Marketing

Even though it can take longer to see results, focusing on customer retention is often more profitable, and easier. This is because existing customers are much easier to sell to than new customers who don’t know your brand or products. In fact, the probability of converting a current customer to purchase is 60-70%, however, with a new customer, it is only 5-20%. This is all due to your current customers knowing, and trusting your brand and products. Additionally, each time a customer returns to a business, they are likely to spend more.

Retention can Boost Acquisition

Customer retention and customer acquisition are more in line than most people think. When done well, a customer retention marketing campaign can also bring in new customers. This often happens through word of mouth and referrals. After all, if customers are happy with your service, brand, and products they are likely to mention it to friends or family. When customers do this, friends and family take this feedback as authoritative and are likely to check out your products.

So, Customer Retention vs Customer Acquisition, which should you focus on?

Obviously, customer retention is key to long-term business success. However, utilizing acquisition campaigns can help generate returning customers as well. Consider how your business can begin to work on retaining customers and increase the amount of reoccurring purchases. Maybe you should introduce a loyalty program where users can earn points on purchases, referrals, and sharing on social media? Or, add more personalization to your marketing campaigns, focusing on your analytics to target the right people for the right products. However, the easiest way to retain customers is to offer great service and high-quality products. Therefore, instead of looking at it as customer retention vs customer acquisition, consider how you can incorporate both strategies to boost profits and business growth.

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