New Customer Acquisition vs Retention: Best Practices
Customers are the most important part of your business. It’s a fact. The ultimate goal of any growing business is to attract and nurture a loyal relationship with its customers.
But customer acquisition and customer retention often compete for attention from your marketing budget.
When faced with the reality that acquiring a new customer can cost five times as much as retaining an existing one, you may be tempted to throw all of your resources to attracting new business.
The reality is that it’s important to dedicate as many resources to retain existing customers as it is selling to new ones. Both are essential and require separate strategies.
Increasing customer retention by just 5% can increase profits from 25% to 95%. In addition, the success rate of selling to a customer that you already have is 60-70%, versus 5-20% for new customers. There is great value in keeping the right customers.
Businesses need to craft a game plan that effectively attracts and retains customers with tactics that can be measured and altered as needed to achieve success in both areas. Here, we look at best practices for marketing strategies that identify and manage new customers differently than returning customers.
Attract Customers and Maintain Contact
Attracting a new customer takes time and patience.
Consumers have more options than ever – not only in terms of where and when they shop, but also how. It only makes sense that retailers have to work harder and smarter to gain customer loyalty.
To realize the benefits downstream, retailers will need to move the battle to the top of the sales funnel. Here lies the “awareness” and “interest” phase of the purchase experience.
Strengthening the top of the funnel also means giving attention to the middle and bottom of the funnel so those initial prospects move forward to conversion.
This is why it is so important to optimize all your digital assets – your website, landing pages, content, SEO, and social media campaigns – to work together as an effective marketing funnel. Talk to us about your business marketing strategies.
When someone moves into the middle of your sales funnel, that means you’ve captured their interest. This is where you want to show why your product is the perfect fit or solution to your customer’s needs.
How well you satisfy your customer’s needs will affect the likelihood that they will return. Returning customers will spend more often and will refer their friends and family.
Know Your Customer
Is a customer someone who has purchased an item from your company within the last six months, or at any point in time? What about a repeat purchaser from several years ago?
Say two customers bought from you yesterday. Today one searches for items from your company using a generic search (i.e. sports cars), the other—a branded search (i.e. Ferrari sports cars). Are they both considered your customers? Or should the one using a generic search have to be “re-acquired”?
You would also want to consider transaction data – at what point in time is it unlikely that your customer will return? Will they still return after a year has passed?
Understand Your Customer’s Purchase Path
Searches typically fall into the realm of new customer acquisition, situated towards the top of the funnel and comes at higher cost.
However, this cost is justified when you understand that you can further nurture your customers to purchase using other channels such as email and direct marketing.
A customer’s journey can be complex, so it is advisable to have a multi-channel strategy. For example, a customer may discover a new product on Instagram, view that product again via display ad retargeting, and later research that product on Amazon – only to finally purchase it after receiving a promotional email.
Create Ad Campaigns for Acquisition and Retention
After defining who your customer is, divide your ad campaigns based on new or returning customers. For example, your ad campaign could target these 3 sets of audiences:
- Completely new visitors to your site.
- Those that have visited your site in the past 3 months but have not purchased.
- Lastly, this group has purchased from you within the last 3 months and would be returning customers.
Set Unique Return Goals for Each Group
With your audiences set, it’s time to determine a unique, specific return goal for each.
Generally, you should be willing to invest more (to a less efficient return) to attract new customers. However, since you have already invested in the returning customer, you should set a more efficient return goal in that case.
Segment Further to Align with Your Customer’s Journey
Once you’ve obtained enough data to analyze, you may be able to segment each ad campaign further. You may be able to target each audience by device, or branded vs. non-branded search terms.
Watch for KPIs of Success
Watch your key performance indicators to see if you are hitting your return goals. Are new customers in line with your new customer profile? Are you gaining new customers while maintaining the same level of profit?
Your growth in search will naturally level off if you aren’t consistently refreshing your ad campaigns. It’s smart to develop a habit of making tweaks every 3 months or so, depending on your data results.
If you would like to learn more about how to improve your customer acquisition and retention, contact us today.