Difference Between Customer Retention and Acquisition

One of hardest decisions to make when expanding a business is whether to focus on client acquisition or retention. These are two closely related business concepts that aim to grow a company's revenue. This article will provide you with all the information you need to decide which approach is better for you.

Customer Retention

The ability of a company to retain customers and keep them from moving to a competitor is known as customer retention. High customer retention shows that customers are satisfied with the quality of goods and services.

Customer Retention Rate (CRR)

Customer retention rate refers to the number of customers retained by a company over a specific period.

The formula for calculating customer retention rate (CRR) is:

Customer Retention Rate = (E - N)/S ) * 100

Where:

• E = Number of customers at the end of a period.
• N = Number of new customers acquired during that period.
• S = Number of customers at the start of that period.

Ways to Improve Customer Retention

Customer Acquisition

The process of acquiring new clients or consumers is referred to as customer acquisition. This is essentially the main objective of a business and is usually accomplished when a customer makes their first purchase or signs up a service.

Customer Acquisition Funnel

The series of stages a potential customer goes through from the point of initial product awareness to the point of becoming a paying customer is represented as a customer acquisition funnel. In include the following stages:

1. Awareness: Making your product known to the customers.
2. Interest: Generating interest by showcasing your product as the solution to a problem.
3. Consideration: Customers compare your product with competitors.
4. Intent: Customers show signs of buyer intent, like checking reviews or interacting with your website.
5. Evaluation: Customers weigh the pros and cons of your product.
6. Purchase: The final stage where the customer makes the purchase.

Consumer Acquisition Cost

The amount of money a company spends acquiring new customers is known as its customer acquisition cost, or CAC.

Customer acquisition cost (CAC) = Total Cost Of Marketing And Sales Over some time/Number Of New Customers Acquired During That Period

Difference Between Customer Retention and Acquisition

Key differences between customer retention and customer acquisition are listed in the following table.

Conclusion

While both customer retention and customer acquisition are concerned with increasing a company's business via consumers, they are different. Customer retention is a company's ability to retain customers and keep them from moving to a competitor. Customer acquisition, on the other hand, process of acquiring new clients or consumers.