Acquisition vs. retention.
The battle all marketers encounter.
Now, the question is: which one to focus on? Or even both? Or none?
In this article, you’ll find out.
To determine how successful your marketing efforts were last month, you check your analytics.
The number of new customers you are acquiring does not seem to be rising as much as you would like. Panicked, you rush to identify the problems - why aren't you getting more customers? How will you justify this to higher management? What are you doing wrong?
What if the only mistake you made was placing too much emphasis on your acquisition metrics alone?
Note: All metrics are valuable and useful - but they should be seen as one whole, not in silos, for maximum effect.
- How often do you compare your action trends to your retention trends?
- Do you even measure retention at all?
It is easy to understand why people emphasize acquisition metrics; seeing new customers increase every month is a great indication that your efforts are paying off.
If you're losing customers as fast as you're gaining them, you're working at net zero.
By implementing a retention strategy and evaluating it as part of your performance analytics, you will get a more holistic view of your store's performance and be able to formulate improvement strategies.
In this post, we’re going to show you:
- Why you need to think about retention in ecommerce
- Where you should start
- How to measure retention performance for the best insights
- Research experiments you can implement to gather the correct information
- How to use this data moving forward (+bonus survey structure)
- A free toolkit to track your retention vs. acquisition.
Improving customer retention is essential but often overlooked: here’s why
Customer retention isn't considered as exciting as an acquisition for a lot of companies. In the end, everyone wants the shiny new thing and the belief that things are greener on the other side.
A higher level of customer retention increases profitability, but not enough people are aware of this. It is no longer necessary to rely solely on new customers, and it is often cheaper to sell to an existing customer than to convince someone new. Moreover, if you can reduce the price for your customers, you'll have a bigger profit margin.
It makes sense to increase your return on your investment and work to generate additional revenue from stable customers after your initial investment. With a loyal customer base, you are able to predict your stock requirements for upcoming months, predict customer behavior, and begin to increase sales during peak times and holidays.
As your sales cycle shortens and revenue is more predictable, you can invest more into your business's growth. PPC strategies, as suggested by a PPC company based in NY, advise businesses to balance their acquisition efforts with retention strategies to maximize ROI. Growth through retention is more affordable and scalable than paid acquisition.
Common issues when attempting to improve customer retention
Analytical results aren't what many ecommerce founders expect when they look at them.
Even with an excellent customer acquisition process, businesses face common challenges that result in poor customer retention.
In the beginning, thinking of one-time transactions limits your opportunity for upselling and cross-selling additional complementary products.
You may attract buyers who want low prices if you build a discount store, but you must build a brand if you charge high prices for your product. Consider companies like Apple, who charge $40 for a charger you could get for $1 elsewhere. How can they do that? What makes this charger stand out from the rest?
By telling a story from the moment they announce a new product to the moment they open their stores and beyond, they make people fall in love with their brand.
Where to start with customer retention?
This post is not intended as a call to abandon your acquisition strategies, but rather to incorporate more effort into your retention strategies as well. As a result, you will have more time, more assets, and more ways to drive additional revenues.
Consider a loop. You keep your circle constant if you have five customers and do not add any more.
If you only work on acquisition, you have a straight line and no retention.
In order to be successful, you should adopt a coil-like approach, in which you're constantly looking for new clients and selling to existing clients. It's not easy to move to a coil system, though, particularly if retention values aren't baked into your culture.
Change the way you think about customer retention.
If you’re looking t improve customer retention, It starts with a change in mindset. When you approach retention in a positive way, you can develop processes that contribute to the growth of your company well beyond the initial sale.
- Feature products that drive loyalty as your front-liners
- Repeat successful campaigns to attract more people who are likely to become loyal customers
- Reuse coupon codes that attract engaged buyers and drop the codes that don’t
- Stop working with influencers and referral sources that bring only one-timers
To improve customer retention, measure current efforts to gather insights
The phrase "What gets measured, gets improved" is widely known for its effectiveness because it works.
Starting from where you are, you can measure what you are already doing to improve your customer retention rate. No matter what you're doing, keeping a measure can give you insight into what efforts organically result in retained customers.
It is important not to overlook this measurement phase. Regardless of where you think you are on the journey, the insights are invaluable.
You will be able to identify which group, new or existing, actually generates the most revenue. You might have more new customers than existing ones, but have you considered whether these existing customers drive more revenue?
Through this phase, you will be able to understand your customers' frequency tendency better, and that's an excellent thing for your entire business. For example, for those that buy from you more than once, how often is this? How long is it between each purchase?
Regardless of what you do, analyzing your company's metrics is always a good idea. By looking at your whole marketing performance through the lens of customer acquisition and retention, you will be able to uncover the initiatives that drive the most sales.
It gives you actionable data on which ones fail, so you can make informed decisions going forward.
A free offer: analyze and improve your customer retention with this calculator.
Possibly you aren't familiar with your metrics. Do you know your lifetime value from your average order value?
Use this free business sheet to gain a better understanding of how important retention and acquisition are. You can enter your own data, or dummy data to get an idea of how the site works.
It is a simple calculator that analyzes your business from a broad perspective and determines what a change in focus could mean to you.
Grab a copy of it here, completely free!
How to research to find retention insights
After you gather your data, you may feel overwhelmed by the quantity and variety of information you have, the excitement from gathering it may have waned slightly, and you wonder what to do next? You’re ready to improve your customer retention, but you don’t really know where to start.
The process may seem difficult at first, but we've created a handy checklist to guide you. As far as retention is concerned, no one size fits all approach applies. Each business, and more importantly, each customer, is different, so what works for one company may not work for another.
The following list aims to stimulate your thinking. In selecting some (or all) of these tactics, you'll be able to uncover the questions that are critical to your business and help you dig deeper into your data.
- Find users who recently bought from you
- Identify users who bought from you 6+ months ago
- Reach out to both cohorts with a survey/interview (+bonus tip: offer an incentive for their time, and encourage honest feedback).
- Ask them about their experience with your business, what made them buy (again if they have done), and what made them stop.
- Combine these insights with the quantifiable data for a holistic view when launching new campaigns
What to do moving forward?
What if we flipped the argument on its head? Instead of battling over acquisition versus retention, let's simply support both. Retention and acquisition. Two key metrics to track within your business for long-term growth.
You hear the ding ding bell when you get your first sale, the second, the third, and so on.
In reality, the work isn't done there: getting people in the door is just half of the battle; keeping them there is the rest.
By integrating both metrics as a core part of your systems, you will be able to grow and maintain your e-commerce business.
P.S. If you're having difficulty getting conversions and need help before you tackle retention, we've launched our ecommerce funnel academy. You will learn five steps you can take to fix a leak in your ecommerce funnel in this five-part academy. Among its many features, it includes free, actionable advice, real-life examples, and frameworks you can use right away.