Acquisition And Retention, The Codependent Friends

To build traction, then growth for your service, acquiring early customers is the natural path to follow. But sustainability in any business does not come only by bringing in more and more customers in the store. What you need are loyal customers that trust your service and come again after their first purchase. It means that you also need to build strong customer retention, to maximize the revenue you get from each of your customers in time.

Acquisition and retention are the components of growth, and it may be hard to prioritize, and action these two levers wisely. In this article, we will review the interdependence of these two factors, then introduce customer experience as a guide to conduct both your acquisition and retention strategies.

Building Growth Is The Only Way

Let’s quickly review the principles for building an effective growth for your newly-launched service:

First comes the traction phase, with the objective to find the product-market fit that validates your idea. This is done by testing different acquisition channels, and confirming by then both the interest of people for your product, as well as the sustainability of the acquisition process on a small scale.

Then comes the growth phase, once traction indicators say you are ready for it and once you identified the channels that bring customers while being sustainable for your company (customers bring at some point more money than it costs to acquire them, to generate positive income figures). At this point, turn the volume up with the(se) acquisition channel(s), and hopefully the money will flow in !

Until now, everything you can see is the preponderant importance of the acquisition strategy for any business, as the key to pursue the activity.

But growth is not only a matter of acquisition, and there is no such thing as sustainability based only on incoming new sales.

The acquisition cost for one customer is rarely covered by a first purchase.

For every business, and moreover online SaaS businesses, licensed on a subscription basis, sustainability is built in time. It happens by confirming your ability to retain customers after their first purchase (and the following ones), as well as to increase the revenue they bring every month, if possible.

Read more on our blog: Retention Is Playing In Defense, But It’s Cool

Acquisition without Retention is a nonsense.

Quite as much as a business without customers.

Every online business (should) rely on durable revenue from their customers. Because, if an important or major part of your newly-acquired customers are never coming again for a second purchase, or discontinuing their subscription after some days, weeks, or even a few months, all the time, energy and money you have invested in their acquisition were useless. For the abovementionned reason, you will have failed to get a benefit from them, and your company will get in trouble.

Retention must be a topic from the first day you will have to deal with someone using your service – or even before. To take a good start, the revenue that this customer will bring to your company depends on your ability to :

respect the promise you made during the acquisition phase – confirms that what you deliver is actually matching or over what you promised in the communication you adopted in your prospecting
actually deliver what this customer expects from this first purchase – confirms that your product or service meets the initial level of expectations that the customer placed in it
deliver something that has a real value – overall, the customer accepts to pay money for your service because it brings something to him: time saved, improved quality of conditions for his work .. your service then becomes essential to him
adapt in time to the evolving needs from your customer base – keep a safety distance between what you deliver, and what your customers expect from the type of service you deliver, to avoid any competitor to get in the game

Noticed how 100% of this is your responsibility?

But, the tricky thing with acquisition and retention is not only that they are both a heavy responsibilities, independently. It is that they are completely dependent, each one from each other.

Acquisition and retention strategies’ impact is stronger when they work hand-in-hand.

Between acquisition and retention, there is no point in declaring which one is the most important, or which one must receive most of your attention.

It is based on your objectives and your KPIs that you must constantly adapt your strategy to drive both indicators to the next level.

The right balance for sustainability

Securing a recurring income, keeping a positive cash flow, convincing investors … building growth is a key for every business. The impact on your activity of acquisition and retention and their interdependence can not be more direct than in a financial point of view:

Retention increases customer LifeTime Value (LTV)

If you manage to double the time you retain one customer, with the same revenue generated each time, then his lifetime value doubles. It simply means you make twice more money from it after you acquired it. Simple math, on which we placed nice acronyms so you can share these numbers with colleagues, peers or investors.

Retention secures a greater acquisition budget

Simply, the more revenue you get from existing customers, the more you can decide to invest in additional acquisition.

Retention costs less than acquisition

Attracting new customers is freaking hard and expensive. All together, the lead generation, nurturing and closing are a huge effort, and are actually the hardest part of the job – losing customers which used to trust you enough so they accepted to give you their CB credentials is a sorry thing.

Retention brings up-sell & cross-sell opportunities

Your customers’ needs may change in time, as well as your product line and features may evolve. As every new problem is an opportunity, you will then find growth drivers among your own customer base.

Retention may drive additional customer acquisition

Retention is not only about keeping your customers alive. Delivering a good customer experience is the key to get your customers talking about you and recommending your product – operating for you a pro-bono, maintenance-free, authority-based word-of-mouth “campaign”.

Acquisition and retention build your company’s valuation

Although the relation with acquisition and retention is less direct here, these indicators are some of the most observed by investors, during any fundraising process. The evaluation that will be made of your service will be largely based on these figures, to establish your company valuation and decide if, and what amount can be invested in it.

Customer Experience brings it all together

In our activities at Onvey, we like and promote the idea that Customer Experience is a key for Growth. It is an interesting equation that favour both acquisition and retention, in a logic of growth. Not replacing, but completing your strategy, as the right way to follow to get to the next level:

Maximize acquisition, to bring material to your retention strategy.

Maximize retention, to value your acquisition strategy.
Deliver positive customer experience, to lever up both acquisition and retention.

In this mindset, we consider that, to build a sustainable growth, the first thing you must look to achieve, among your interactions with the world, is to build a positive and amazing experience for your customers.

Delivering a better customer experience, as an objective for every of your actions, will be a natural guide to build a strong empathy for your service across your customer base, bringing solid retention figures, and will even drive and facilitate your acquisition. Here are some pieces of advice that plead for this mindset :

Do not build retention, build experience. Great customer experience brings higher retention, and helps acquisition by word of mouth.
Customers don’t want to feel retained when they have reasons to leave. Good news, a positive experience will give them only reasons to stay.
A great customer experience is not about only matching customers expectations. It is only by surpassing them and delivering more than customers expect that you will build empathy for your service.
Building customer experience is an easy way to figure out where to start for building a strong retention. Simply ask yourself on a daily basis: – what can you do to make your customer’s life better?

This year will again see many startups launches, among which just a few will succeed. Question: lately, have you seen any successful service providing a poor customer service or user experience ?