Wednesday, May 31

What is the Difference Between Customer Acquisition and Customer Retention?

It can be challenging to tell the difference between customer acquisition and customer retention, especially if you’re working on a new marketing plan or preparing to step into the world of business. In fact, you may find yourself asking: what is the difference between customer acquisition and customer retention? Should you have a customer acquisition plan or a retention strategy? Why does it matter?

Though similar in some ways, customer retention and customer acquisition marketing require very different strategies, such as SEO marketing or identity marketing. Depending on where your company is at, it may be more important to focus on one over the other. 

That’s why we’ve broken down the difference between customer acquisition and customer retention and the importance of them both to businesses at all stages. Once you identify the marketing needs for your company, you can use both to your full advantage.

What Is Customer Acquisition?

Customer acquisition is the act of promoting your brand and creating experiences that lead prospective customers to make their first conversion. Depending on the kind of business you have, this conversion can be a subscription, download, order, purchase, or other metrics.

How is Customer Acquisition Measured?

The process of customer acquisition strategy coming into fruition can take time, which is because the customer acquisition process includes the movement from:

  1. A prospective customer not knowing your brand exists to 
  2. That customer comparing your products to others
  3. That customer decided to make a conversion.

This can be a quick process for some, but for others, it could take several weeks or even months to go from point one to point three.

Customer acquisition marketing efficiency can be measured by Customer Acquisition Costs, also known as CAC. The formula for this is: 

CAC = marketing and sales costs/customers acquired. 

The CAC formula can be used to calculate the cost of campaigns such as paid media, ads, or content marketing. With these numbers, you can see the efficiency of your customer acquisition marketing and identity marketing in action. These numbers can also give you a chance to consider what types of customer acquisition strategies you’ll use again in the future.

Why Does it Matter?

As you know, customers are what can make or break a business. Depending on what goods or services you offer through your company, customer acquisition marketing may be the most critical part of your marketing strategy. Customer acquisition strategies can help increase brand awareness, help with sales, and grow your business in the long run.

What is Customer Retention?

Customer retention is the next step of customer acquisition. Customer retention focuses on developing relationships with existing customers to create brand loyalty and repeat purchases.

How is Customer Retention measured?

Several different key metrics inform customer retention. For a sense of continued engagements, you can track the Customer Retention Rate, also known as CRR. The CRR reveals the percentage of customers that have engaged with the brand over some time.

The formula for CRR is:

CRR= [(number of customers at end of the period – number of new customers during the period) / number of customers at the beginning of the period)] x 100

Customer Churn Rate, or CCR, reveals the percentage of customers that stopped engaging with your brand over some time. The formula for the CCR is:

CCR= (Number of customers lost during a given period/number of customers at the beginning of the period) x 100

Measuring both the CCR and CRR can be important to calculate loyalty or to assess any changes the brand made that could have affected customer retention. 

For longer-term information, you should calculate the Customer Lifetime Value, also known as CLV. This formula reveals the amount of money that customers spend on your products or services throughout their lives. There are several different ways to calculate a CLV depending on your business.

Why Does it Matter?

Customer retention is often less expensive with better profits in the long run. One study showed that gaining new customers can cost five times more than keeping an existing one. In comparison, increasing customer retention by just 5% can increase profits by up to 95%!

Customer retention in part relies on identity marketing or the act of using data to create individual profiles for the customer. Depending on what you are selling, the way your brand pushes identity marketing may vary and can have a huge impact on customer retention as well as acquisition.

Around 70% of people say they prefer marketing to be tailored to their interests and habits. A necessary way to engage with that kind of identity marketing is to focus at least a section of your time on customer retention. Many companies lose money due to avoidable consumer switches. So while customer acquisition plans can help create a business, retaining customers is what truly makes a business.


So, what is the difference between customer acquisition and customer retention? As you can tell, you have to find marketing plans that work for you and your business. 

Once you identify marketing plans that should work for your company, you can proceed confidently. Depending on the goods and services you offer, a focused customer acquisition strategy may be one of the most vital parts of your marketing. However, the numbers don’t lie – it’s important not to forget about customer retention!

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