Are you constantly chasing new customer waves, hoping to ride the next one into success? Or do you want to tap into the gold vein of existing customers? Are you torn between customer acquisition and retention?
Today’s article will help you better understand and reconcile them to achieve sustainable e-commerce growth. You’ll see how they compare and how to combine them to optimize ROI for your e-commerce business.
Prepare for valuable insights and actionable tips to help unlock the secrets to growth and results.
Let’s start with the basics!
What is Acquisition & Retention in E-commerce?
Start with basic marketing definitions to step up your marketing game. That’s the only way to prepare yourself for the work ahead.
The marketing glossary will introduce you to two of the most robust, if underestimated e-commerce concepts:
- Customer Acquisition – the process of acquiring prospects. It involves generating leads and nurturing them until they convert. That process generates the so-called customer acquisition cost – CAC, associated with the cost of attracting new customers with your existing business.
- Customer Retention – the overall approach and techniques used to keep existing customers and incentivize them to make repeat purchases. It’s associated with retention and churn rates and can help boost the crucial Customer Lifetime Value.
To start with customer retention, check our customer retention knowledge hub. The main reason marketers and business owners underestimate such tactics is the fact that they require attention and effort to work in your favor.
Below, we’ll explore their undeniable benefits. They clearly show why it’s so important to explore the fields of customer acquisition and retention and invest the time and effort required to make them work!
Benefits of Acquisition & Retention
|ACQUISITION BENEFITS||RETENTION BENEFITS|
|1. Increases the customer base by attracting new customers.||1. It’s cheaper than customer acquisition – you don’t build customer relationships from scratch.|
|2. Boosts brand awareness by increasing brand visibility.||2. Enhances brand reputation by nurturing customer loyalty.|
|3. Helps with establishing a strong brand presence and reputation.||3. Can create brand ambassadors and referrals, leading to virtually free acquisition.|
|4. Supports business growth by increasing the number of new customers.||4. Increases profits through reduced CAC, decreased churn rates, and increased CLV.|
|5. Creates conditions for increased revenues through enhanced demand.||5. It enables cross-selling and upselling, thus increasing profits.|
The truth is that some marketers and sales teams make the mistake of pitting the two against each other. But they must go hand in hand, especially if you’re after sustainable growth.
Below, we’ll explore the need for acquisition and retention depending on the context of your business’ maturity.
When to Focus on Retention & When to Focus on Acquisition?
The e-commerce business’ maturity determines which technique to prioritize. Here’s how and why:
1. Just Started
You just opened your online store, and sales are zero. That’s the case with every business that’s just starting. That’s why your priority must be acquisition.
Focus on driving traffic – organic, paid, through the SERP or your social media channels. Your initial CAC is bound to be higher, but you must be prepared for that if you want to reach people at all.
2. Gaining Traction
Within the first 2 months of opening your online store, you’ll start seeing sales. Making 1-5 sales per week indicates you’re gaining traction. Best-case scenario, that means 1-5 new customers per week. It might not seem as much, but you should start dedicating at least 15% of your efforts to retaining those customers.
Your best bet is to establish a newsletter and offer a discount to encourage a second purchase. That would encourage existing customers to return soon after their first purchase, not letting them forget about this brand-new store.
2-3 months after opening an online store, and once you start seeing at least 1 sale a day, you can consider your business is growing consistently. It also means your CAC starts dropping, your brand visibility improves, and more new customers require your attention.
To keep up, direct at least 30% of your actions and efforts from acquisition to retention. That’s one way you can start actively reducing CAC and achieving growth.
Within 4 to 6 months of opening an online store, you should start seeing 10 sales per day. That’s the moment when your business is considered established. People are aware of your products, they know what offers you’re making, and word-of-mouth generates significant direct traffic.
6 months into your operations mark a critical moment when you’ll either make it or break it. That’s because it’s high time you started paying equal attention to existing customers and prospects. Divide your efforts 50-50 to turn regulars into loyal customers and further decrease CAC.
5. Well Established
Within a year of opening an online store, people will be familiar with your brand. You’ll probably be seeing 10+ sales per day. Most new customers will come from direct traffic.
At this point, you should start paying more attention to existing customers – around 60% of your efforts should focus on retention. That’s necessary if you want to focus on growth through enhanced Average Order Value and by nurturing CLV.
Of course, the final distribution of efforts depends on factors like industry, niche, and available budget (for paid ads in SERP and social media). How much and how effective your efforts are depends on how big your team is. Are you a one-person orchestra, or do you have colleagues with task-specific skills, etc.?
But the flow of effort is similar. Once you establish a steady stream of new traffic and customers, you must gradually shift your focus to retention.
Below, you can explore various strategies that help streamline efforts for both techniques. If you don’t know where to start and how to transition, remember that you can adapt every idea to your e-commerce business. Let’s check them out!
How Does Acquisition & Retention Relate to E-commerce?
Acquisition and retention show how well your business is doing. They determine whether you’ll profit or customer costs are so steep it’s impossible to stay afloat.
Practice shows that the average CLV to CAC ratio gravitates around 3:1. Meaning that a customer should return three times the acquisition cost. Anything around 1:1 or below indicates you’re spending more than what you’re earning. And that’s devastating for businesses that are past their 6th month.
That’s because even though you’re considered established, you’re still spending too much on acquisition, and you fail to retain existing customers. Your business is not growing. Customers buy once and never come back. To help with efforts, here are the best strategies to employ for each task:
A. Acquisition Strategies
- Content Marketing – from blog posts to video content and the short-form TikTok format, creating relevant content is one of the most efficient acquisition strategies. Content marketing answers questions and meets people’s needs even before they’ve become customers. Besides, businesses that actively blog are 13x more likely to enhance ROI. (Optinmonster)
- SEO – search engine optimization helps you achieve better visibility in search results. It can use existing content as a stepping stone and help you rank higher than the competition. The major benefit of SEO is reduced advertising costs and increased organic traffic, which, in turn, reduces CAC.
- Paid Advertising – that’s the fastest way to generate lots of traffic to your online store. It’s the most appropriate tool to gain visitors if you’ve just opened your store. However, PPC can get expensive over time, and qualified traffic won’t cut it.
- Referrals & Partnerships – the longer you’ve been around, the more likely it’s to have established relationships with partners and clients. Reach out to already loyal customers and incentivize them to share about your store with their audiences. Micro-influencers and small content creators are the perfect partners.
- Social Media – apart from providing paid ads, social media channels help you build a brand image and a following. But you must be consistent with posting and actively participate in customer communication if you want to make the most out of the channel and attract new visitors. Social media platforms are also the best way to attract new customers through creativity.
B. Retention Strategies
- Identifying High-Value Customers – with the help of various instruments and techniques like the RFM analysis, identify your most valuable clients. Those can be people who purchase often or rarely but with significant average order values.
- Customer Loyalty Programs – offer recurring benefits to regular customers. From coupons and vouchers to exclusive deals, you can inspire loyalty through unique offers. Once you know your most valuable customers better, you can easily adjust your loyalty program to fit their specific characteristics. That’s what makes customer loyalty programs one of the most popular and widely used tactics for customer retention.
- Personalization – different customers have different needs, but all require a tailored experience when they do business with you. Avoid generic solutions and offers and employ the power of technology to enhance personalization. From more relevant product recommendations and dynamic web content to a personalized approach to customer support, give the people what they want.
- Offering Subscription Services – think of Amazon Prime. Subscription services make it worthwhile to do business with you. Exclusive content and discounts, priority customer support, faster shipping, and return benefits are simple examples of what you can do with a subscription service in e-commerce. If you’re operating in a specific niche with new products every month (let’s say, luxury scented candles and accessories), offer monthly sample boxes for people to explore before they commit to a scent.
- User-Generated Content – UGC is any brand-related content created by customers. Facilitating the creation of UGC helps strengthen customer relationships. It shows how people use your products. In addition, when you encourage UGC creation, it tells customers you care about their experience with your products.
Don’t hesitate to check out our dedicated articles on the various tactics to get even more ideas and actionable insights on applying a retention and acquisition strategy. To see how to outline such a strategy, keep reading!
How to Build a Retention & Acquisition Strategy?
There are several steps to creating a working retention and acquisition strategy:
- Step 1: Be familiar with your desired customer demographics and preferences.
Having a deep understanding of your target audience is the first step to success. The best tool for the job is a customer data platform. It collects and consolidates valuable customer data from various sources and helps you build a 360-degree view of your customer.
From demographics to preferences and needs, a CDP can help you align marketing and sales campaigns with customers. Use available insights to identify valuable segments that give you a competitive edge.
- Step 2: Understand your competitors and analyze their strategies.
Stay ahead of the competition by analyzing their approach to acquisition and retention. What ads do they launch on social media? What discounts and loyalty programs do they apply? How have they structured their online store, and are anti-cart-abandonment measures in place?
Such a thorough analysis can help you identify lapses in their strategy, identify your competitive advantage, and build your customer segments meaningfully, in a way that helps you stand out from the competition.
- Step 3: Set measurable goals and create a timeline to measure success.
One of the best methods of setting goals is making them SMART. In other words, make them specific, measurable, achievable, relevant, and time-bound. Such a goal for an e-commerce business would sound something like “Increase sales by 7% in the next 3 months.” It checks all the boxes, with achievable/attainable depending entirely on your business context.
That approach to goal setting allows you to track progress and measure results against goals easily. You can assess the online store’s performance within a structured framework that helps you make data-driven decisions and improve efficiency. And from that – boost results.
- Step 4: Set up analytics tracking systems to measure progress.
E-commerce analytics reports are your best friend. When using UTMs and tracking tools, you can easily measure performance by gathering relevant data. That, in turn, can lead to actionable insights into performance and customer behavior thanks to tracking important customer and business metrics like AOV (a customer metric) and Sales Revenue (a business metric).
Tracking shows how strategies perform and what areas need improvement. When you set up tracking, you ensure the availability of data that can support any business decision you make.
- Step 5: Allocate budget to invest in relevant acquisition channels.
Once you have enough customer data, relevant segments, and results tracking set in place, you can identify your most important acquisition channels. As a rule of thumb, those channels have the lowest CAC and highest acquisition rates.
We already covered key acquisition channels above. Allocating your budget will be based on past performance. But the most substantial sources are organic (the content + SEO combination, which helps establish a constant presence) and paid ads (which quickly boost visibility).
- Step 6: Ensure your website is optimized for the best customer experience.
Today, customer experience is everything. No matter how cheap or how high-quality your products are, if customers can’t find their way on your store, they’ll leave. Not to mention, they won’t trust you with their payment details if the website isn’t optimized.
Given how crucial that touchpoint is for acquisition and retention, make sure it can offer an optimal customer experience. That includes seamless navigation, short load times, a streamlined purchase process, and minimum friction.
- Step 7: Leverage modern tools to deliver personalized experiences.
CRM systems, marketing automation tools, CDPs, and sophisticated product recommendations engines using powerful AI work together to help you deliver a personalized experience. Even if your CRM system is simply an Excel sheet and all you have are just a CDP and a recommendations engine, you can still deliver what customers expect of you.
Use the gathered information for personalized product recommendations, targeted email campaigns (don’t forget to use email marketing automation workflows for maximum efficiency), and dynamic web content to resonate with every different customer without spreading yourself thin.
- Step 8: Stay up-to-date with emerging trends and technology.
Whether we’re talking about generative AI to streamline your work when coming up with content and copy or the latest analytics tools and all-in-one platforms like VibeTrace, keep your eyes peeled. Otherwise, the competition that does it will outplay and outperform you.
Don’t be afraid to adopt new tools and solutions that will optimize your efforts for acquiring and retaining customers. The e-commerce field is dynamic and changes with the ever-evolving customer needs. Be ready to adapt if you want to be competitive.
- Step 9: Regularly analyze, adjust, and refine your acquisition and retention strategies.
The maturity of your business, the ever-evolving customer needs, and the dynamic nature of the e-commerce field require you to be flexible. Regular analysis has a profound impact on results.
By continuously monitoring performance and measuring it against your predetermined SMART goals, you can identify areas in need of improvement, unexpected outliers, and just as unexpected opportunities.
Want to be up to date with Marketing?
Subscribe to Marketing Automation dedicated newsletter!
Stay connected with what’s really important to optimize your digital revenues.
By clicking the button, you accept our Terms & Conditions. Also you will need to confirm your email address.
But most importantly, don’t be afraid to experiment. Customer acquisition and retention allow for lots of creativity and experiments. Some would require a solid budget, others – just time and effort. Prioritize areas of interest, and don’t be afraid to make a mistake.
And if you’re successful, it means your business will be successful.
Below, we’ll discuss the principal advantages of having such a strategy to begin with. If you’re operating an e-commerce business, keep reading to see what you can gain from your efforts, apart from profits and growth.
What Can E-commerce Businesses Learn From Acquisition & Retention Strategies?
If you’re after growth, you must remember that customer acquisition and retention are the two sides of the same coin. Don’t ever pit them against each other.
Each has a profound effect on performance and comes with crucial lessons every e-commerce business owner and manager needs to learn. Here are just a few of those valuable lessons:
A. Maximizing and Monetizing the Customer Journey
Customer lifetime value is one of the most important and valuable metrics an e-commerce business can measure. Acquisition and retention are your invaluable tools for optimizing the customer journey and monetizing key stages.
That, in turn, helps you identify existing opportunities and leads to higher CLV. If you analyze available data and form conclusions, you can further personalize the experience and help customers make the most out of it. As a result, the business will make the most out of it too.
Additionally, focusing on CLV and maximizing the customer journey further strengthens customer relationships and nurtures repeat-purchase behavior.
B. Identifying Opportunities for Acquisition, Retention & Growth
When integrating an acquisition and retention strategy into your operations, you get to:
- Identify effective and profitable communication channels;
- Identify areas that require improved and more targeted communication;
- Identify segments and opportunities for growth you’ve overlooked;
- Identify and leverage brand ambassadors and the potential for influencer collaborations.
All this nurtures customer loyalty and turns prospects into regulars. They’re not just numbers in a spreadsheet anymore, but, most importantly, they know it. As a result, you can cut costs and optimize overall marketing efforts, making another step toward sustainable growth.
C. Utilizing Customer Segmentation to Target Relevant Audiences
Once you start developing customer acquisition and retention strategies for e-commerce, you can better utilize all available data. Segmentation goes beyond age and gender. It encompasses needs, values, and beliefs and can guide you to the best way to target customers.
Once you understand those needs, values, and beliefs, you can deliver more relevant recommendations and content, craft personalized experiences, and grab the users’ attention by resonating with every one of them.
When you focus on a strategic approach to acquisition and retention, you can continuously refine segments and how you address them.
That will keep your business flexible and able to adapt quickly to the ever-evolving customer needs and demands.
D. Measure & Track Performance
Having effective acquisition and successful retention in mind, you can establish more meaningful KPIs to achieve specific OKRs. That’s because you’ll consider and measure customer behavior and various retention metrics like CLV.
Such specific and non-generic metrics help you make data-driven decisions. All because you’re interpreting data in a more meaningful way. Those data-driven decisions, in turn, help you optimize campaigns with the customer in mind.
The resulting enhanced customer journey and experience lead to accelerated growth.
To Wrap Up
The e-commerce field comes with fierce competition you must be ready for if you want your business to thrive. To rise above the competition, you must adapt and proactively explore and track customer needs and demands.
Regardless of how mature your business is – you’re just starting, or you’ve been around for some time now, acquisition and retention will play a leading role in your future.
By embracing them, you can set yourself on a path to sustainable growth through customer loyalty, low acquisition costs, and a competitive edge in personalization and relevant offers.
Contact our experts to learn what the all-in-one VibeTrace marketing platform can do for you in that regard, and make your first steps toward accelerated e-commerce growth today!