Shopify businesses are at a crossroads when it comes to prioritizing customer acquisition vs retention. While you need both to keep your company alive, they don’t provide the same ROI - and there are quite a few other differences as well.
In theory, customer acquisition would be more important - you can’t retain customers if you aren’t bringing them into your ecosystem in the first place, after all.
But once your business is off the ground with a stable customer base turning your attention to retention makes much more sense. It’s far easier (and cheaper!) to sell to an existing customer than a new one. Loyal customers can turn into your brand’s biggest advocates, too.
Learn more about the differences between customer retention vs acquisition below. We’ll help you strike the right balance between the two and show you why investing in retention is worth every penny.
What is Customer Acquisition?
Customer acquisition is the process of bringing new customers into your business and convincing them to make that first purchase.
Think of it as the gateway to building a loyal customer base. There’s a lot that goes into it, from getting your brand in front of customers for the first time, piquing their interest, earning their trust, and showing them the value you have to offer.
There are countless ways you can acquire new customers, from social media marketing to paid advertising, influencer partnerships, word of mouth, and more.
Each of these has its own costs and success rates, which is why you need to measure customer acquisition cost (CAC) to find the best growth channel for your business. Other metrics you’ll need to monitor include conversion rate and website traffic.
What is Customer Retention?
Now, let’s look at the other half of the customer acquisition vs retention comparison. This involves nurturing existing customer relationships to keep them coming back for more.
As we said from the start it tends to be less costly than acquisition, and can deliver a dramatic boost to your bottom line. Loyal customers are known for spending more - but they also go out into the world and recommend your brand to others. In this sense, a solid customer retention strategy can double as a customer acquisition channel.
There are a few different ways you can retain customers - many of which you’ll use for acquisition. You can run retargeting ads, email marketing campaigns, organic social media posting, content marketing, and more.
Even something as simple as quality customer service is a step in the right direction for improving retention. But, the #1 approach is a customer loyalty program, which incentivizes customers for repeat purchases. More on that later.
You’ll gauge customer retention efforts through metrics such as customer retention rate, churn rate, and customer lifetime value (CLV). This will help you figure out how much it makes sense to acquire a customer for.
Think about it like this - if you know that, on average, your customers spend $500 over the course of their relationship with your brand, you don’t need to stress about spending $100 to acquire them.
So many brands end up taking a loss on a customer’s initial order knowing that they’ll end up profiting in the long run. High customer retention rates helps you be more liberal with your acquisition efforts.
That being said, let’s look at some similarities between customer acquisition and retention before we compare and contrast them deeper.
Similarities Between Customer Acquisition and Retention
One of the many misconceptions we see Shopify brands make is thinking that these are opposite ends of the customer lifecycle journey, while in reality, they’re closely intertwined.
We already said you can’t have one without the other, and we mentioned that a solid retention strategy is also a great way to acquire new customers through word of mouth. But let’s get more specific about how customer acquisition and retention are similar.
In the simplest sense, they both aim to improve customer engagement - be it through a compelling ad that attracts a new customer or a loyalty program that rewards existing ones. The difference is the goal of that engagement, whether it's to spark initial intrigue or foster loyalty.
The need for a positive customer experience remains the same across both strategies as well. Creating personalized, memorable experiences is the foundation for both acquisition and retention. You need to be able to resonate with the customer to build a connection.
From website functionality to customer service, a seamless experience is of the utmost importance. Acquisition works best when a potential customer’s first impression is strong, while retention seeks to reinforce that impression over time.
We want to emphasize the need for personalization at every stage in a customer’s journey, too. Sure, it’s much easier to personalize communications and experiences through retention because you have more data on that customer to do so.
However, there are ways to prioritize personalization during acquisition as well. You just need to do a great job creating an ideal customer persona, which is something that becomes easier as you hone in on who you are as a brand.
You can zoom out even further and see another similarity between customer retention and acquisition: they share the common goal of revenue growth.
There’s no way to bring in revenue as a new Shopify brand without acquiring customers. But, retaining them is how you really drive long-term growth and profitability. So, let’s take a look at some of the differences between customer acquisition vs retention.
Key Differences Between Customer Acquisition vs Retention
So, what’s the difference between customer acquisition and retention? It comes down to where the customer is at in their journey and the strategies and costs involved.
Understanding the Customer Lifecycle Stage
The most obvious difference between customer retention vs acquisition is where the customer (or potential customer) is in their journey.
Acquiring customers involves introducing new people to your brand who could be completely unaware of who you are and what you have to offer. Here, the goal is to make a strong first impression and convert interest into a sale.
Retention, on the other hand, comes into play once a customer has made a purchase. The focus shifts to maintaining their satisfaction and loyalty, encouraging them to keep engaging with your brand over time.
Comparing the Cost of Customer Acquisition vs Retention
You’re probably interested in comparing the cost of customer acquisition vs retention more than anything else, as it impacts your bottom line.
You’ve likely heard that it costs more to acquire a new customer than to retain an existing one, but you may not know just how much more it costs: up to five times more!
This comes down to all the work that goes into convincing someone to shop with your brand for the first time. You have to serve them multiple ads before they even click through to your site in most cases. Then, there’s even more involved in converting intrigue into purchase.
But if you do a good job delivering an awesome experience for that customer on their first purchase, you’ll have a much easier time getting them to come back for more. Plus, you have their email address, phone number, and other data - so it’s much cheaper to re-engage them.
Impact on Revenue and Long-Term Growth
We see so many brands focusing on bringing as many new customers into their ecosystem as possible, especially at first. This drives immediate revenue.
But, long-term growth comes from being able to retain customers and encourage them to make multiple purchases from your brand. Loyal customers not only make repeat purchases but also tend to spend more over time - in some cases, up to 67% more!
Methods Used for Acquisition and Retention
There will likely be some overlap in the strategies used to acquire and retain customers, but the language will be very different. However, you will see a difference in how much you prioritize different channels based on whether your focus is customer acquisition vs retention.
Acquisition efforts tend to rely more on paid advertising and influencer marketing. In contrast, retention opens up more organic (and affordable) opportunities - like email marketing, SMS pushes, social media engagements, and your very own loyalty program.
Customer Loyalty and Brand Advocacy Potential
Another important difference between customer retention vs acquisition is that when you focus on retaining customers and fostering loyalty, you are building a network of brand advocates that will help grow your business further.
Don’t just take our word for it - 86% of loyal customers are willing to recommend the brand to their family and friends. Even if you do an amazing job on a customer’s first experience, that type of trust takes time to build.
ROI for Acquiring vs Retaining Customers
We already mentioned the cost of customer acquisition vs retention, but the ROI is another conversation on its own. You’ll find that the ROI for customer retention far exceeds that of customer acquisition.
This is especially true in an era when ad costs are rising, and brands are taking losses on a customer’s first purchase just for the sake of nurturing that relationship and hopefully generating a high LTV.
There are stats that back this up, too. Repeat customers have a 60-70% chance of making a purchase compared to the 5-20% chance of converting new customers.
Should You Prioritize Customer Acquisition or Retention?
We hope this comparison of customer acquisition vs retention has left you with a clear understanding of each, but maybe you still have questions - like which is most important to focus on for your business right now.
There are many reasons why you may choose to focus more on acquisition - like when first starting your brand. Or, maybe you’re trying to tap into a new market or launch a brand-new product to a new audience.
Some brands choose to make acquisition their priority simply because that’s what investors are interested in. In some cases, compensation structures reward acquisition for sales and marketing teams more than retention - for better or worse.
Striking a Balance Between Customer Acquisition and Retention
Ultimately, though, there needs to be a balance between acquiring new customers and retaining existing ones. You can’t retain customers you don’t have, but if you don’t focus on retention, you’re on a hamster wheel - working really hard to chase growth, but not really going anywhere.
The ideal split of resources between customer acquisition and retention should be dependent on where your brand is at.
Newer brands obviously need to prioritize acquisition, but even at this stage, retention shouldn’t be ignored. Your very first customer could be your most loyal one. In fact, building loyalty from the start is one of the best ways to lay a solid foundation for sustainable growth.
Customers love the idea of forging a close relationship with small, emerging brands. You can use this to your advantage by writing personalized thank you’s for your first customers, or if you want to automate it, using email marketing follow-ups.
Established brands can skew their focus more in favor of retention. After all, studies show that increasing retention by just 5% can boost profits by 25% to 95%. This can be done through personalized rewards, loyalty programs, and tailored communications.
Bringing Our Customer Retention vs Acquisition Comparison to a Close
That does it for our comparison of customer acquisition vs retention. While each plays an essential role in pushing your business forward, they do so in different ways.
Customer acquisition is important for bringing new people into your brand’s ecosystem, but retention is what keeps them around and drives long-term growth in a profitable manner. You can’t have one without the other, so make sure you’re focusing on both.
But since retention strategies deliver more impressive returns, we encourage you to make that your top priority today if you haven’t already. Strengthen your customer journey with Rivo’s seamless retention tools.
Our Shopify loyalty program and Shopify referral program can help you find a balance between retention and acquisition - see how they stack up:
