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How do I know whether to focus on growth or retention in my business?

It's always a fine balancing act in business, knowing when to invest in new customer acquistion, or double-down on your retention marketing - but there are signals you can be looking out for to know when to tip the scales in either direction.

This week we look at the different indicators to help you decide, with help to understand the tactics to use for each strategy.

Why it's never an either/or scenario

It's true, retention:acquistion is an ongoing cycle, never one in isolation, but that said, when we analyse new client's businesses it is always clear that one needs prioritising over the other.

For instance, if a client has been spending on acquiring sales through paid ads, often they will have grown their customer base quickly with a lot of first-time purchasers and then it's about nurturing those single-time customers on to place their 2nd, 3rd and 4th orders using retention tactics.

On the flipside, if a brand has previously never invested in targeting new audiences, they may have a really strong LTV customer (lifetime value) and a small, yet engaged database. Without acquiring any new customers, they have been reliant on organic growth, word of mouth and repeat purchasers to grow their business, which can be slow and hard to control or accelerate.

What are the key questions to ask and metrics to track?

If you want to understand where your business is at right now, these are the questions I ask new clients to work out if they are ready to start any acquisition activity, or whether retention should be their focus:


Acquisition marketing is the most expensive form of growth, so before you invest a penny you need to make sure you ask yourself these 5 key questions:

Is your website fully conversion rate optimised and do you have a strong conversion rate (1.9% or above) - will new customers understand your offering and do you have any barriers to purchase? (high shipping rates, limited size range etc).

Do you have enough stock? A key consideration - if your ads work and you double your monthly orders, are you going to be able to service them? This may sound like a brilliant problem to have but many clients have long production times and can't simply 're-order', which could halt momentum of their growth if they sell-out mid-season.

Do you have the logisitics in place for increased sales? If you are a small team, do you have the workforce to manage an increase in customer service enquiries, fulfillment/returns? Often clients underestimate the additional work that growth will create, then customer service suffers, new purchasers have a bad first experience and never come back.

Are you comfortable investing in something that may not turn a profit for 2-3 months? Paid advertising is not a tap that you can turn on that will immediately generate you sales. A 8-12 week learning period is required for any performance marketing campaign to test audiences and creatives before it is able to scale into profit. If you are unable to commit financially to this initial learning period without expectations of profit, you could turn your ads off before they've ever reached their potential.

Are you confident that if you acquire a new customer, they are going to be nurtured into a long-term customer? It's (relatively) easy to achieve an increase in sales if you have a big enough budget - but for long-term succcess you need to focus on acquiring the customer, not the sale. Ensure those first-time purchasers are targeted effectively in your email and SMS comms for maximium LTV.


You've sown the seed - but now how can you help it to flourish?

Arguably, this should have come first - as if you don't have a strong retention model in place, you're not going to get the max return out of your acquistion spend.

It costs 5x less to retain a customer than it does to acquire one* and a 5% increase in retention rate can lead to a 25% inc. in profit**.

Clients we see come to us who are ripe for retention marketing activity are those:

Who have historically spent a lot on acquisition marketing through paid ads, but don't have strong email marketing segmentation or automations in place to nurture their customers to make multiple purchases.

They have a low purchase frequency, meaning their current customers aren't buying from them very often, perhaps due to inconsistent email marketing.

Who have a historic database with a large number of lapsed customers that could be nurtured back into the brand fold.

What does Retention and Acquistion look like?

A common misconception is that acqusition marketing always has to mean 'paid ads'. Organic social can also be a great way to reach new audiences if you have a clear strategy in place. A longer term, less costly acquistion channel is SEO - whilst it won't bring you sales overnight, it will bring you intentional shoppers who are actively searching for what you sell, so is worth the time and investment. By focussing on improving your visibility for 'non-brand terms', so 'print dresses' rather than 'YOUR BRAND NAME dresses', you will unlock huge potential for new customer discovery.

Collaborative competitions that put your brand in-front of new audiences, as well as fairs, pop-ups and events are all ways that you can get in front of new audiences.

Retention marketing is all about engaging the customers you already have, or even if they haven't bought from you - the people already within your brand's eco-system, from social followers to newsletter subscribers.

Loyalty schemes are a great way to encourage and reward customers to make multiple purchases with you and strengthens brand loyalty.

Hosting customer events and giving your customers priority access to sales or launches will also help to make them feel seen and appreciated by you.

So where to start? - make sure your ducks are in a row; is your site likely to convert new traffic and do you have the mechanisms in place to turn new first-time customers into long-term shoppers? If it's yes to all of the above, it may be time to start thinking about seeking out new audiences...

If you'd like help analysing where your business is currently at in the acqusition/retention cycle - book in a call or a cuppa here

*The European Business Review. **  Bains and Company


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