Balancing Customer Acquisition & Retention for Ecommerce

New and repeat customers are two very different audiences with different needs. While debate has long raged over which audience should be the main focus of your time and money, the emerging consensus is that each type of audience holds higher importance at different stages of a business’s lifecycle. Below, we explore how to balance customer acquisition and retention (and a bonus: growing customer spend), when to focus on each, and how to do so effectively.

1. Attracting Net New Customers

Customer acquisition involves seeking out customers who have not purchased from you before and prompting them to convert. Obviously, new customers are critical to any business starting out or looking to scale.

However, research indicates that the cost of acquiring new customers has increased by 222% over the past eight years. Before deciding to invest your time and efforts into attracting net new customers, make sure your business is in a good place financially and time-wise.

When to focus on attracting net new customers

• If you have just started your business. If your store has had few (or no) customers so far, then finding and enticing them to purchase is the logical first step.
• If your repeat purchase rate is high. For a business that is well-established with an already-decent repeat purchase rate, attracting new customers is a good next step.
• If your company can handle scaling upward. Examine your budget and bandwidth. If you have some wiggle room and/or the ability to spend more time and money on the fulfillment process, you’re in a good place to consider scaling up.

Revenue growth ideas for attracting net new customers

1. Optimize your SEO. Making sure that your store can be found online is the first step to acquiring new customers, and investing in the organic side of this process is critical. Audit your existing SEO practices to see where your site stands so you can set up a good foundation and make changes in areas that are lacking.
2. Invest in paid advertising initiatives. Paid advertising, whether through PPC ads in search or through other avenues like print or commercials, will also help get your name out to new customers—but at a higher price. Make sure you only pay for advertising that will reach your target market, and not on people who don’t need your products at all.
3. Start a referral program. Customers who like your products will be happy to spread the word about your business—especially if they have an incentive to do so. Offer a reward for referring a certain number of new paying customers to your business, and offer first purchase discounts for existing customers to pass along to incentivize their network.
4. Build your review profile. Customers newly introduced to your business will likely research your business before purchasing to make sure they can expect a good experience. Ask your existing, happy customers to review products on your site—and your business itself on external sites—so that your business is painted in a good light.
5. Get social. In 2022, global internet users spent 147 minutes on social media sites every day on average. By regularly posting relevant content on social sites that appeal to your audience, you can build a brand following in an area where people aren’t necessarily thinking about buying—and then drive them to purchase anyway.

2. Retaining Existing Customers

Customer retention involves concentrating on the base of customers who have already purchased from you and prompting them to make repeat purchases. Many companies overlook their past customers in favor of attracting new customers who haven’t heard of or purchased from them before.

Unfortunately, this approach can lead to unnecessary missed opportunities. In fact, research indicates that increasing customer retention rates by just 5% can increase profits by 25% to 95%, indicating their much stronger potential.

When to focus on retaining existing customers

• If your budget is smaller. Customer retention initiatives tend to cost less than their acquisition counterparts, so if your cash flow is low, invest here first.
• If your products are consumable. If you sell products that can be used up, your goal should be to convince customers who have purchased them before to restock.
• If your repeat purchase rate is low. This could indicate that you need to examine your product quality and service experience for areas to improve before trying to scale up.

Revenue growth ideas for retaining existing customers

1. Solidify your brand story. Customers who know what your company is about (other than making sales, of course) will be more invested in your brand. If your company’s purpose is to sell easily-manufactured products to price-conscious individuals, make sure your customers know that so they won’t expect luxury-quality goods.
2. Step up customer service efforts. Sometimes experience speaks louder than the product itself. Make sure your shipping information is communicated promptly, your products are packaged well, your return policy is easy to find, and you are able to quickly resolve any problems that may arise.
3. Ask for feedback. This demonstrates to customers that you genuinely care about their experience and improving your business. Take each piece of feedback with a grain of salt—some customers cannot be pleased, but others may have vital suggestions that could greatly improve your products or customer service as a whole.
4. Start a loyalty program. A loyalty program is a great way to keep customers coming back. Whether you are providing membership-only discounts or rewards for every nth purchase, customers will feel valued and appreciate being rewarded for their continued support of your business.
5. Send regular email campaigns. Newsletters, promotions, and educational emails will keep your business at the top of your customers’ minds. However, any email campaign is only as good as its relevance. Pay attention to open and click through rates to ensure that the content you’re sending is resonating with your audience.

3. Growing Current Customer Spend

A sort of mash-up between customer acquisition and retention, growing the spending of your current customers involves finding creative ways to direct acquisition initiatives at your base of customers who purchase from you regularly.

Because these shoppers are already attuned to your brand and trusting of your company, they are a potentially lucrative target audience to focus on because most of the buy-in work has already happened. As an added bonus, building up these customers is likely to contribute positively to word-of-mouth advertising.

When to focus on growing current customer spend

• If repeat purchases are high, but average order value is low. If customers like your products but don’t buy a lot from you at once, you’ve already established trust with them—now give them more to be excited about.
• If your business caters to a niche. Smaller groups tend to be more passionate, and you can capitalize on this by building a community around your products.
• If your products have upsell or cross-sell potential. Anything you can do to encourage customers to spend more to get something better is a win-win.

Revenue growth ideas for growing current customer spend

1. Boost personalization efforts. These days, personalization is the name of the game. The more you can convince customers that an experience has been curated specifically for them, the more invested in buying from your brand they become. Personalize emails, recommended products, and more to make existing customers feel special and valued.
2. Run and market promotions. Shoppers are much more likely to make a purchase if they know they are getting your product for less money than they’re used to spending. Run sales, coupon codes, or other exclusive promotions specifically for your repeat customers to thank them for their continued patronage.
3. Develop new revenue streams. If you’re worried that your customers may soon tire of your product offerings, find new or complementary products to add to your repertoire. These could be accessories for your existing products, completely new products that serve the same niche, or services to go with your products—the possibilities are endless.
4. Partner with other businesses. If creating new products or services doesn’t fall within your existing bandwidth, consider partnering with another similar business to sell your products in bundles. This is also a great opportunity to set up a charitable partnership so that you and your customers can help others—and feel great about it!
5. Create brand ambassadors. If your customers are super into you already, recruit them as official brand ambassadors for your business. Include them in case studies and reward them for spreading the word about your business—with a direct line to enthusiastic fans, you can do a lot to improve your business and gain new followers.

Final Thoughts

By paying attention to the current state of your business, you can determine whether customer acquisition, retention, or growing existing customer spend should be your main focus in the short term—and set your business up for success in the long term. Follow the suggestions above to ensure that your business initiatives are positioned to meet and exceed expectations.