Retention vs. Acquisition: Which one is more powerful for #SaaS businesses? 🧐

You should seek to maximize the yield curve. Retention is a multiplier on acquisition. Acquisition is a multiplier on retention. You need both, but since going from 99% to 99.9% is a lot more expensive than going from 80% to 90%, your goal is to get "pretty good" at both before perfecting either.

Retention is more difficult to accomplish to the standards you set. Not only is the aha moment important, but the need to be engaged often is also 2nd in line. We work on this daily. We started with the welcome email series. We inserted some nudging and massaging into the communication. Solutions to pain points may be not easily seen when they are at the 2nd level of importance. So selling the benefits through in app messages is our next goal. Furthermore, not every user has the same needs, so defining some persona buckets is important.

I'll also hop on the Retention bandwagon. If a customer has been with me for a while, I can assume they've been getting desirable outcomes. Those outcomes are things they happily share, and my product/service is a foundational element that gets discussed as often as their successes. That, in turn, gets me more customers.

I don't spend a dime on acquisition, which means I grow slow, but I also experience very minimal churn with what I do, and have very happy, very successful customers. I highly recommend reading "Company of One" by Paul Jarvis.

Retention. Not losing an existing user is the same, mathematically, as gaining a new user. In both situations the end result is you have one more user than you otherwise would have.

However, as @Primer pointed out, retention is often cheaper than acquisition. (I don't know if this is universally true. I can imagine situations where some customers might be very costly to try to retain.)

Improving retention also usually involves improving your product, customer support, etc., which can lead to second-order effects, like finding product-market fit faster, sparking more word-of-mouth growth from happy customers, etc. (That said, acquisition can do the same depending on the method, e.g. writing lots of high-quality educational content for your industry.)

Retention. There's a ton of ways to acquire users (Retention is one of them) and yet it doesn't say anything about a valuable product or service. The Retention metric tells you that you are in a good track for a sustainable business and your happy customers will make sure to spread the word.

Retention. Retention. Retention. Acquiring customers costs 6-7 x's more than keeping the ones you already have.

Not to mention, you miss out on all those billing opportunities. You don't just lose that month towards your MRR, you lose the on-going monthly payments.

Let's just say you have a customer paying you $20 and on average your customers stick around for 12 months. You don't just lose the $20 you lose the next 12 months of payments. ($20*12=$240).

I can't go into the calculations you need to consider the compounding effects of churn in a comment. I just think it's crazy not more companies are worried about this.

Retention.

Find an idea that has small friction to acquisition. Acquire customers, then prioritize retaining them.

The only time acquisition beats retention is if you're trying to validate a market.

It largely depends on the stage of the business and what your immediate goals are:

• In the early days acquisition is more important as it's going to get you a larger sampling of your prospective market.
• As your types of customers start to normalize you'll want to "keep more of what you kill" and will have a better understanding of what they need. Retention can become more important.
• If total revenue is important (so you can quit your job and work on the business full-time) and you are acquiring many more customers then you are losing, then acquisition can still be king. Then you can get to a sustainable area faster, where you can focus more on retention. (This assumes you aren't burning more money in acquisition)
• Once you have some traction and positioning with your business, (i.e. you do something really well in your market better than your competitors) you can sure up your position and double down on those features to keep your customers.

Overall it's helpful to oscillate back and forth but keep the frequency of change down. You'll be better off pushing hard on one area for weeks or months so that area can float on it's own when you focus on the other.

1. Get product market fit laser focused so you don't churn
2. Spend rest of your time on acquiring product market fit