Ask IH: What's more important: Customer retention or new customer acquisition?
Growth is sexy and acquiring new users is fun. But does it hurt your bottom line to focus all your efforts on acquisition? If you had to designate 80% of your resources to retention or acquisition, which would you choose and why? Do you have any examples of how focusing on either affected your bottom line?
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Focusing on customer retention increases the LTV of your customers which in turn allows you to spend more to acquire them profitably which should enable you to increase the rate of acquisition.
Hey Shawn!
I love the connection you've made between retention and acquisition in the long-run. I think it's something a lot of business owners miss the mark on.
Thanks!
Depends on size of business, current business objective, and current goal for investors.
Think of it like this:
If you were building a tower that had a faulty foundation, it would not matter how high you built the tower - it would fall over eventually.
In the same way, if you can't retain customers, that means that there are foundational problems with your business. In the short-term, your growth numbers will go up, but that is irrelevant if you aren't retaining that growth.
Hope that helps!
This is a great analogy, Jake! You're completely right, retention is the foundation of success. Thanks for contributing :)
At the end of the day the goal is to create something that's useful for someone else, customer retention is the best proof that you're succeeding and have built something that solves a problem, otherwise if many people see your app but no one stays that means it's not valuable to them.
I really like the notion that retention is the best proof that your product is actually useful. Great insight! Thanks for commenting :)
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"What's the point of acquiring new users if you can't retain them?"
This is what my primary goal of my business is. Yes getting new customers is an important step, but keeping customers happy. I will be putting a lot of effort and resources into customer service and happiness.
"What's the point of acquiring new users if you can't retain them?"
I love this statement, and it rings so true. It's a double edged sword and you have to keep both sides sharp.
Thanks for commenting, Daniel!