Client acquisition and client retention are equally important to your business success, but they support your goals in different ways. Many companies focus more on acquisition than retention, neglecting long-term goals for short-term wins.
Client Acquisition vs. Client Retention Explained
- Client acquisition: Client acquisition is a business growth strategy focused on attracting and acquiring new clients. Some common strategies include SEO, paid advertising and content marketing.
- Client retention: Client retention is a business growth strategy focused on retaining and extracting additional value out of an existing customer base. Some common strategies include reward programs, client services and recommendation systems.
Retention offers higher return on investment for your marketing spend for some business models, making it a cost-effective solution for driving business growth. That said, client retention can’t happen if you don’t have clients to begin with, which is where client acquisition comes in.
So, which should you focus on? It depends. Here’s everything you need to know.
What Is Client Acquisition?
Client acquisition is a strategy focused on attracting new clients to fuel business growth. The tactics involved in client acquisition emphasize bringing in new customers and building brand awareness, such as:
- Search engine optimization (SEO)
- Social media
- Referrals
- Paid advertising
- Content marketing
Client acquisition is vital to building a client base, which every business needs to succeed, especially for those offering advanced solutions. It’s an expensive endeavor, though, with the global cost for client acquisition valued at $626.86 billion in 2023.
What Is Client Retention?
Client retention is the process of earning loyalty from existing clients and encouraging repeat purchases. This includes strategies like:
- Loyalty and reward programs
- Client service
- Feedback and recommendations
- Personalized experiences
- Responsive communication
Client retention helps you get more value out of your existing clients because it’s more expensive to acquire new clients than keeping your current clients loyal.
Client Acquisition and Client Retention for Business Growth
Client acquisition and retention are two different processes, but they’re both essential to a successful marketing strategy. You need clients to stay in business, so acquisition brings them in and retention keeps them happy.
Instead of thinking of them as one or the other, consider acquisition and retention two aspects of the same larger goal — driving growth. If you neglect either one, you won’t be as effective in reaching your goals.
That said, acquisition and retention serve different purposes for your business growth. Acquisition grows your client base, which is essential to businesses in the early stages, particularly service-based businesses. Even if you start off with a few key clients, you will need more to gain more opportunities and create growth.
Retention helps you get more value out of each client you have. A client’s lifetime value (CLV) is the projected value of the client over the course of their relationship with your business. Loyal customers make consistent purchases and offer more value than a one-time buyer, at least for most business models. Having strong client retention strategies in place enables your business to maximize CLV by encouraging repeat purchases.
Client Retention vs. Client Acquisition: Which Is the Better Investment?
Even enterprise companies don’t have unlimited funds for their marketing budgets. It’s important to look for value in your marketing investments. So, is acquisition or retention a better use of your resources?
Client Acquisition Is More Expensive
Depending on the industry, client acquisition is often more expensive than retention. New clients require building a relationship from the ground up, building brand trust and earning that sale. Retention is cheaper because you already have a relationship, so you don’t need to put the same time and money into getting the sale.
Client Retention Offers Better Return on Investment
Client acquisition has higher upfront costs and time, as it can take months to see returns. Retention offers better return on investment (ROI) than acquisition, since you’re earning sales without major time and barriers to get the client to make a purchase.
Client Retention Boosts Referrals
Client retention builds client loyalty, which improves your word-of-mouth referrals. This type of marketing is free and one of the most effective types of marketing. Customers typically take the recommendation of a friend or family member or a corporate ad, according to one report from Business 2 Community.
Your client retention efforts encourage referrals by prioritizing trust, loyalty and client service. This ensures that your clients stay with your company and continue to make purchases, but also that they are more likely to advocate for your brand with others.
Client Acquisition vs. Client Retention: Which One Should I Focus On?
There’s no way around it – you need both client acquisition and retention to succeed. But different stages of your business require more of a focus on acquisition or retention.
When to Focus on Client Acquisition
Client acquisition is important for businesses that are just getting started to bring in new clients. This is also important if you have existing clients but you’re expanding into new markets or looking for a more diverse client base.
If you have a decline in sales or referrals, you may need to focus more on client acquisition to attract new clients and offset your losses and diversify your client base. Then, you can focus on client retention to keep clients as you earn them.
When to Focus on Client Retention
Client retention should be your focus if you have a robust existing client base that you want to maintain or grow. With current loyal clients, you are more likely to get referrals and repeat business that can help your acquisition efforts. Loyal clients also spend more money and purchase more expensive products and services, on average.
For example, in competitive markets, particularly in sectors like emergency services, staying abreast of technological advancements such as Next Generation 911 (NG911) is vital for client retention. NG911 marks a significant evolution in emergency response systems, adapting to modern communication needs with features like accurate location tracking, text-to-911 capabilities and live video feeds for emergency situations.
As the industry moves towards a 2025 transition to NG911, companies that are knowledgeable about and prepared for these changes can better inform and support their clients, enhancing client trust and retention in a market that values technological competence and innovation.
Retention is important for companies that operate in competitive markets as well. The costs to switch for clients are often low, so they know they can just go to a competitor if you’re not satisfying their needs. In addition, if your client acquisition costs are high, retention can offset those costs and ensure that you’re getting long-term gains out of your investment.
Why Both Client Acquisition and Client Retention Are Important
All things being equal, every business should put some effort into client acquisition and client retention at the same time. These are two sides of the same coin to grow your business with a steady stream of new customers and keep them happy and loyal along the way. Creating a realistic marketing strategy that includes both is the key to steady, sustainable growth.
