Why marketers need to shift from acquisition to customer retention

Two customers happy with their customer experience

Opportunities abound in the world of digital marketing. Recent changes in customer behavior have seen a massive surge in online behavior. Customers now predominantly use online channels to discover and investigate products, and services and gather information on brands they are considering doing business with.  

As a result, it would be safe to assume that marketing budgets are reflecting this opportunity. Unfortunately, not. Marketing budgets have shrunk as businesses tighten their purse strings. The average share of a company’s revenue that’s spent on marketing declined to just over 6% in 2021. 

Share of marketing budgets in revenue worldwide 2014-2021

Note(s): North America, France, Germany, United Kingdom; 2014 to 2021; 400*; marketers at companies with $500 million to $20 billion+ in annual revenue
Further information regarding this statistic can be found on page 43.
Source(s): Gartner; ID 1285395


Customer acquisition or customer retention?

The rise of marketing opportunities online may make it feel like acquiring new customers and growing your marketing database is the answer to business growth. If there are more customers online looking to discover new brands then you have a better chance of converting them, right? Not necessarily.  

While the acquisition is still a big priority for a lot of brands, competition is rife. You’re not the only brand to see the revenue opportunities offered by the new increased activity online. Brands like Google, Facebook, and TikTok want to keep users on their channels and clicking on revenue-generating paid ads rather than surfacing new brands organically.  

That means big brands with bigger budgets are the ones succeeding in converting customers.  

Returning customers is, therefore, more valuable than ever and the benefits of employing customer retention tactics should not be overlooked.  

Rising customer acquisition costs

Research carried out by Profitwell found that customer acquisition costs (CAC) had increased by 60% in the half-decade from 2014 to 2019.  

During the recent pandemic, when online demand for goods first surged, ecommerce giants like Amazon and supermarkets ramped up their tactics, investing massively in paid search and delivery fulfillment. With 74% of online searches starting on Amazon nowadays, it’s been made nearly impossible for brands to compete with these industry leaders for new customer acquisitions.  

How to retain customers

As well as moving online, customers’ expectations of online experiences have changed too. Put simply, they expect more. These expectations contribute to the myriad of factors influencing modern customer loyalty.  

As well as the practical, fundamental influences, such as having an appealing product catalog and competitive pricing, website usability, convenient payment methods, visibility of social proof, and shared values all contribute to the customer’s initial decision-making process. Once you have their attention, how you use your owned channels – email, social, website – will determine how loyal your customers will be.  

Harness your customer data to segment  

Your data literally holds all the answers. Want to set your marketing team clear KPIs? Check out your data. Want to know what products or services to develop? Your data will tell you. Want to know which customers are of the highest value? The answer is in your data.  

Calculating your Customer Lifetime Value (CLV) helps you increase sales and profit as well as boost your customer loyalty. It can help identify segments that will generate the most revenue over time, enabling you to justify spending on your marketing campaigns. Thankfully, improved data capture, understanding of the importance of first-party data, and better access to predictive analytics tools mean that CLV can be forecast with greater accuracy.  

A great example of this is Dotdigital’s RFM customer modeling tool. Pulling in customer data from across your marketing stack, it intuitively groups customers based on the recency, frequency, and monetary value of their interactions with you. You can then build segments to target high-value and loyal customers, or even customers who need nurturing.  

The end goal is to never let a customer go after you have invested in their initial acquisition.  

Whether through CLV, RFM, lead scoring, or NPS, you need to harness your customer data to target the right customer with the right message at the most optimal stage of their journey.  

Personalize your marketing for memorable experiences 

Personalization is about more than addressing your email subscriber on a first-name basis. Truly personalized messages and content takes into account user behavior as they interact across your digital touchpoints and user preferences such as specific product choice and interests.  

This ensures that customers are seeing deals, promotions, and content that is relevant to them, on the channels and at the frequency, they want to see it.  

Recent research found that customers are 80% more likely to make repeat purchases when brands create personalized experiences. These experiences can be anything from relevant product recommendations, to location-based updates. Overall, personalized communication on your website or in your email marketing campaigns can increase brand loyalty – particularly among millennials – by around 28%.  

Personalized experiences help you nurture your customer relationship by being useful, informative, and relevant to their specific stage in the journey. This will keep customers returning to your brand, time and time again.  

The long-term value of customer retention

It’s necessary for marketers to understand the long-term value of customer retention. Nurturing your existing customers is just as vital for your business’ success as acquiring new ones. Not only is it cost-effective, but the likelihood of converting an existing customer is 60-70%, whereas you only have a 5-20% chance of converting new prospects. 

The results will not be immediate, unlike measuring your marketing list growth. You need to ask yourself how you can improve the customer experience to keep customers coming back and turning into brand advocates. Calculating and tracking CLV and customer behavior will help you identify high-value segments and where you need to direct your marketing resources. In turn, this will ensure you’re getting a higher ROI for your marketing campaigns.  

Customers want and value personalized experiences. Using your customer data and intent signals you can segment and target existing customers with experiences tailored to their needs and desires. With a strong core customer base of loyal customers, you will ultimately see customer acquisition rates improve, as they turn into brand advocates and spread the word about your business.  


Jenna Paton, Content Marketing Manager
Jenna expertly writes thought-leadership content about cross-channel marketing and customer engagement and manages the creation and execution of Dotdigital's content marketing strategy.

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