Customer Retention, SaaS | 5 MIN READ

Customer Acquisition vs Customer Retention: What Should SaaS Companies Prioritize?

Customer acquisition vs customer retention, who wins in this game of two? Does a SaaS business strive for the former or the latter and which is more important for your business?

Simran Mohanty
Jul 21, 2021

Customer-Acquisition-vs-Customer-Retention

Customer Acquisition vs Customer Retention

Of all the debates that one can possibly have in the world of sales and marketing, one that takes no backseat is customer acquisition vs customer retention. Which is better and which one should you zero in on? Even though it looks like a simple question, the answer here is not so simple. While acquiring customers is an integral part of any growing business, retaining them for good is also equally important. However, there are no winners in this game of two, there sure is a black horse that wins this game. Stay tuned till the end of this blog to know which is it? But first, let us brush up on the basics. 

What is Customer Acquisition? 

Customer acquisition is the process of acquiring new customers. It focuses on attracting new clients to your business via healthy lead generation and nurturing strategies that turn a prospect into a potential customer. You would not be able to run a successful business without acquiring new clients. It holds true especially for the startups and the ones at their nascent stage of business. They need more customers to sustain their business. 

On that note, securing the first few customers can seem pretty daunting. 

Since you are new to the market, a customer will have some apprehensions before trusting your brand. Building a brand reputation is also tough when you don’t have a firm customer base to stand for you. The second your base starts to grow and multiply, customer acquisition becomes a lot easier. 

Acquiring a customer is just not all about getting your first paid subscription. You will have to ensure that they derive value from your business and choose to stick around with you through the thick and thin. According to a report by Invespcro, about 44% of the companies have a greater focus on customer acquisition while 18% zero in on the retention part. 

customer acquisition
Source: invesp

What is Customer Retention? 

As the name suggests, customer retention is the subtle art of retaining a customer. Basically, it is an approach that enhances repeat purchases and reduces the bulging churn rates. The more your customers stay retained to your business, the better are the chances of you being a successful business. While retaining a customer is not as tough as it might sound like, it all depends on the quality of customer experience you deliver to your clients. 

Some of the vital factors that help retain customers, start with a perfect onboarding plan, building and imbibing trust and confidence in the hearts of your customer and reaching out time and again to see whether they have anything that they need. It is no rocket science to understand the needs and demands of your customers and fulfilling them at the earliest. 

When you focus on the customer retention aspect, you will soon start to see a rise in the customer satisfaction graph.

Only a satisfied customer will stick around with you and maximize the repeat purchases as well. On the plus side, this develops and nurtures your relationship with them and ensures their support throughout the long haul. As you know that your customers are the backbone of your business, retaining them and keeping them happy and satisfied is all that should matter to you. And stats back that up – Increasing customer retention rates by a mere 5% increases profits by anywhere from 25% to 95%. Even a 2% increase in customer retention can decrease overall company costs by up to 10%.

Customer Acquisition vs Customer Retention 

Whether or not should you focus on customer acquisition or customer retention really depends on the stage of growth of your SaaS business. For a company that is just starting off, acquiring customers is more than necessary. And for a company that has already put forth a dominant stance in the industry, retaining a customer is something crucial for their business. There is a chance of losing out on a ton of valuable sales by not investing in retention strategies that foster customer satisfaction and loyalty. 

With acquisition, it costs five to ten times more to acquire a new customer than to retain an existing one. But it has been statistically proven that a retained, long-term customer tends to spend more than a newly acquired customer. In fact, as much as 80% of a company’s revenue hail from 20% of its existing customer base. Not only that, customer retention is pretty cost-effective. The retention strategies offer a higher return on investment than customer acquisition. 

Customer retention
Source: invesp

Additionally, customer acquisition is a free source of brand ambassadors. A customer who is truly satisfied with your business with preferably not take a backseat when it comes to becoming a brand advocate for your company. Over time, this will help to reduce your initial customer acquisition costs as word of mouth takes hold – thus lowering your overall marketing costs even further.

Parting Thoughts 

Know that both customer acquisition vs customer retention is crucially important for your business to grow and prosper. You want to acquire clients and then retain them – that is the end of the story. While acquiring customers tends to play a bigger role when you are starting up, customer retention is something you need throughout the venture of your company. With the use of intelligent customer retention strategies, you can expand the return on investment of your acquisition efforts. This then helps to create an expanding customer base of loyal, satisfied customers that eventually revs up the revenue and sales bar. 

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Simran Mohanty

Simran hails from the content marketing backdrop with extensive knowledge in blogs, articles, and technical whitepapers in the non-fictional domain. She uses her 'gift of the gab' to explore new possibilities on her way and to make an exquisite impact on her readers. In her spare time, she likes to read journals on artificial intelligence or play with her cute kittens.

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