Acquisition vs. Retention: Should Your Ecommerce Business Play Offense or Defense?
Your store’s offense is its acquisition efforts. Acquisition is the tools and tactics you use to get more shoppers to your site and includes things like Google Adwords and Facebook Ads. On the flip side there is your marketing defense, otherwise know as retention. Retention is the tools and tactics you use to get an existing customer to buy from you again, and more frequently.
The best ecommerce marketing strategies incorporate a balance of both acquisition (offense) and retention (defense). The right balance depends on the makeup of your store, so let’s break down a winning strategy for your store!
Your Offense (Acquisition)
Your ecommerce offense is focused on getting people to your site to make a purchase. You will never make a sale if there is no one browsing your site. This offensive strategy is also known as customer acquisition, which is defined as:
“The process of persuading a potential shopper to visit your site through outward facing communication and converting that shopper into a paying customer.”
Customer acquisition is the way in which you will get customers to your site and convince them to make a purchase. The more potential shoppers you can attract, the more potential sales you can make. Many people refer to acquisition as “just marketing” but that completely ignores the other half of a winning strategy, retention.
Your Defense (Retention)
Once you have acquired enough customers you can shift your focus to a defensive marketing strategy. This defense is also known as retention and is defined as:
“The activities a store uses to increase the amount of repeat customers and increase the profitability of each existing customer.”
Customer retention strategies are used to get more value out of your existing customer base. You want to make sure that the customers you worked hard to acquire stay with you. You are essentially defending against them choosing a competitor or alternative like an offline store.
Customer acquisition creates a foundation of customers that you can then use a retention strategy to maximize the profitability of each. But how much time and resources should you devote to each? The answer to that depends on your store.
Is One More Important than the Other?
Is it possible to win a basketball game only playing offence or defence? No! While it is possible to be a very competitive team focusing more heavily on one than the other, if you ignore one completely you will not win. The same is true in ecommerce, you can have a much heavier focus on one over the other, but you should never ignore one completely.
Acquisition is needed to grow your customer base and increase your sales. However, popular acquisition techniques like Adwords have become more expensive, and unpaid social media reach is on the decline. This means there is a higher return on your retention investments compared to acquisition efforts, which cost more and more each year. In fact, it is 7x more expensive to acquire a customer than it is to retain one. Customer retention can help drive down your marketing costs and increase your profitability!
How Do I Know Which to Focus On?
Now that you know what each component is, we can now look at when you should be using each. You should almost always be using a combination of the two strategies. What will change is the amount you should be focusing on each. Your focus on each is influenced both by what you sell and and where your store is its life-cycle.
What Stage Is Your Store In?
The strategy you focus on is heavily influenced by where your store is in its life-cycle. A store that started yesterday is vastly different than one that has been up and running for the last three years. Take a look at the timeline below for more specific advice for your store’s individual needs.
1. Just Starting: When you have just started your store there is one thing you should be focused on: getting customers. At this point in your life-cycle your acquisition efforts should completely trump retention. Focus on adding apps and using strategies that will help you grow your customer base.
2. Gaining Traction: You now have customers and you are getting sporadic sales. At this life-cycle stage you can begin to introduce retention elements. You now have a customer base that you can encourage to buy from you again. My recommendation would be to start with retention email campaigns that focus on encouraging a past customer to purchase from you again.
3. Consistent: You aren’t quite an ecommerce juggernaut, but you have a customer base and sales are growing. This is the point where you should begin to think about mixing in more retention with your acquisition efforts. You can look at starting a loyalty and/or referral program as well as getting more serious with your retention email automation.
4. Established: You are now an established ecommerce store. A common problem for retailers of this size is finding ways to continue to grow. Acquisition may be leading to a lot of one time purchases, but a retention strategy can get customers buying more often which increases their lifetime value (CLV). At this stage you should become serious about your retention efforts.
5. Well-Established: At this stage in the life-cycle your store has made it! You have risen to ecommerce stardom and you have a lot of processes and automations in place. At this point you will want to focus heavily on retention. It is easier to grow revenue getting an existing customer to buy more than it is to convince a new shopper to buy from you. Allow me to illustrate.
In the graph below, each store has 100 customers buying a $10 item each month. The grey store is retaining 5% of those customers each month, and the pink is retaining 10%. As you can see the 5% increase can lead to rapid growth that is difficult with straight acquisition.
Aside from the life-cycle stage your store is in you will also want to tailor your strategy based on what you sell.
What Are You Selling?
What you sell has an huge impact on which marketing strategy you should focus on. A retailer selling high end leather furniture is going to be totally different than a site that is selling tea and coffee.
A store whose customers purchase high value items frequently will have the highest customer lifetime value (CLV). These are the types of stores who have the most to gain from a solid retention strategy.
In general as you move to the right across this matrix you should start focusing more and more on retention. But remember you should never ignore one or the other. The key is a balance that makes sense for your store. Let’s get into some specific strategies .
Strategies to Try
Now that you know a complete ecommerce marketing strategy includes both retention and acquisition, we can look at how to incorporate both into your store. Here are a couple of strategies you can try for each.
Offensive Strategies (Acquisition)
1. Google Adwords
Often regarded as the go to form of customer acquisition. Adwords allow you to tailor your marketing message to a very specific group of people. This allows you to keep your marketing spend down while only reaching people you deem to be in your target audience.
There are tons of resources out there to help you better understand Adwords, including “How to Spend Your First $100 on Google Adwords” which is a must read!
2. Social Media and Social Media Ads
Social media is a fantastic way to attract customers. Not only do you have access to your own network of customers and fans, you also open your messaging to their networks as well.
Experiment with different social channels and figure out which ones are driving results for your store. Once you know which channels are most effective, you can supercharge them buy purchasing some promoted posts.
A good place to start is this “Social Commerce Infographic”, that shows you how effective social channels are, and which are best in particular industries.
3. Content Marketing
Content marketing often takes a back seat for many ecommerce sites, because it doesn't have the immediate results of Adwords or social media ads. However, if you commit to a content strategy, you will see some amazing results.
Content helps you to create a brand for your store in your target audience. You will be seen as an expert and who doesn't want to shop from an industry expert? Content marketing is a great way to acquire customers for those who are willing to accept the challenge.
You can get started with your own content marketing strategy by watching Ezra Firestone’s (of smartmarketer.com) video series on creating a content marketing strategy. In this video series Ezra goes over everything you need to get started and build your content strategy.
As stated before these acquisition strategies are only half of the ecommerce marketing equation. They need to be supplemented with the right amount of customer retention efforts.
Defensive Strategies (Retention)
1. Retention Emails
Retention emails are one of the easiest retention tactics to put into action. Most stores already have some form of email marketing solution, and retention emails can be incorporated into that solution. Typical retention emails focus on increasing a customers purchase frequency and recovering “lost” customers.
You can get a customer to purchase more frequently by emailing them offers that encourage them to come back and purchase before their average repeat purchase rate. You can also send emails with a very valuable offer to customers who have gone a much longer than average time without making a purchase. These “lost” customer emails are your last attempt to retain that customer.
2. Loyalty Programs
Loyalty programs are a very strong retention tool for ecommerce. They not only encourage repeat business, but are usually also used to reward for other profitable actions like an account sign up or customer referral.
When a customer receives points (as part of a loyalty program) they are given a switching cost that they must forfeit if they wish to choose a competitor for their next purchase. It is very difficult for a customer to abandon that additional value. Your customers get more value every time they come back and you get the benefits of their repeat business.
You can start your very own loyalty and rewards program for free with an app like Sweet Tooth.
3. Support Systems
Support systems create a way for you to effectively communicate with your customers, and provide them with the support they need. A support system can help both pre and post sale by allowing a customer service rep to have clear communication with the customer.
Having a live chat or help desk can turn a customer question into a sale or a customer complaint into a resolution. Often times an effectively resolved complaint or problem can turn an unhappy customer into a loyal, repeat customer.
You can learn more about using support systems in “5 ways to take charge of your ecommerce customer service.”
All of these strategies are part of an overall customer retention strategy! If you want more info on crafting your own customer retention strategy you can read “The Ultimate Guide to Customer Retention” or “7 Customer Retention Tactics to get Current Customers to Purchase More.”
You should always start by determining the right mix of acquisition and retention for your store; based on what you are selling and your store’s life-cycle stage. Once you know the right balance you can look at strategies for each.
A store that incorporates acquisition and retention is playing both offense and defense, and is set up to win in the long term.