Acquisition vs Retention: Choosing the Right Strategy

Every downturn in the market cycle sees businesses immediately rush towards customer retention and foregoing all efforts towards acquisition. As the cycle turns, customer acquisition come back into focus and retention takes a backseat.

While this may seem like sound business practice, such drastic shifts in focus could do businesses more harm than good. It can never be a choice between the two; but its more about striking the right balance. One goes up, the other comes down but is not reduced to 0. Its about paying optimum attention to each depending on the market cycle, industry, etc.

The Debate Rages On…

The debate around customer acquisition vs. customer retention is often one that brings out interesting perspectives.

Customer acquisition focuses on initiatives to attract new customers. On the other hand, customer retention comprises efforts to retain existing customers so they keep coming back for more.

Customer acquisition mainly relies on reaching out to prospects and warming up cold leads. Retention relies on understanding your current customers’ pain points and enhancing customer experience.

Acquisition vs Retention - What is it?

Given that any business would have limited resources, companies are often required to make the tough call on whether to focus on customer acquisition or retention. hese decisions are based on a variety of factors like type of industry, life cycle, etc.

While both acquisition and retention strive towards increasing revenue, they require different approaches. For example, acquisition may focus on strategies aligned with market development and diversification. In contrast, retention typically works in tandem with improving customer support and increasing customer lifetime value (CLV).

Cost Comparison between Customer Acquisition and Retention

Cost Comparison between Customer Acquisition and Retention

Cost involved is one of the prime factors that any business considers before making a choice between customer acquisition and retention. What a business would have to pay for customer acquisition vs. customer retentioncan vary wildly from business to business and industry to industry,. But hey, we can rely on our good old friend “data” to make better decisions.

Sarvana Kumar, CEO of, says that it can cost between five to seven times more to acquire a new customer than to retain an existing customer, depending on your industry. Further, Shaily Verma, Head of Data at Damac, notes that the probability of selling to a new prospect is 2% to 10%. In contrast, the probability of selling to an existing customer is 60% to 70%!

It’s clear that the cost of acquisition is significantly more than the cost of retention.

There are two main reasons for this.

First, people buy from brands that they trust, and building trust in today’s world is expensive.
Second, marketing channels ideal for customer retention (for example, email marketing) are usually cheaper than marketing channels and activities apt for acquisition (for example, lead generation, paid or targeted ads, etc.).

When deciding how much to spend on acquisition and retention of customers, brands need to consider the CLV (customer lifetime value), that is, how much revenue a customer brings in once they are associated with the brand .
But obviously, cost is not the only decisive factor. And of course, companies would need to acquire customers before they can retain them, right?

Still doesn’t settle the debate? Let’s get to the point.

Acquisition or Retention?

Acquisition or Retention?

Jokes apart, here’s what the experts have to say.

“I think no business should have to decide between retention and acquisition because both of them are important.”, says Ankit Bansal, Head of Digital Marketing Strategy at 6th Street, leading online shopping site in GCC. He adds that it’s not an “or” situation, but an “and” situation. Companies need to focus on both, but the proportion of that focus will vary. In some circumstances, brands may want to focus more on acquisition, while in others, they may want to give retention a bigger push.

When to Focus on Customer Acquisition

Customer acquisition is the primary goal for companies in the growth stage. For a new business, with zero customers and zero brand recognition, all effort must be directed towards getting the brand name out there and acquiring customers.

This will have a direct impact on the revenue for the business. But, before they go about acquiring, brands need to ensure that there is a big enough addressable market, the messaging and brand voice are clear, and that there is proper product-market fit, among other things. “It is essential not to go blind,” says Shaily Verma, Head of Data at Damac, underscoring the importance of research in customer acquisition.

Another situation in which customer acquisition is a necessity is when the company is entering a new market. Say, if your company is well-known in Bengaluru, it does not mean people know you in Mumbai too. This is why customer acquisition needs to have primacy during this stage.

Further, at least some marketing efforts need to go towards customer acquisition no matter how large or established the company is. No brand in the world has 100% name recognition. Even Coca-Cola needs to focus on acquiring new customers.

Here are some top-notch examples of how brands have managed to attract new customers:

Shopify has made a big name for itself in a short span of time. This company is behind the success of numerous e-commerce stores. The company has devised innovative ways of getting noticed. For instance, it uses interactive content such as business name generators and quizzes to attract prospects. This type of content is highly sharable and generates a self-sustaining word-of-mouth loop for the company.

Acquisition vs Retention - Shopify

Another new brand that is making waves is TurboTax. This brand runs ads that promise free tax filing services. The catch is only some customers are eligible for free tax returns on the site. While TurboTax may not make money directly from those people, it will still have the potential to drive revenue from those who click on the ad and then find out the filing isn’t free for them, and will proceed to get the filing done anyway. Meanwhile, there are also upsell opportunities for free customers. Such kind of freemium models are a cool way to give customers a taste of your product.

Acquisition vs Retention - TurboTax

When to Focus on Customer Retention?

According to a study by Bain & Company, an increase in customer retention of 5% could improve profits by 25% to 95%! This just goes to show how much potential for revenue generation customer retention has.

Brands would benefit from engaging in customer retention because it’s much more cost-effective than customer acquisition. A company that has built a sizeable base of customers can magnify its focus on customer retention. Further, it is essential to note that customer retention efforts have acquisition impact as well in the form of referrals from loyal customers.

Let’s take a look at how some established brands are distinguishing themselves by building a loyal following.


Customers are only getting more demanding with time as options galore. They expect the same level of service from an online experience as they do from an offline one, and Amazon understands this! The brand stresses on the customer’s journey right from the time a visitor lands on an Amazon page all the way upto checkout. This is by designing a process so seamless that 49% of all Amazon customers give the company the highest marks for excellent service.

Acquisition vs Retention - Amazon

Four Seasons

Another example of stellar customer retention is that of Four Seasons. In business, especially hospitality, it is a non-negotiable to make every customer feel important. The brand has taken proactive steps to cater to every need of their guests by releasing a chat service for guests to get in touch with the staff. The result: their bookings have never been higher.

Acquisition vs Retention - Four Seasons

Now, retention can be tricky in some industries like travel. The travel industry expects customers to be periodic users of their offerings, not too frequent. How does retention work there?

“Although acquisition takes priority in this particular case, retention also plays a big role,” says Namrata Bhatia, Director Marketing at Holiday Factory. “Using data models while humanizing the entire customer experience and also personalizing recommendations can go a long way in creating a base of loyal customers.

In the end, it’s all about finding a way to keep the customer alive in your ecosystem, emails…SMS…whatever it takes! Remember, a loyal customer can become your brand advocate,” she adds. “Ideally,” Shaily says, “your retention should fund your acquisition.”

This is such an eye-opener. Brands need to focus on self-sustaining models to lower burn resulting from acquisition. And who can deny the power of technology in driving optimal marketing efforts!

Considering the staggering amount of data available to marketers, they need to know how to divide the population into clear segments and figure out whom to target, when and how. Leveraging data models can help detect early churn likelihood, and listening to customers can help get to the root cause of customer problems.

Ankit from 6thStreet concludes, “Data drives strategy in both acquisition and retention. While most businesses have access to enough data, what matters is how you use it, else it’s just a wormhole. Is the data actionable in real time? Is it enabling people to make the right decisions? Using automation tools for continuous tracking, testing, and actioning is what brands need to balance their acquisition/retention strategies.”

Consolidating all automation platforms to make sense of the data and building a robust martech stack can make things a lot easier for brands.

Case Study: Uber

When it comes to an interesting mix of acquisition and retention strategies, Uber goes the distance!

A revolutionary idea to ease local transport, Uber came to be in 2011. Since the very start, the company acquired new customers by offering free first rides and massive referral programs. For retention, Uber devised its loyalty program “Uber VIP.”

Most importantly, it leveraged the two-sided review system for both drivers and customers to get feedback and make service improvements. Uber Cash and Reward Program for loyal customers added to customer delight and served as an icing on the cake, or should we say, made the ride sweeter?

The result: Uber’s unprecedented growth, with Uber drivers completing 7.6 billion trips in 2022, a 20.6% increase y-o-y.

Uber is indeed an epitome of how acquisition and retention strategies can be intertwined into a self-sustaining loop.

Acquisition vs Retention - Uber

TLDR? Here’s the long and short of it:

  • Looks like the never-settled debate of customer acquisition vs. retention will alas never be settled.
  • Both acquisition and retention take priority in different cases depending on the industry, brand maturity, customer journey, and so on.
  • While the costs of acquisition are certainly higher than retention, acquisition is an essential step for brands, particularly the new ones or those entering a new market or geography.
  • In the end, it isn’t an “either-or” question, but a balance that combines both in relevant proportions.
  • Consolidating marketing automation tools and making robust use of data can help brands strike the requisite balance between acquisition and retention.

Discovery and Customer Onboarding: First Steps Towards a Happy Customer

Think of a brand or product, or app that makes you happy. So happy that you would gladly use it again and again and also recommend it to others?

Can you think why that brand/product/app makes you happy?

Was it the product itself or the accompanying experiences like customer onboarding? Or both? Now turn it around, consider your customer base, and assess whether you have been giving your customers a similar experience.

Making a customer happy is challenging, but we’re here to help you identify and engage better with those on the happy path to becoming your loyal customers and advocates of your brand. 

So let’s dive right in.

The 7 Stages of the Happy Path in Customer Lifecycle

In this series, we will walk you through the journey path of a happy customer. It marks the stages in a customer’s life, from discovering a new product/app to becoming a repeat customer until they qualify as loyal customers and eventually advocate for your brand. 

There are 7 life stages in a happy customer’s journey:

Customer Lifecycle Marketing Stages1. Discovery

This is when the customer discovers a product or service that fulfills a certain need of theirs such as food delivery, hotel booking or booking a cab.

The customer may have discovered the product/app/platform through various sources such as: 

  • Ads on traditional, digital, and social media
  • Through organic mentions or reviews by other users on social media apps, blog posts, vlogs, etc.
  • Word-of-mouth publicity through friends, family, colleagues, and acquaintances

Here, target potential customers and draw them to the product using relevant content about the product and emphasizing the value it offers. Keep the communication simple. Avoid details about advanced features. That can come later.

“During discovery (stage) focus on making an impression on your customers to drive them towards your destination (your product website or app) where they can know more about your product,” says Sagar Patil, a growth consultant, who has worked with retention marketing, CRM and product teams at brands like Flipkart and Jumia (UAE). He is also the Course Director for CELP – Customer Engagement Leadership Program – the flagship customer engagement course of

2. Customer Onboarding: Getting That First Impression Right

Customer Onboarding is all about making that big first impression. Here, your customer gets to experience your product and the value offered by it for the first time. This experience can be a deal-maker (retention, long-term relationship) or deal-breaker (never try to use the product again), depending on the onboarding flow designed. 

At this stage, help the customer become familiar with the product by giving details about the functioning of the product, its usage, and its many benefits. Overwhelming customers with a lot of product-related information such as add-on features can be confusing and off-putting. Identify the most viewed or used features and display details about them during the onboarding process.

A good onboarding flow should convince the customer to commit themselves to the product or app.

Convincing The Customer

What does this commitment look like? Well, that is unique to each product. 

It can be in the form of a good registration flow or experience for freemium products. Here you allow the customer restricted access to a few app/product features which then convinces them to purchase a subscription. Apps that fall into this category include music or video streaming platforms (SoundCloud, Gaana, Spotify, Netflix, Prime Video), online news outlets (Indian Express, Business Standard, The Economist, The Caravan Magazine)  audiobook platforms (Audible), etc.

These apps hook the customers by showcasing some of their best features during the onboarding stage. They also demonstrate the ease and convenience of using the app so that the customer commits to a long-term subscription.

Onboarding Customer Lifecycle Marketing SoundCloud

The SoundCloud onboarding process is one such example of a smooth onboarding flow. On downloading the app, at first glance you know the value proposition it offers – helping you discover new music. From there, the app has a seamless, pleasing-to-the-eye interface asking you to sign up with mail which opens the disclaimer tab.

Onboarding Customer Lifecycle Marketing SoundCloud

The app does request information other than your age and gender so that it can personalize content and music recommendations. After that, choose a display name and picture, and you are ready to explore the app! 

In case of India-based music apps such as Gaana, customers are also asked to choose their preferred language or languages to customize music recommendations further.

Balancing Customer Experience And Customer Convenience

It is critical to strike the right balance between a good customer experience and the utility of the information requested here. Ask enough questions, so you are able to profile the customer based on likes, dislikes, and preferences without being too intrusive.

Customer convenience is of utmost importance here. Requesting information that may seem irrelevant during the onboarding process could make customers uncomfortable. 

In the above SoundCloud example, asking for gender and age along with language preferences is fine but asking them to part with personal information like address and bank account details would be deemed unnecessary. 

Using Registration to Familiarize Customers with App Features

Another form of onboarding is to customers familiar with the app by helping them set up their wallet, complete their KYC registration or walk them through the various app features. Examples include crypto apps (CoinDCX, WazirX), financial services apps (Scripbox), fitness apps (, Fitbit), etc. These apps require you to register, and also pay for their services before the customer can derive value from them.

For instance, crypto apps like CoinDCX Pro requires the customer to complete the KYC verification process before it even lets you add money to the e-wallet. KYC process includes taking a selfie and providing both an address and identity proof document scans. The KYC takes some time to get approved. 

Once the approval is received, add the CoinDCX bank account as a ‘beneficiary’ to your online banking account to transfer money to the e-wallet. After this, you can start trading. The app is well supported by an offline team that reaches out to help customers to start trading.

Financial platforms that require personal information are always viewed with a little suspicion.  Any pain points during the onboarding processes can seriously harm the prospects and the credibility of such platforms.

The next stage is Activation. You can read about it here.