How to improve customer acquisition and retention
The secret of business growth is deceptively simple: if you can acquire more customers and keep them for longer, your sales will accelerate. To achieve this, we help our investees to build a scientific, data-driven approach to customer acquisition and retention.
This is why we’ve built our dedicated, in-house customer acquisition & retention team. The expert team, headed up by Dave Kirby whose background spans both marketing and strategy, works closely with our leadership teams to enable them to build efficient customer acquisition engines. It’s a different way to think about your marketing function. Many organisations think of marketing as a cost source rather than as a profit centre for your business, driving its growth. By shifting the focus to customer acquisition, we’ve found this to be a catalyst for growth.
In practice, that means compiling much more accurate and comprehensive data, and then putting this information to work. Our experts focus on data points such as customer lifetime value, customer acquisition cost, and which customer segments generate the most value for your business. Based on that data, you can focus your efforts with much greater precision.
Getting this customer acquisition funnel right gives entrepreneurs a competitive advantage and is essential to delivering on potential growth in a business. Guidance on the foundations, such as primary research with customers and prospects, optimising your digital marketing team, or implementing more sophisticated marketing tools, can put your business on the right pathway to a more strategic approach to improving customer acquisition and retention. We work with our investees to provide this help and equip them for the future.
Customer acquisition and retention in practice
The aim should be to build a virtuous cycle of customer acquisition and retention into your business. Our team’s expertise focuses on identifying where to prioritise marketing spend, improving the efficiency of your marketing and targeting the right customers. And by reinvesting the returns from this process, you can drive further gains.
It’s a formula for success that has delivered substantial growth for many of our investee businesses. Take, for example, BoilerJuice, the leading online heating oil marketplace. We helped its marketing team to understand the true lifetime value of their customers – we identified that the spread between the customer lifetime value today and the cost of customer acquisition was more than six times. That was an opportunity to accelerate the rate of customer acquisition, by investing more in marketing given we had the confidence that this would be profitable from our analysis, enabling them to acquire more customers and ultimately drive profitability. For BoilerJuice, working this way has seen it become the partner of choice for over 60% of UK heating oil suppliers and gain significant share of the UK’s online market.
Disguise, the live events specialist, is another example of what this approach to customer acquisition and retention can achieve. The customer acquisition & retention team worked with disguise to build a much more detailed understanding of the factors driving its sales, including the role played by creative directors and technicians, which had previously not been visible. This empowered the company to make bold decisions about how its sales team should be structured and operate, better aligning it against the customer journey. The result has been a significant increase in revenues and profitability.
Value from data
Crucially, to get to the answer of how to improve customer acquisition and retention, you will always need to have access to accurate data on your customers and their markets. This process is not always easy, but we can apply new technologies, access data sources and use sophisticated analytics techniques to generate actionable insight.
This insight empowers businesses, enabling senior leaders to make bold decisions about where to invest for future growth with greater confidence. It’s a scientific approach to customer acquisition and retention, built on data and analytics rather than hope.
Our team can support this transition to a data-driven customer acquisition and retention strategy, drawing on the experience and expertise gained in working with other businesses in this way over the past two decades.
What does a good customer acquisition and retention strategy look like?
The best businesses will understand their cost of customer acquisition, how much their customers will spend with them over time, and what they can do to increase this. These are the basics of a strong customer acquisition and retention strategy. It means that you understand where to prioritise marketing spending, which customer segments you should go after, and the balance between hunting new customer acquisition and encouraging existing clients to spend more. Knowing this empowers leadership teams to make confident decisions about how to grow their business efficiently
A reliable customer acquisition and retention strategy will stand on the solid foundations of accurate and comprehensive data. We work with our investees to answer questions such as:
- How many customers do you have today?
- How many customers are potentially available to your business – that is, how big is the addressable market for what you do?
- What does a customer cost to acquire for the first time?
- How often do your customers make purchases from you?
- How much do your customers typically spend on each purchase?
- How long do your customers stay with you?
The ability to answer these questions accurately creates a golden opportunity: if you understand both the lifetime value of your customers and the customer acquisition cost, you can set your business on the path to maximising profit.
To some extent, the ability to compile customer acquisition data analytics will depend on the nature of your business. For ecommerce businesses, tracking this information will typically be easier than for consumer-facing businesses trading from physical premises. Equally, the profile of different businesses’ customers will naturally vary. A software-as-a-service business with subscription income that comes in each month will have a steady customer lifetime value that rises in straight line; a retail shop’s graph would look more lumpy as individual transactions ebb and flow over time. There is no right or wrong answer to these questions. It’s how you leverage this information to drive further acquisition or improve retention.
From insight to action
Crucially, however, your customer acquisition analytics should enable you to proceed with your plans for growing your business on a much more informed basis. The cost of customer acquisition varies, and the returns diminish as you have to spend more; but with the right data, you’ll have a clear picture of the total profit you’ll make for any combination of cost of customer acquisition against lifetime value. That is, you can optimise your business towards the profit maximising level of customer acquisition.
Moreover, there are lots of things you can do to improve the lifetime value equation. For example, you can make your marketing more efficient – by investing in a new website to improve conversion rates, say, or redesigning sales processes to convert more customers. This way, you’ll increase profit without having to spend any more on marketing because you can reinvest savings in further customer acquisition.
Equally, you can increase the lifetime value of your customers by targeting the most valuable segments. Once you’ve worked out which customers derive the most value from your products or services, you’ll know which customers you should be going after – which new customers to target and who in the current customer base should get most attention.
Importantly, this isn’t a single exercise. When your marketing team constantly repeats and refines this analysis, it can create a virtuous circle of customer acquisition and retention. This is what it means to operate with an effective customer acquisition and retention strategy.
How Livingbridge can empower your business
Our customer acquisition & retention team has years of experience working closely with investee companies to help them improve or build out a new customer acquisition marketing strategy. Our experts can help you identify and source the data you need, work with you to turn this raw data into actionable insight and guide you through the process of putting principle into practice.
We’ve worked with many companies who have achieved great results by investing time and resources in their customer acquisition and retention strategies. At our investee company BoilerJuice, a project to understand the addressable market at a highly segmented level. A local-focused customer acquisitions strategy boosted customer numbers by 50% in just two years.
Ten10 is another good example of what is possible. We invested in the company in 2015 and began discussions with its senior leaders about what an investment in paid search could achieve for the company. We were able to guide Ten10 towards a much better understanding of what its previous digital marketing efforts had achieved, and to identify an addressable market of an additional 277,000 clicks in the UK and the US. Since this engagement in 2017, 30% of new client wins have come from digital marketing.
At Sykes Cottages, meanwhile, close attention to customer service was crucial in boosting customer retention. We helped Sykes implement new structures based on measuring its net promoter score (NPS) and developed data which demonstrated how customers who engaged with its feedback systems were more likely to rebook. The result was that Sykes’ rebooking rate went from 33% at the time of our investment to 42% by 2019.
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