Retention vs Acquisition: What is top priority for marketers

With the rapid fragmentation of audiences, business categories and mediums, consumers are often spoilt for choices which result in diminishing brand loyalty. Therefore, it’s getting more and more difficult for marketers to finding the right balance in spending between acquisition and retention. India’s top marketers divulge their secrets for acing the omnichannel marketing game.

Shashank Srivastava

According to Shashank Srivastava, Senior Executive Director, Marketing and Sales, Maruti Suzuki, automotive is a very high involvement category for any owner, and, therefore, the company always has a holistic marketing approach. This high involvement starts from the purchase process, lasts right through the duration of ownership and extends till the time he/she sells the vehicle and buys a new one. 

“We at Maruti Suzuki look at lifetime relationships with our customers. As such for us, there is no separation between acquisition and retention. It’s about starting customer relationships and constantly building on it. We are a customer-obsessed organisation and that has worked well for us over the years,” he said.

He also added that any campaign that endears itself to customers and connects with them, is at once an acquisition campaign for new relationships and a retention campaign for the existing. 

“Many of our recent successful campaigns from Baleno and Brezza to Grand Vitara, Fronx and Jimny have not only welcomed new customers into the Maruti Suzuki family, but have also attracted existing Maruti Suzuki owners to upgrade from their existing model,” he said.

In his views, ATL-led campaigns have been focused on acquisition and CRM-led campaigns have been used for retention, conventionally, but those lines have blurred since the existing customers see brand TVCs and print ads as much as new customers. 

“In turn, existing customers with happy ownership experiences spread a positive word of mouth, and that has been proven to be the most effective source of new customer acquisition. I cannot say if this is necessarily true for all industries and categories, but it’s true for the automotive business,” he opined.

Anna Ohlin

According to Anna Ohlin, Country Marketing Manager, IKEA India, customer acquisition is all about onboarding new customers to the business and in today’s time, it is all the more important to acquire quality and long-term new customers. Retention, on the other hand, is the ability of an organisation to drive growth through customer lifetime value.

“Though retention is always important, many new companies put more focus on acquiring new customers, however, it is important to note that the cost to acquire a new customer is significantly higher than retaining the new customer,” she added.

In her viewpoint, an organisation should be able to activate both strategies at any given stage to drive maximum growth. She further opined, “We should always remember; retention starts immediately after onboarding in today’s highly complex and competitive landscape.”

“The challenges in acquisitions would be grabbing the attention of consumers in an extremely fragmented age. But it is also important to gain quality customers which is more expensive but pays off in the long term. At Ikea, we always prefer activating both,” she said.

With this, she also added that if a brand doesn’t have a good retention strategy in place, it might find itself losing all those customers that it had spent so much effort acquiring. 

Rohan Mascarenhas

As per Rohan Mascarenhas, Head- Brand and Marketing Communication, VECV (Volvo-Eicher JV), customer acquisition and retention are both important, but the priority depends on the evolution of the category and the current state of the segment is focused on. 

“It’s a credible fact that the cost of acquiring a new customer is five times that of retaining an existing one, and the chances of closing a new sale with an existing customer is 50-60%, while it’s only 10-20% with a first-time customer. Moreover, a marginal increase in spend on existing customers results in a highly disproportionate level of profitability,” he said.

Further, he also added that despite the aforementioned, the top line and bottom line in business need to be balanced - especially when it comes to venturing into new potential markets and futuristic product lines etc. Therefore, profitable growth could be the right strategy, especially in ‘high investment and high risk’ categories.

“Acquisition-centric marketing has its advantages in terms of pushing in more potential customers into the top-end of the purchase funnel. But there are some pertinent questions to be asked. What is the quality of the customers being acquired (quick to convert or easy to upgrade, etc.)? How robust and effective is the customer journey from awareness to conversion (competence of the team/integrated tech platforms ad management system, etc.)? Are the acquisition costs being tracked and optimised based on customer personas, market maturity, marketing engagement, tactical campaigns,” he stated. 

In his view, while strategic tie-ups with online aggregators coupled with a robust enquiry management system is a new but highly cost-effective acquisition initiative, customised solutions through app-based intelligence also seem to be working for customer retention.

“In my opinion, acquisition-based marketing works best for low-purchase prices and very low frequency of repeat purchases, like sweets or cold drinks. However, in categories where the investment is high and there is an opportunity for repeat purchase, upgradation to the next level and recommendation to others, then a retention focus is very effective, like in the case of mobile phones, cars, trucks and buses, and more,” he said.

Amit Garg

According to Amit Garg, AGM- Marketing, Healthcare supplements, Dabur India, the type of strategy that one chooses for their brand is mainly based on what lifecycle is the brand at and what is the penetration level in which the category is operating because rarely a brand chooses both the strategies- either one goes for more customer trials or retain the current consumers of the brand.

“In most of the categories that we are operating in, currently, we are in a very low-penetrated category but some of them are very highly penetrated as well, for example- oral care. In such highly penetrated categories, since the objective is to get new users and to gain market share from competitors, therefore customer acquisition is very important. But in that case, too, customer retention plays a secondary role,” he said.

He also went on to add that when it comes to the FMCG sector, the customers can only be retained if the product is ‘strong’ and ‘powerful’ and not much has to be invested in retention. 

“Basically, depending on the category, one of the two is the primary strategy and is followed by the other as a secondary strategy. In fact, for healthcare, what has worked for us is the product proposition primarily, followed by the trust and belief that Dabur brings along with it. Retention in our case happens because of the power of the product and its equity, but the acquisition is our primary strategy for healthcare because a lot of new consumers are coming in and the penetration of the category is small,” he stated.

Do ‘Brand Loyalists’ really exist in the modern tactical landscape?

IKEA India’s Ohlin pointed out that the scale of brand loyalty is diminishing today, she said, “Building a deeper relationship with consumers is extremely important for them to come back to your business multiple times. Consumers today expect a lot more from the brand than just engagement and offers at different times of the year. And, brands need to provide personalised experience seamlessly across omnichannel touchpoints, ensure excellent customer service including fast query resolution to gain customer loyalty.”

She also emphasised that loyalty programs alone are not enough to retain customers’ trust, brands also need to stand for the cause, build engaging communities to stay relevant and create brand desire among its potential and existing customers.

Dabur’s Garg also shared the view that earlier on there was loyalty in consumers, but today consumers are more volatile and are switching brands quickly. But in the healthcare segment, the consumers mainly stick to a brand when they are cured by a certain product of that brand. Switching happens more in categories such as personal care, confectionery, etc.

All the more, Srivastava also pointed out that ‘Brand Loyalist’ is not a word that Maruti Suzuki likes to use.

“If we can constantly stay relevant functionally, connect emotionally and satisfy their lifestyle, then we hope customers will continue to see value in their relationship with us. In fact, many of our customers have relationships not just throughout their lifetime, but across generations. And, we do not take these relationships for granted but stay grateful for their love every day,” he added.

Unlike Srivastava, Mascarenhas opined that customers today become loyalists when the brand goes beyond fulfilling its functional promise and is truly integrated into their lives. Therefore, an intelligent Customer Relationship Program - that goes beyond the typical ‘loyalty points’ – can evolve customer in terms of value, and turn them into brand evangelists.

Moreover, in his view, investing in providing and promoting a high level of customised value results in not only creating strong brand equity and loyalty but consistent profitable growth as well.

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