Customer retention over acquisition in 2025: The good, bad, and glossy side of retention

New Delhi: Recently, CleverTap released a report on the top five marketing trends for 2025. The report highlighted that customer retention will overtake customer acquisition as a strategic priority.

Citing economic and geopolitical uncertainty, the report mentioned that “acquiring new customers becomes more challenging and expensive for businesses as customer priorities change. This is where a robust customer retention strategy can help businesses stay competitive and profitable and where we see this trend coming to the limelight this year.”

Weighing in on how acquisition costs have gone up over the years, Anshuk Aggarwal, co-founder of AdYogi, said, “Five years ago, the acquisition cost in India was as low as Rs 400 (approximately $4-5). Today, it has increased to $10-15. As a result, brands are realising the importance of retaining their customers and boosting loyalty. 

WhatsApp has become a core channel for customer retention. Many brands use WhatsApp to communicate with their existing customers, informing them about new launches or sale events. This approach helps bring back existing customers and enhances loyalty.”

Retention over acquisition

According to Forbes, an increase in customer retention by 5% can lead to a company’s profits growing by 25% to around 95% over a period of time. Moreover, studies show that existing customers are 50% more likely to try new products and spend 31% more than new customers.

Explaining the importance of retention in simple words, Vivek Kumar, Chief Business Officer at DViO, said, “Acquiring a new customer is exhilarating. It’s the dopamine rush of a “new win,” the thrill of scaling. But here’s the brutal truth—if your business is a bucket with a hole in it, pouring in more water won’t fix the leak.

Retention is the secret weapon of sustainable brands, yet most marketers still chase new customers like a mirage, forgetting that the real gold lies in those who’ve already chosen them because my experience has told me that 80% of your revenue comes from 20% of your customers.”

Shifting budgets

Now that we have established that retention marketing will be a key area of focus in 2025, what percentage of their budget would brands dedicate to retention?

Answering the question, Aditya Jangid, Managing Director of AdCounty Media, said, “With a certain emphasis on commerce, fintech, and subscriptions, 30-40% of brands' budgets are expected to be allocated for retention strategies encompassing customer loyalty, engagement, and AI-driven personalisation. 

Brands that prioritise long-term customer value (LTV) over immediate profit will spearhead this trend and adjust their budget priorities in accordance with retention.”

Brands, listen in.

You need to stop thinking about retention as a “budget shift, but think about it as a budget leak that needs fixing.”

Why?

Because “most brands don’t even realise they’re paying to win back people who already know them. A poorly structured marketing budget means brands spend millions acquiring customers, then lose them due to friction, only to target them again with new ads,” said Kumar of DViO.

Achieving “profitable growth”

If businesses try to increase customer lifetime value (CLV), which is a metric that measures the total revenue a business can expect from a single customer throughout their relationship, they can achieve cost-effectiveness, increased customer loyalty, and higher conversion rates.

But it is always easier said than done, so how can brands achieve cost-effectiveness by focusing on retention?

“Retention marketing is, by its very nature, a low-cost proposition as it drives maximum customer lifetime value (CLV) rather than solely acquisition. Brands can incorporate AI-powered automation, hyper-personalisation, and omnichannel communication to cost-effectively market to customers.

Examples of such tactics include email marketing, loyalty rewards, and referral programs, which have been proven effective and do not have high advertising costs. In addition, predictive analysis helps distinguish between at-risk customers before the point at which they churn, leading to proactive contact. In the end, brands that focus on retention have less need for expensive ad-based acquisitions while they proffer growth via customer advocacy,” said Jangid of AdCounty Media.

Adding to Jangid, Kumar (DViO) said, “Brands often measure churn as an event, such as when someone cancels a subscription, deletes an app, or stops purchasing. However, churn starts long before that—it begins when a loyal customer starts second-guessing you.

This can happen when their checkout experience is frustrating when they see an ad for new customers offering a better deal than what they get, or when they realise your competitor understands them better than you do.”

How to achieve retention?

Brands are most likely to use new-age tech and hyper-personalisation to focus on their existing customers, but what are the weapons in their arsenal they are most likely to use?

Chandan Bagwe, Founder and Managing Director, C Com Digital, said, “CRM systems, customer data platforms, marketing automation platforms, and customer feedback tools can be used by brands to focus on retention.”

Elaborating on his thought, Bagwe said, “Customer Relationship Management (CRM) systems are essential tools for businesses looking to manage interactions with current and potential customers. They help organise customer data, track interactions, and analyse customer behaviours. By consolidating customer information into a single platform, businesses can personalise their communications and tailor their marketing strategies to meet individual customer needs.

Secondly, marketing automation platforms can be used to automate repetitive marketing tasks, such as email campaigns, social media posting, and ad scheduling. By using marketing automation, businesses can create personalised marketing workflows that help nurture leads through the sales funnel. These tools often provide analytics and reporting features, which allow companies to measure campaign effectiveness, optimise strategies, and improve return on investment. 

Thirdly, brands will have to use customer feedback tools that gather feedback and mark the areas for improvement. These tools include surveys, polls, and review platforms that enable businesses to capture insights directly from their customers. By analysing this feedback, companies can identify trends, address customer concerns, and enhance their products or services.”

Sharing examples of how Indian brands are focusing on increasing the CLV, Gaurav S. Ghanekar, Media Executive at BC Web Wise, said, “Zomato Gold bundled with orders at a very minimal cost drives repeat purchases with subscription-based loyalty programs offering free deliveries and discounts. Mamaearth fosters community engagement through sustainability initiatives and interactive content, strengthening brand loyalty. 

Tata Cliq ensures a seamless post-purchase experience with easy returns and 24/7 customer support. Cred uses gamification and rewards, encouraging timely credit card payments for continued app engagement. Meanwhile, Amazon Prime retains users by providing exclusive perks, early access to deals, and OTT content, making it difficult for customers to switch.”

Brand building or performance in 2025?

Kumar (DViO) feels that retention marketing will lead brands to stop seeing brand building and performance marketing separately.

Stating the rationale for his thoughts, he said, “Retention is a long-term performance strategy. When you build deep, habitual brand relationships, you create a pipeline of future revenue that doesn’t need to be ‘converted’ again. It’s the difference between selling a product today and selling a customer’s next ten purchases, or running ads for reach and running ads that reinforce past choices. The brands that merge brand storytelling with retention-driven data will own customer loyalty without needing to buy it back every quarter.”

Impact on adex

Since the acquisition costs are high and most brands are likely to focus on retention, the question arises: what will be the impact of retention marketing on the overall adex in 2025?

Speaking of the effects, Jangid (AdCounty Media) said, “Retention marketing will probably change the landscape and reduce the spend volumes directed toward acquisition-oriented campaigns to first-party data-based engagement. Lower third-party reliance, increasing spend in CRM-bound channels like email and SMS, and smarter allocation in customer experience initiatives can be expected.

Furthermore, reduced new-user acquisition ad spends but increased personalised remarketing, retargeting, and loyalty-driven ad strategies are also likely. Performance marketing budgets tend to be more lifecycle-based rather than merely initial conversion-focused campaigns.”

To put everything mentioned above simply, Kumar said, “‘Just checking in’ emails are out, and true personalisation is in. Customers don’t need another generic loyalty email; they need experiences designed around their habits. Think of Netflix’s eerily accurate suggestions or Starbucks knowing your morning order. 

Fixing the smallest frictions before they become deal breakers is crucial. Retention isn’t always about grand gestures—it’s about removing micro-frustrations that make a customer hesitate. A confusing app layout, too many checkout steps, or a lack of seamless customer support can kill loyalty faster than bad products.

Thirdly, creating habit loops instead of one-time transactions is essential. People stick to brands that integrate into their routines, whether it’s a refill subscription model or a habit-forming rewards program. The goal is to make choosing your brand effortless. The losers are those who still believe retention is about loyalty programs and email discounts.”