"Your customer doesnt care how much you know until they know how much you care"-Damon

Richards

destination@customeracquisition.com
Marketers face a big question in todays dynamic world- enterprise success lies in acquiring
new customers, or retain and nurture their current customer base. Its a conundrum
companies have faced for years and continue to do so even now. Is it wise to go out for new
leads or develop a loyal customer? The
dilemma is where to allocate time, money and
resources- so as to attain profitability.

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70 per cent of the companies say its cheaper

to retain a customer than acquire one. A recent
research shows that 44 per cent of the
companies have a greater focus on customer
acquisition vs. 18 per cent that focus on
retention. Customers are assets that need to be
acquired before they can be management for
profits.
Acquisition will remain the cornerstone in the
early stages of a start-up business. Its a means of brand building and further generating
revenue. As the competition rises customer acquisition strategies become more important
than retention. For new startups and for those looking for newer markets, acquiring new
customers is crucial, as they do not have any customer base. For the already existing
companies, where the market is mature there is always a need to acquire a new customer, as
the older ones are lost.
Customer acquisition is always a dependent process and certainly exerts influence on
customer retention and consumer behaviour. In the E consultancy study, 47 per cent of the
marketers said they behave equally on retention and acquisition. Retention is all about turning
the first time buyers into repeat purchasers. Customer loyalty has been positively related to
profitability. It takes less effort and resources on loyal customers compared to acquiring new
one. Amongst rising corporate expenditures on customer loyalty, there has been some
challenging evidence as far as its relation with profitability is concerned. Recent evidence from
Werner Reinartz and Kumar has shown that the loyal breed of customers was hardly
generating any profits. Their database taken from four companies, studies for four years,
challenges the fact that loyal customers are cheaper to serve lesser price sensitive and bring
business to the organization.
Businesses need to be more judgmental and objective in measuring relationship between
loyalty and profitability. This is for the first time that the profitability of loyalty has been

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but is not guaranteed by Chitkara Business School as to its accuracy. Chitkara
Business School will not be responsible for any interpretations, opinions
generated or decisions taken by readers.

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challenged. Understanding which customers are really profitable for any organization remains
a relative term.
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Written by: - Ms. Swati Vashishtha

Faculty of Marketing, Chitkara Business School

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