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Customer Retention is Your Budget’s Best Friend

By September 27, 2022Education, News & Updates 10 Min Read

Investing in returning users can increase your revenue by 25% to 95%.

retention vs ua magnet

In a competitive market, what’s more important? Acquiring new customers or retaining current ones? While the lure of acquisition is tempting, it can cost your business up to 5x the amount of maintaining your existing customer base. Marketers can use customer retention to create scalable growth while minimizing their user acquisition (UA) costs to save money.

Companies win by targeting the right audiences, getting to know those users, meeting their wants, and developing customer experiences that keep users interested over time rather than pouring ever-increasing quantities of money into advertising to reach and entice new customers. 

This blog will dive into UA, customer retention, and their impact on your bottom line.

What is customer retention?

The measure of how well a company retains customers who use its products and/or services over a given period.

Not only is customer retention the cornerstone of sustainable growth for small and large businesses, but it’s also a good barometer for the quality of products and/or services your company provides. You can use the retention rate formula below to measure your progress in quantitative terms.

retention equation

Retention rate

Retention rate is the ratio of the number of retained customers to the number at risk. This number is calculated by dividing the total number of unique users that activate at least one session and the number of installs within a given period.

How you benefit

Consumers that trust your company and faithfully use your products and services are worth their weight in gold. Beyond profit, these relationships enable marketers to make budget decisions more comfortably, are lower risk, and require less maintenance over time.

Cut acquisition costs

Companies that master customer retention can reduce customer acquisition costs (CAC). This is because customer lifetime value (LTV) increases hand in hand with higher retention rates. A higher LTV/UA ratio indicates a healthy business and happy customers. 

Increase revenue

Retained customers are more likely to reengage financially with your company. An established relationship will lead to them buying and spending more frequently than newly acquired customers. They recognize the worth of your products or services and will return time and again.

Build longevity 

Your customers are the foundation of your business’s long-term success. Customer loyalty goes a long way, especially in economic uncertainty when every transaction counts. Investing in these relationships improves your company’s future financial stability. 

But here’s the catch, retention starts with acquisition. In other words, no risk, no reward. Let’s take a look at UA and what that means.

What is user acquisition?

The science of building an audience and brand. UA is a quantitative approach to marketing with a specific goal of gaining customers.

We all have to start somewhere, and that beginning is helmed by acquisition. You can’t have customer retention without it, and it can be an expensive process. To determine if your acquisition efforts align with your budget, you can refer to CAC. This is the cost of acquiring a  customer. It details the resources and expenditures that occur during the acquisition process. It’s a way to keep your budget in check and a crucial metric for determining how much value new consumers offer your business. Common strategies you might recognize include promotions such as customer referrals or loyalty programs.

Do the benefits outweigh the cost?

Customer acquisition is especially important for new businesses or those with less known products. Using the right UA approach can help companies expand, while targeted programs enable businesses to gain the right clients at a lower cost. But this comes with inherent risk. 

Time and expense 

Figuring out which strategy to employ can take time, and your first attempts may not yield the results you hope for. To keep track of your process, your plan needs to be quantifiable. Without numerical data to back up your acquisition, it will be challenging to know what’s working and what isn’t. In all, it’s important to remember that this direction is frequently higher in expense than client retention and requires more attention.

Mobile ad fraud 

Did you know that a predicted $100 billion annually will be lost to mobile ad fraud by 2023? The theft of the cost-per-install (CPI) or cost-per-engagement (CPE) bounties leaves marketers with compromised data that will then falsely inform future UA strategies. Because the UA is based on inaccurate metrics, the ‘highest performing’ channels are repeatedly scaled, perpetuating the ad fraud loop. Kochava specializes in mobile ad fraud detection and prevention via potent and comprehensive tools. Learn how you can protect yourself here.

Depending on your company’s stage and goals, a UA-focused approach may be your answer.  Find out how Kochava helped IDT save 15-30% of their UA budget.

Creating scalable growth with Kochava

Simply put, everything can influence retention adversely or positively. Competitors, products, company marketing, and UA strategy are all external and internal factors that have impact potential. The good news is that Kochava has multiple resources available to support your business’s upward growth! We provide tailored re-engagement strategies across paid and owned media efforts, resulting in increased growth through audience activation. You can request a demo here. You can increase retention by utilizing detailed behavioral insights to reduce your customer churn rate. Engage current users effectively and tailor future marketing efforts by excluding users who exhibit uninstaller-like behavior. Learn more about uninstall tracking and predictive churn here.

Invest in the long run

Let’s recap! 

For developing companies, user acquisition has the potential for explosive growth but is expensive, riskier, and yields less profit than retention. Our advice? You should invest in the long run. 

Retention is more cost-effective and has a lower risk

Investing in returning users can increase your revenue by 25% to 95%.

UA is necessary for retention 

Retention is about developing established customer relationships. You can’t do that without spending money to acquire them first. 

Kochava can help your business succeed

Whatever your approach, we have a wide range of resources tailored to support your business’s upward growth.

We’re here to help!

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For more information, visit our website or reach us at support@kochava.com.