Customer Acquisition vs. Retention: A battle for DTC Brand Focus
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Customer acquisition and retention are in a constant battle for DTC’s focus. But which is actually more important? It’s a question a lot of DTC brands find themselves asking as they funnel limited resources into different efforts.
So let me start by saying: we’re talking about two sides of the same coin. You can’t run a successful DTC business without a focus on both.
In the words of Jordan Gal, CEO of Carthook:
Thing is, acquisition is much more straightforward to understand and act on. And you can’t have retention without actively bringing in new customers.
For a lot of brands, this means that retention consistently takes a backseat.
But don’t get it twisted here: That doesn’t mean that acquisition is more important. A one-sided focus is damaging to the long-term health of your business.
Data shows us that brands that focus on retention actually unlock way more growth than they expect. We all know it’s imperative to focus on, but it’s so easy to ignore (despite our best intentions).
So what’s holding us back from really leaning into the power of retention?
I took it to the experts for this one. Let’s dig into some of the main reasons acquisition and retention are still in a locked battle, and how your brand can balance both for long-term success.
Acquisition Takes Priority Early On
Acquisition has to happen before a business can think about retention, especially in the early days when a brand is still building up a following.
Once these habits are built up, it can be tough to shift focus and and give both elements the focus they deserve.
Our own Ken Johnson put it this way: “It’s difficult/scary to invest in retention before you have enough customers to justify the expense... up until about $50k+ MRR you’re still flying by the seat of your pants.”
Part of the problem here is limited data. Until you have a large enough base of recurring customers, your data will have a pretty big margin for error- meaning even thinking about retention can cause anxious sweat.
So how can your business make the best decisions based on limited data? Taylor Holiday from Common Thread Collective recommends testing based on your peak buying cohorts, i.e. your holiday campaigns, to get the biggest possible sample set.
Perfect timing, eh?
Retention isn’t Data-Friendly
With acquisition, this process is relatively simple. A customer signs up for a subscription or purchases an item, pops up in your metrics, and the team celebrates.
Yes, customer journeys can be long and complicated, and getting proper attribution is a real headache, but data is flying at you from every angle. You can analyze and act quickly.
With retention, though, you’re dealing with data over the long term. And we don’t always love the long-term...
Kaitlyn Holliday from Four Sigmatic looks at it this way:
And there’s another problem. It’s wildly difficult to truly track retention, even if you have the data.
As Jarid Lukid from Kind Snacks put it: “It's not as easy to measure as acquisition. You need the right data model/tools.”
“Another difficult aspect to tracking retention is the complexity of LTV aka the Queen Bee (or Bey) of retention metrics. Ask any marketer how their business measures LTV and you’ll get enough answers to fill your Moleskin. Do you use predictive algorithms? Do you use historical results? And what’s your time frame? The key is to pick one (or a couple) and stay consistent.”
This is where the water gets muddy. Churn is an aggregate response to your business, so it could be customers responding to your product, your messaging, your branding, pricing, volume, the ads you run, or simple involuntary churn.
So where do you start? What’s your north star metric? How in the heck do we accurately measure and respond to our churn?
The issue lies in a lack of reporting.
eCommerce platforms don’t offer customer lifetime value metrics as a built-in feature, so you’ll need to work the system a little bit.
Aaron Orendorff, Founder of iconiContent, has a game-changing strategy. Here’s how he does it:
Here’s another tip: instead of thinking in terms of lifetime value, use what Common Thread Collective calls “window value.”
Here’s how Taylor makes it work:
“First, what are customers worth to you in 30, 60, 90-day windows? Second, what payback period can you afford from a cash basis? This combination of metrics is available in almost 0 out of the box tools.
So, businesses (like ours) are forced to manually hack together combinations of LTV:CAC for these types of cohorts. If you’re interested, I did a 30-minute breakdown of a tool we created to measure LTV:CAC for exactly these kinds of windows.”
Want to see this crazy sh*t in action? Ancient Nutrition’s team has been all over this CAC:LTV number.
By aggregating and digging into their data, they’re plotting campaigns and offers that *guarantee* a positive ROI.
How? By focusing on these “window values”. Here’s Jeff Schnepple on Playing for Keeps explaining this process:
Retention Isn’t a Quick Win
We all want speedy results when it comes to understanding and growing our businesses, but retention happens over a much longer time-scale than acquisition.
As Reza Khadjavi, founder and CEO of Shoelace, puts it:
AKA: It’s easy to tell if your marketing and sales teams are bringing in new customers and if your website is converting at a decent rate, but you won’t know if your retention efforts are working for months after they begin.
Not only that, but any changes to your plan and approach will likewise take a while to have a noticeable impact. (cue the nervous sweats)
My tip? Change your perception, change your culture (more on this in a minute).
Think long-term and remember that an excited, loyal base costs less to maintain and brings in more revenue than you’ll make from constant acquisition.
In the words of Brian Chesky, CEO of AirBnB:
"Build your business one person at a time. Just focus on 100 people. If they love you, they will market the product for you and tell everyone else."
Retention Isn’t Built into Business Culture
Sales is a job as old as time, and every DTC company out there has acquisition processes in place. Retention, on the other hand, has only come to the forefront much more recently.
Where acquisition has tons of advertising platforms, conversion best practices, and tech behind it, retention is still finding its feet.
Where acquisition is heavily rewarded in most businesses, retention gets less attention (and gratitude).
Change is in the air, though. More and more companies (and DTC brands in particular) are realizing that having a specific person or team handling retention efforts is vital to healthy growth.
After all, when something is everyone’s responsibility (which retention tends to be), it quickly falls apart because it’s no one’s specialty.
And if you are focused on retention, but not feeling the power of it yet, Jordan from Carthook has some words of wisdom: “Retention is still forming its tech and best practices. And the long-term nature of it means fewer [companies] are doing it.”
Stand out from the crowd. Be brave enough to dig deep and stay one step ahead.
Retention Happens Behind Closed Doors
Where acquisition is generally public-facing, retention happens between customers and brands. It’s not easy to replicate the methods of other top brands because there just isn’t the same level of visibility (unless you sign up for a ton of subscriptions and scout them out. But that’s what I’m here for).
Even internally, retention can be misunderstood by many companies. Alex O’Bryne from We Make Websites notes that “retention is often through direct, personalised channels that aren't as visible or as understood by management.”
P.s. That’s what my podcast Playing for Keeps is here to change. I’ve been sitting down with companies like MeUndies, Kettle & Fire, and Kopari Beauty to learn what they’re doing on the frontlines of retention and demystify the techniques they use to stay there. Give it a listen.
Retention Solutions Aren't Always Scalable
Marketing and sales efforts tend to scale pretty naturally. Higher ad spends, for example, are a pretty obvious approach to bringing in more customers.
Retention on the other hand, often relies on individual attention and a personal touch to make customers feel valued. It requires rethinking over time as you fight churn with a bigger and bigger customer base.
Brandon Doyle from Wallaroo Media put it this way: “We advise clients to ‘do things that don’t scale’ in regards to retention as much as possible. Hand-written notes, extra goodies, etc. to further build brand equity.”
While these are fantastic ways to build better connections to your customers, I know what you’re thinking. “Great! But I can’t rely entirely on these kinds of techniques.”
So we have to plug as many leaks as possible. Matt Goldman, our amazing CEO shares his two cents:
Looking for more ways to scale retention efforts? Try these five actionable eCommerce retention strategies from Kaleigh Moore.
Sorry but, We Still Gotta Work
Retention is hard, slow work, but we still have to do it.
It’s a lot of breaking down big issues into smaller, actionable pieces. It can be frustrating. Exhausting. Stressful.
I feel you.
But keep in mind: It will also unlock unprecedented growth for your business.
That’s the heart of a retention focus right there- building up healthier business practices from the beginning that you can rely on in the long term.
If you want your brand to be around in 3-5 years, take a step back and analyze your business.
Where are your priorities? Are you balancing acquisition and retention in a way that’s setting you up for success? Or are you letting these obstacles hold you back?
Knowledge is the antidote for retention fear. And that’s quite literally what we’re I’m about here.
Sign up for my monthly newsletter to stay on top of all things retention and customer experience in the DTC world. And be sure to subscribe to Playing for Keeps. We’re breaking down one of these obstacles completely. Join us.