For any business, whether online or offline, having an acquisition and retention strategy is very important. In this article, we will understand what should be the ideal retention and acquisition budget mix for any business. 

Retention & Acquisition Meaning 

Acquisition means getting new customers to your business and retention means reaching out to existing customers and pushing them for their next purchase. 

Idea Split for Online Businesses 

Most D2C (direct to customer) businesses split their acquisition and retention budgets in the ratio of 70% to 30% respectively. 

Acquisition : Retention = 70% : 30% 

Acquisition and Retention Budget Split Based on Industry 

The split based on industry would depend a lot based on your industry retention rate.  

Retention For Your Industry 

Source 

How to Calculate your Retention Rate? 

There are two ways to calculate the retention rate. One is for eCommerce, D2C, businesses, retail and another one is for a subscription business. 

Retention Rate for Ecommerce 

Retention rate is the ratio of customers who have made more than one purchase in a given period to the total number of customers in a given period. 

Customers with greater than 1 purchase ÷ Total number of customers in a given period 

Retention Rate for Subscriptions 

(Customers at the End of a Period – Customers Acquired During the period) ÷ Customers at the Beginning of the period 

Acquisition and Retention Budget Split for a New Business 

For new businesses, an ideal split would be to keep 90-100% of their budget on acquiring customers and only 10% of their budget on retention. For any business to grow it is important to get customers first and hence retention would go on the back burner for a new business. 

Learn more about sales channel-wise split for a D2C/ eCommerce company here