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.
Table of Contents
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 Rate||Acquisition Budget||Retention Budget|
Retention For Your Industry
|Sports & Gaming||31%|
|Travel & Hospitality||55%|
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.