There are too many companies asking, “How do we acquire more users?” that should instead be asking “How do we get better at keeping the users we already have?”.
Its easy when approaching the problem of growth to think that you just need to get more users, after all that seems to be the very definition of growth. However, if you take a step back though and think about growth as the maximization of user-weeks over time, it quickly becomes apparent that focusing on retention has a much larger effect than topline growth. This is also much more of a sustainable growth mindset. Rapid user growth followed by rapid user attrition is an indicator of unsustainable growth. Strong retention of users over time is a good indicator of product-market fit, something you’re hopefully looking to achieve anyway.
Retention is the place I start everywhere I go. Building a strong retention program is the key to success for any business. There's the old "It's much cheaper to keep a customer happy than find new ones" saying, but it goes beyond that. If one thinks about it logically, the bigger base of loyalty business that is retained, the more money one will make. Retained/loyal customers have many advantages over new or dormant ones.
Customers in retention campaigns have a well-defined pattern of behavior
These customers are perfect for targeted promotions, cross-sells and upsells. Because of the purchasing and communication interaction behavior stored from these customers, tailoring offers specific to the needs of customers is the easiest way to convert into sales. The less that is known about a customer, the more shotgun approach is taken and less likely to obtain real revenue.
Customers in retention campaigns have less expensive communication channels
Because the customer is known, the communication with the customer is much cheaper on a converted basis. Even through the direct mail channel, which can be as high as $3-4 per piece depending on how elaborate it may be, the conversion rate is much higher on this type of communication. Most communication in this channel can be near free, with email and push notifications through apps.
On the other side, acquiring new customers is very expensive. Even if going completely online, the conversion rates are so small compared to the cost per click or action, that it makes the customer acquisition cost upside down for 2 - 3 purchases for many companies. If the business needs to go traditional advertising routes, now the cost becomes staggering.
Retention customers bring in the most revenue
While this varies from business to business, I doubt you will find many longterm successful organizations that don't have this phenomena. The loyal customer is the bread and butter for the business and can be relied upon to grow revenue. Within retention campaigns there are customers of all different types and understanding the loyal customer that can spend more money is the best opportunity for profit growth.
It may seem counterintuitive to look for growth in your loyal customer base, but I have always thought of it like this. The more customers that I can have in the active customer base, the more opportunity I have for growth. Acquisition rarely can go away and there should always be a plan to acquire more customers, but that cost should decrease as the business matures. For a very mature business, this cost should be as low as possible.
A simple way to illustrate this is
New Customers + Retained Customers + Reactivated Customers = Active Customer Base.
So if the business can acquire at a consistent base, lets call this 1 million customers per year and retain the majority of their customers, lets call this 10 million customers, then they can grow their active customer base by close to 1 million per year. Now if those customers are retained and a new million come in, the growth lies in increasing the retention customers. Otherwise, it costs too much to try to double your acquired customers, especially the more mature the company is. Try to focus on retention first, it is truly the King.