This week i wrote a post on linkedin, here it is -
Before going into the discussion between the both, let's do a quick exercise.
- Write down your current customer acquisition cost.
- Write down the revenue you earn on average from one customer.
- Write down your retention rate an the revenue earned after.
Now, are you making profits or loss per customer. Yes, you could argue Rohan it is a long term game and i agree it is. But what is your unit economics?
The problem is most of the software startups are pushing for sales and acquisition which is important but meanwhile they are not investing the retention game. Now, i define retention a little differently for the softwares.
A self serving software that keeps you customer hooked to your platform wanting them to buy more and stay longer.
And acquisition rarely makes profit until the ticket size is very big, and for most of the software startups the first sale is usually low and to reach the high ticket size. You need to improve your retention rate. Before we go deeper into this, some self promotion :)
I am helping software managers and engineers level up as a consultant, after conducting 7 successful webinars receiving an overwhelming response from all over India.
Tomorrow i am having my 8th webinar session, Decode 1% Tech with Rohan. If you are a software engineer or manager with minimum of 2 years in experience. Check it out
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Customer acquisition vs. customer retention—which one is better? That's actually a misleading question: both are important for sustainability and growth in their own way.
The problem is not the comparison but the fact that major startups and companies focus more on the acquisition. Look around yourself, what do you see more acquisition talks or retention? n reality, though, retention offers a much higher ROI on advertising spend for certain business models—and is often much more cost-effective than its counterpart.
Customer acquisition is the process of gaining new customers. It involves attracting prospects to your business, and then persuading them to buy your product or service. Customer retention is the process and ability of a company to keep its customers over a period of time. It involves keeping customers active and happy users of your product or services.
Growing Customer base vs Retaining for long term
On the one hand acquisition is the first step to bring in customers, without customers where will you do business and not only customers acquisition. It open up doors for new opportunities.
Whereas, the LTV Lifetime value of a customer in increased by retention. When a customer is happy to pay you again and again and again and even buy more products from you. That's when you make profits.
Acquisition is more expensive vs retention has a better ROI and happy customers boost your word of mouth. But does retention means we have to run loyalty program and all of that stuff?
Maybe, that is the traditional way of doing it. But to really really activate your softwares to retain customers you need to do something more simpler. The principles that guide your customer to use your software again and again and then putting up the right offers at all the exits where your customer could possibly leave your software is the key.
Now, these techniques are so powerful. That a question of morality comes in. And this is a very good question, because you need to have a long term game rather than quick value.
That being said, i am working on a pretty powerful system combining my experience of more than a decade and working with over 30+ startups. If you need early access, join the waitlist here - https://rohangirdhani.com/software-retention-waitlist
But if are more of a result oriented person and just need those strategies to work for your software right now. I offer 1v1 consultation to activate your customer retention to maximize profits through your software. Just DM "Profits" and we can take from there.
📰 Three amazing articles to make better software that you must read
- Don't just build softwares build experience
- Psychology driven product design
- Why every software needs a blueprint?
▶️ Two amazing videos to make better software
Thank you so much for reading this edition of the newsletter, if you found this interesting you would also love my course THE SOFTWARE BLUEPRINT.
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