Fueling the Brand Growth Engine

Customer acquisition, retention, and engagement

The marketing buzzwords of all buzzwords. And for good reason — strong acquisition, retention, and engagement are the keys to success for any brand. New business strategies are typically aimed at strengthening one or more of these categories. They are the KPIs & the north stars for every brand, and they are questions that always exist: how do we improve acquisition, how do we increase retention, and how do we grow engagement?

These three terms need no introduction, but we’ll do it anyway for the sake of clarity.

  • Customer acquisition is how a brand gets new customers exposed to their product or service.

  • Customer retention is how often customers come back after they have been exposed to the product or service.

  • Customer engagement is how much time they spend with the brand and the variety of actions they take & purchases they make.

These pillars are often viewed as separate strategies, each with its own set of tactics and objectives. However, when approached from a broader perspective, we find that these elements interconnect to form a self-propelling flywheel, where the whole is far greater than the sum of the parts.

Durable acquisition strategies build and increase retention → Strong retention improves customer engagement → And if all goes right, engaged customers improve acquisition. Now we’re cooking with gas.

In order for this virtuous cycle to continue rolling, let alone begin, a brand needs to leverage a holistic brand growth strategy. Acquiring, retaining, and engaging customers must be a continuous, synergistic process, rather than one that is disjointed and made of individual elements.

Customer Acquisition

In certain respects, acquiring customers has become simpler than ever before, but paradoxically, it has also grown more challenging (expensive).

It’s easier because there is far more total surface area for advertising than there ever has been (think social media, news, streaming, and games). As the world’s digital footprint continues to grow, there are far more avenues for advertising than there ever were before. Consumers also have access to more information than ever before, meaning that niche products can more deeply penetrate their total addressable market.

In other ways, acquisition is harder than ever before. Since there’s so much capacity for advertising, there is also a lot of competition. The barriers to entry for brands have continued to lower through no-code DTC tools and the accessibility of advertising space. This means that the cost to acquire new customers has continued to increase year over year for the past 5 years. It’s far harder to differentiate yourself as a brand.

The thing is, acquisition is a necessary evil. Brands don’t exist without customer acquisition, plain and simple. Customer acquisition is the starting point, the first step in a customer’s journey with your brand. It’s when they turn from consumer to customer. The art of customer acquisition complex — it’s a constant moving target, and it relies heavily on effective marketing and advertising. If the DTC glory days taught us anything, it’s that relying on customer acquisition itself is not a sustainable brand strategy.

Acquisition is, of course, the spark that sets the brand growth flywheel into motion. Without acquisition, there are no customers to retain or engage. That crucial first interaction with your brand can set the tone for the entire customer journey, greatly influencing whether a customer chooses to stick around. This is a make-or-break moment, an opportunity to communicate key information about your brand, such as the value your product or service offers and the trust & satisfaction expressed by your existing customer base. As the saying goes, you only get one first impression.

So, let’s imagine a potential customer clicks on your ad — why might they be considering a purchase? Typically, customers are driven by a combination of need, perceived value, and trust in your brand. In order to maximize customer acquisition, you must first understand your audience, deliver value, and build trust.

Remember, acquisition is just the first step. Once your customer has made the initial purchase, the focus shifts to retention and engagement, keeping the flywheel spinning and maintaining the momentum for sustained business growth.

Customer Retention

While acquisition is the spark that gets the flywheel spinning, retention is the steady hand that keeps it in motion. Retention is a bit of an unsung hero. In a nutshell, retention is about keeping your customers coming back for more. It’s about transforming that first-time buyer into a loyal fan who chooses your brand, time and again, over a competitor. In a world with almost zero switching costs, that’s really saying something.

Brands should strive to understand their customers in granular detail, allowing for personalized experiences that make customers feel valued and understood. Today’s consumers have nearly unlimited choices and can easily switch to a competitor if they feel their needs are better met elsewhere. Moreover, the digital world moves at a breakneck speed, and brands must constantly innovate and adapt to keep customers engaged and satisfied.

Like a well-oiled machine, retention requires regular maintenance and fine-tuning. It involves understanding customer needs, delivering consistent value, and cultivating a strong relationship based on trust and satisfaction. Retention is the mechanism that not only keeps customers coming back, but also keeps them spending more, increasing the number of items that they purchase, and trying out new products.

But, and this is a big “but” — retained customers aren’t necessarily engaged customers. Nor should they be treated the same as engaged customers.

Let’s not forget, retention is just one piece of the puzzle. While it keeps the flywheel turning, it’s the force of customer engagement that can take the momentum to the next level.

Customer Engagement

If acquisition is the spark and retention the steady hand, then engagement is the force that truly propels the brand growth flywheel. A customer can be loyal without being engaged, but an engaged customer is almost always loyal.

Engagement is more than mere interactions between the customer and the brand. It’s about creating a strong emotional connection that ties the customer to your brand, products, and services. It’s about making the customer feel like they’re part of a community, that they’re invested in your brand not just as a consumer, but as a stakeholder.

Brands must work to create immersive, multi-dimensional experiences that draw customers in and foster deeper connections. Brands should foster multiplayer conversations and interactions with their customers, gather valuable feedback, and respond promptly to customer concerns.

But, make no mistake, keeping customers engaged is an uphill battle. It’s the battle that all brands, no matter where they fall on the spectrum of engagement, face constantly. Today’s customers have short attention spans and a myriad of distractions at their disposal. Capturing and holding their attention is a task that demands constant creativity and innovation. It’s about knowing your customers’ preferences, delivering on their expectations, and providing them with compelling reasons to continue interacting with your brand.

Consider an engaged customer: What drives them to participate in your brand’s community or share their positive experiences with others? It’s typically a combination of high-perceived value, personal attachment to the brand, and a sense of being heard and valued.

The Flywheel Effect: From Engagement Back to Acquisition

Now that we understand the interplay between these concepts, let’s think about how we can get this brand growth flywheel really moving.

Customer acquisition is an expensive and time consuming endeavor and, as we know, continues to get more difficult. If customer engagement practices, like advertising and offering welcome deals are baked in with a larger retention and engagement strategy, they can prove to be far more impactful — monetarily and emotionally.

Brands may be wary of giving too much value in the way of a welcome offer (like a discount or free product) due to fears that customers will use that reward and then not return. Under a more holistic strategy, brands actually should offer highly valuable welcome incentives that require a customer to join the loyalty program, to incentivize a customer to sign-up and get access to a home with the brand. This is a well known practice of giving customers value in exchange for providing their information to the brand. But in this case, we can now improve retention rates by serving customers relevant experiences and rewards through delightful mechanisms. Meaning that the economics of more enticing (and expensive) welcome offers can make sense for a brand and improve acquisition.

Gaming and social media have uncovered some of the strongest retention mechanisms, which are underutilized by most businesses outside of the technology space. For example, rather than sending customers an email with a coupon code in it, give customers a loot box as a reward where they have a chance to win a variety of exciting prizes (including discounts, free items, tickets to events, gift cards, or even a free vacation).

Brands can reward customers with loot boxes at many different touch points, like after every purchase, when they interact on social media, or when they visit a new store. The benefits of these are two-fold: (1) providing customers with a more engaging experience of earning rewards with your brand and (2) making it more inexpensive for your brand to offer more rewards (both in terms of quantity and diversity).

Another great retention mechanism is streaks, which reward customers for coming back to your brand regularly. When given visibility & status for their loyalty, like a Snapchatter, a customer will continue to come back in order to maintain their streaks. While just a fire emoji and a number of days/weeks/months can work well enough to incentivize regular engagement, brands can also offer things like point multipliers and loot boxes for streaks. The streak gets the customer coming back, while the actions that the customers will take are their engagement — ensuring that your retained customers are also engaged.

Maximizing engagement means offering customers a wide variety of ways to engage with your brand. Going beyond monetary interactions, like quests, quizzes, and games. With quests, customers can earn rewards for taking a series of actions with your brand, like trying all of the ice cream flavors or following your brand and mentioning you in a tweet.

With quizzes, customers can learn more about your brand and you can learn more about your customers. They’ve been giving an exciting and engaging new platform to interact on, while your brand has new valuable information that can be used to hone product offerings, marketing, and more — impacting retention and acquisition.

Engaged customers can become missionaries for your brand. Equip them with the tools to do so, and reward them from bringing in new customers.

Referrals are a great way to empower your loyal, engaged customers to bring in new customers. Consumers are tired of traditional advertising techniques, and would far rather find a brand through trusted family, friends, peers, or influencers that they like and trust. Now, strong engagement provides a new, low-cost avenue for acquisition that has higher conversion rates than typical advertising techniques.

Customer acquisition, retention, and engagement are not isolated strategies but interconnected components of a self-propelling flywheel that drives brand success. Acquisition ignites the process, retention maintains the momentum, and engagement propels it forward.

By adopting a holistic customer experience strategy, brands can leverage innovative mechanisms like loot boxes, streaks, quests, and quizzes to foster loyalty and deepen customer connections. This not only keeps the flywheel spinning but also amplifies its momentum, leading to sustained business growth and turning customers into brand advocates.

It’s clear that a holistic approach through a customer experience platform creates deeper interactions, drives costs down, and provides an axle for the flywheel that your brand can use to start rolling.

At Hang, our platform does just that. Learn more here.

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