Acquisition vs. Retention: Where to Invest in 2025?

The Rising Costs of Customer Acquisition

Over the past few years, customer acquisition costs (CAC) have continued to rise across most digital channels. Since 2022, the cost of acquiring new customers has surged, particularly in saturated markets. Several factors are driving this trend:

• Platform algorithm changes prioritising user experience over advertiser reach
• Privacy-focused updates limiting targeting capabilities
• Increased competition for consumers’ diminishing attention spans
• Rising bid costs on mature advertising platforms

Industry data suggests that UK eCommerce brands are now spending significantly more to acquire the same quality of customer compared to just 18 months ago. This shift has led marketers to rethink traditional strategies that rely on scaling acquisition spend alone.

The Retention Renaissance

In response, customer retention strategies have gained renewed focus. Brands are increasingly recognising that investing in existing customers is not only more cost-effective but often the key to profitability. Even modest improvements in retention can yield significant gains, as returning customers typically:

• Are more likely to try new products
• Spend more per order than new customers
• Require less marketing investment to drive repeat sales

Leading eCommerce brands are redefining retention beyond simple repurchase metrics. Instead, they’re building engagement ecosystems that span owned media channels, loyalty programmes, community-driven interactions, and personalised customer experiences. Tools like Klaviyo are helping brands implement advanced retention strategies through automated email flows, personalised messaging, and targeted segmentation.

Finding the Right Balance

Rather than viewing acquisition and retention as opposing forces, forward-thinking brands are developing integrated strategies that recognise their interdependence. Here’s how businesses can strike the right balance:

Segment-Based Investment Strategy

Not all customer segments require the same approach. High-value customers with strong retention potential may justify higher acquisition costs, whereas other segments might benefit from more cost-efficient strategies that prioritise retention efforts.

Retention-Informed Acquisition

By analysing retention patterns, brands can refine their acquisition strategies to target customers who share traits with their most loyal segments. This reduces wasted ad spend on one-time buyers with low long-term value.

Lifecycle Marketing Automation

Sophisticated automation that responds to customer behaviours at different stages of their journey can significantly improve retention, easing the pressure to continuously acquire new customers. Platforms like HubSpot, for example, provide AI-driven workflows that can be leveraged to nurture customer relationships through tailored experiences.

Community-Driven Growth

Brands that foster authentic communities create a powerful synergy where engaged customers drive both retention and acquisition – sharing experiences, referring friends, and generating valuable content. Showcase your Instagram feed directly on your site to highlight real customer interactions and build social proof. If you’re on Shopify, leverage custom apps to go beyond static images by featuring customer videos alongside product reviews, adding authenticity and ultimately, enhancing engagement.

Why a Balanced Approach Matters

While retention is increasingly important, acquisition remains essential. Sustainable growth depends on a strategy where new customer acquisition lays the foundation for future retention efforts, and retention tactics maximise the value of that investment.

Market data suggests that brands excelling in both acquisition and retention consistently outperform their competitors in sales growth and profitability. Companies that adopt a balanced approach also demonstrate greater resilience during economic uncertainty, an invaluable trait in today’s volatile market.

Use Real-Time Data to Make Decisions

The key to optimising your acquisition-retention balance lies in leveraging robust data analysis. Brands should track key metrics such as:

• Customer Acquisition Cost (CAC): Monitor by channel and segment to identify efficiency opportunities.
• Customer Lifetime Value (CLV): Measure and forecast CLV across different customer cohorts.
• Retention Rate: Analyse by acquisition channel to refine targeting strategies.
• Churn Prediction: Use AI-driven insights to identify at-risk customers before they disengage.

Brands that base decisions on data rather than intuition consistently outperform their competitors. Data-driven strategies allow for more precise budget allocation and faster adaptation to emerging trends.

By taking a holistic, data-driven approach to customer relationships, your brand can create a positive cycle where strong retention improves acquisition efficiency, and strategic acquisition brings in customers primed for long-term loyalty.

In 2025, this isn’t just good marketing. It’s good business.