Savvy marketers will calculate their Customer Acquisition Cost (CAC) to make sure they are acquiring customers cheaply enough to turn a profit.
Most of that goes towards upfront costs like advertising or paid deals, leaving very little to actually retain a customer.
Which is silly because retaining the customer will boost how much they spend (LTV) which is a major component of estimating CAC. Spend more on customer retention and you get more room for the initial acquisition of the customer.
Done right, you can out-spend competitors all while making more profit.
The first step is to set a budget for customer retention. Figure out how much you could spend per customer in order to keep them around.
If you don't know your retention costs, start with a guess (e.g. 1% of CAC or 1% of LTV) and then adjust as you go. You don't need perfection with this, you just need profitability.
You'll want to track your retention as you go too. Repeat Customer Insights, the Cohorts Report, and the Repeat Purchase Rate are the best options for easily seeing progress.
Eric Davis
