Acquire, grow and acquire some more. That’s the mantra for most SaaS and subscription companies today.
As an industry, we invest millions to acquire and convert customers. Ad spend is at an all-time high, and the world of martech tools is becoming increasingly saturated. With the rise of growth hacking and better customer targeting, acquisition is constantly in focus. But that’s changing.
Recently there’s been a flurry of high profile SaaS listings, including Dropbox, Zoom and Slack. These subscription businesses have profitability at their core and know they can’t survive on acquisition alone. It’s just not efficient anymore given that it’s now 7 times more expensive to acquire a customer than to retain one.
In today’s world, there’s more revenue to be earned after the initial purchase, so companies must do everything they can to extend the lifetime value of the customers they fought so hard to acquire.
The truth is, it pays to retain your customers.
Assume that the following companies are identical in their acquisition efforts – they have the same amount of trials and conversions resulting in the same net new monthly recurring revenue (MRR). The only thing that’s different is their percent of monthly churn.
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