Retention vs. Acquisition Budget

On LinkedIn, an intrepid reader asked a question.

• "If cash is tight, how do I decide the percentage of my marketing budget to spend on acquisition vs. retention?"

This is not a Lemonheaded question ... this is an earnest question, one we'll answer every day of the week. What would a Lemonheaded question look like?

• "Should I even bother to spend money on acquisition when cash is tight and we all know that loyal buyers are nine times as profitable as are customers we're trying to acquire?"

Notice the difference?

Your marketing budget should not be divided between acquisition and retention. Your marketing budget should self-determine itself based on the profitability of your marketing efforts.

• If an acquisition activity generates profit, you should continue to execute the tactic.
• If an acquisition activity is unprofitable, you should continue to execute the tactic if the acquired customer makes up the loss within "x" months, with twelve (12) months being a common limit.

From here, your acquisition marketing budget self-calculates. You know exactly how much to spend.

If you don't have enough money to spend on acquisition activities, sit down with your Chief Financial Officer, do your homework, and state your case. If most cases, your CFO will be willing to spend the money because you were able to demonstrate adequate return on investment.