Lead generation vs. customer retention


Lead generation (often confused with lead conversion) seems to be on everyone’s radar these days, but what about customer retention? Why do most businesses focus and spend so much on lead generation and so little on customer retention, when both are essential to any thriving business?

The difference in spending is staggering: 80% of companies spend over 70% of their marketing budget on lead and demand generation. That means less than 30% of those budgets go to customer retention efforts, including upsell and cross-sell.(1)

Lead generation, or lead gen, exists for one purpose: to fill your pipeline with sales-ready prospects, so sales can convert them into customers. Lead gen advocates will tell you a business can’t grow without a steady flow of new leads. This is true, a business can’t grow without new customers. However, nor can a business grow if it loses more customers than it acquires. Let’s take a closer look at both lead generation and customer retention to better understand how each contributes to business growth.

On lead generation

What is lead generation?

Lead generation involves identifying potential customers and convincing them to engage with your brand. In short, lead gen involves turning anonymous consumers into leads in your sales pipeline. It is the first step toward new customer acquisition and should incorporate numerous tactics, outreach channels, and strategies.

Marketing’s wheelhouse

Effective lead generation hinges on tight sales and marketing alignment. Marketing is typically responsible for most aspects of lead generation (excluding cold sales calls and emails). With the help of marketing automation software, marketers capture anonymous consumers’ personal information. They then drive campaigns to nurture leads until they have displayed enough interest to be considered ‘marketing qualified’. Normally, the lead is then passed to sales for further nurturing, depending on a business’s lead disposition process. At that point, the lead generation process is complete and marketing passes the baton to sales to close the deal. To learn more about proper lead management, read up on lead disposition process.

Most of the above can be automated using a unified customer relationship management (CRM) solution that includes marketing automation, CRM, and sales management in one platform. A unified CRM also boosts marketing’s ability to generate and qualify more sales-ready leads. But, that’s not the only benefit provided by effective lead generation tactics.

Benefits of effective lead generation

In addition to identifying and qualifying leads with the greatest propensity to purchase, effective lead generation also:

  • Enables sales to convert more leads into paying customers in less time
  • Drives business and revenue growth
  • Gives you more customers who can provide insight into your target audiences and what they need and want
  • Keeps morale high and motivates sales and marketing to continually improve their performance

Tips for effective lead generation

Generating high-quality leads is no walk in the park. You must maintain an up-to-date understanding of effective tactics and emerging trends to effectively generate the right leads. Below are a few tips to guide you toward lead gen success.

Research and know your target audience

You must know who to target with your lead generation campaigns. Create buyer personas so you understand potential customers’ needs, challenges, goals, pain points, etc. That insight allows you to address those needs and objectives in your campaign messaging. Your outreach must be relevant and engaging, otherwise, your emails will be marked as spam and additional tactics will be ignored. The more relevant your outreach is, the more genuine and trustworthy you appear.

Leverage emerging lead generation trends

Tactics that worked last year may not work today. For example, consumers are increasingly intolerant to cold outreach and prefer a personalized, human touch. Unless you maintain a current grasp on effective tactics, your efforts will be made in vain.

Talk about benefits

During your initial interactions with a potential customer, focus on benefits or how your offering will make their life and/or job easier and better. Talk about great product features later in the process, after marketing has qualified a lead. Speaking about benefits allows prospective customers to envision themselves experiencing those same benefits, which is much more engaging.

Automate, automate, automate

Today, it’s close to impossible to remain competitive if you don’t use technology to automate manual tasks. Doing so frees up time that marketers can spend on creative work, competitor research, strategy development, and measuring results. If you use a system that integrates sales and marketing functions, the majority of lead gen administration can be automated, giving your team more time to focus on higher-quality work.

On customer retention

Customer retention advocates know that losing a customer costs more than acquiring a new one. It is much cheaper to retain a customer than to generate and convert a lead. Now let’s cover some customer retention basics.

What is customer retention?

Customer retention is a much simpler concept with more straight-forward tactics than lead generation. Customer retention refers to an organization’s efforts to maintain satisfied, loyal customers who don’t leave for a competitor. In other words, it’s all about retaining a customer over the long-run, ensuring reliable, recurring revenue for a business.

Why customer retention is so important

The importance of customer retention is a broad topic with many nuances. Let’s focus on some major benefits that accurately relay the importance of customer retention:

  • Existing customers spend more over time through upsell and cross-sell opportunities
  • Long-term customers are satisfied customers who trust and show loyalty to your brand
  • Loyal customers promote your brand to friends and colleagues (i.e. free word-of-mouth advertising, referrals)
  • Word-of-mouth advertising expands brand awareness and improves your brand’s reputation
  • It’s easier to acquire new customers when the market sees you as a reliable leader with a great reputation
  • Tenured customers reduce the administrative work generated by high customer churn rates
  • Loyal customers represent a reliable source of recurring income, ensuring the future success of your business

A bit more on customer satisfaction and loyalty

When a satisfied customer becomes loyal to your brand, they don’t just stick around longer. Loyal customers actually drive business growth for you. They do this in many ways. But don’t just take our word for it, see what the numbers have to say:

  • Satisfied customers are 87% more likely to buy add-ons or extra services than dissatisfied ones.(2)
  • 60% of loyal customers promote your brand to friends and family.(3)
  • 39% of loyal consumers pay more for your product even when a cheaper alternative is available.(4)

Generating loyal, satisfied customers almost entirely boils down to one common denominator: the customer experience. How do you deliver a great customer experience? With a solid product and great customer service delivered by satisfied employees.

Tips for increasing customer retention

There are countless tactics, large and small, that you and your company can do to generate satisfied customers and increase customer retention.

Improve the customer experience

We already touched on this, but it is extremely important. The customer experience has already overtaken price and product quality as the top driving factor behind consumer purchase decisions. A great customer experience leads to satisfied customers, which leads to long-term loyal customers, which leads to customer retention.

Give your customers a voice

Customers need to feel their voices are being heard. It allows them to feel they are in a partnership with you, not a faceless relationship with a logo. Survey them to see how you could improve, then implement some changes. Form a client advisory board to allow customers to tell you what they need and want. You’ll be surprised how many goodwill points you’ll win from these few tactics as long as you implement changes based on customer feedback.

Make a good first impression

It’s true, first impressions matter. When you sign a new customer, that’s the perfect time to start your customer retention tactics. Don’t just leave them to fend for themselves. Rather, ensure you have a robust onboarding program and free, thorough training. Customers need to be able to effectively use your product or service to the fullest of its capacity. If not, they’ll likely leave for a competitor. Their first day as a new customer is the most important day of their relationship with you.

Offer superior customer support

When a customer runs into a problem, they need it solved quickly. Every minute and hour that they have to wait for a solution to a support ticket, the higher the chances are they will leave you for a competitor. One great way to ensure you’re delivering superior customer support is to measure and continually improve your First Call Resolution rate.

The final word

So, which is more important: lead generation or customer retention? The answer is (drumroll please): there is no definitive answer. Each business is unique and so are its needs. The trick lies in finding the right balance between the two—one which lets you grow sustainably over the long term.

Lead generation is essential for growth. However, if you focus too much on it and neglect your existing customers’ needs, customer churn will overwhelm you. At the same time, you can’t focus 100% of your attention on retaining existing customers. Otherwise, you’d either not grow at all or grow slowly.

That’s why you need to find the right balance between the two. If you’re not sure what that balance looks like for your business, use the tips above and test a few tactics to see what works best.

With a little legwork and self-reflection, you’ll find the right balance between the two. Then, your business growth rate will start to go up, and continue to do so.

Ready to put your lead generation and customer retention tactics to work? Request a free demo with an Insightly rep to see how you can implement, test, and measure performance of all your efforts across sales and marketing.


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1. Customer Retention and Renewal Messaging: Mission Critical, But Missing In Action, Corporate Visions, 2017

2. Customer experience: New capabilities, new audiences, new opportunities, McKinsey & Company, 2017

3 & 4. What Do Customers Do For Brands They Love?, Yotpo, 2020