For Australian small and medium enterprises, the debate between investing in acquiring new customers versus keeping the ones you have is a constant one. It’s tempting to chase shiny new leads, but a truly sustainable growth strategy requires a considered balance. We often see businesses over-index on acquisition, believing it’s the only path to expansion. However, neglecting retention is a costly mistake.

The optimal split isn’t a fixed percentage; it depends on your business stage and industry. However, a good rule of thumb is to aim for roughly an 80/20 split – 80 per cent of your marketing budget dedicated to retaining existing customers, and 20 per cent to acquiring new ones. This isn’t arbitrary. Acquisition is typically far more expensive than retention. Think about it: you’ve already built trust and a relationship with your current customer base.

Here are a few key insights to help you refine your approach:

• Customer Lifetime Value (CLTV): Understand how much revenue a customer generates over their entire relationship with your business. This informs how much you can *afford* to spend on retention efforts. A higher CLTV justifies a larger retention budget.
• Cohort Analysis: Group customers based on when they first purchased from you. Analysing their behaviour over time reveals retention rates and identifies areas for improvement. Are customers acquired through Facebook ads less loyal than those from Google search?
• Retention Cost vs. Acquisition Cost: Track both meticulously. You’ll likely find retention costs are significantly lower. Focusing on reducing churn – the rate at which customers leave – delivers a higher return on investment.
• Loyalty Programs & Personalisation: These aren’t just ‘nice to haves’. They’re powerful retention tools. Tailored offers, exclusive content, and proactive customer service demonstrate value and build loyalty.

Don’t fall into the trap of solely focusing on top-of-funnel metrics like website traffic. While important, they don’t tell the whole story. A healthy business prioritises both bringing in new customers *and* nurturing the ones it already has. By shifting your focus towards retention, you’ll build a more stable, profitable, and resilient business, well-positioned for continued growth into 2026 and beyond.

To get started, we recommend conducting a CLTV analysis for your key customer segments. This will provide a solid foundation for building a retention-focused marketing budget.