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Expert Answer • 2 min read

How do I allocate discount budgets between acquisition and retention?

As an e-commerce business owner, I'm struggling to determine the right balance of discount spending between attracting new customers and rewarding existing ones. I want to optimize my marketing budget effectively, but I'm unsure how to allocate resources between acquisition and retention strategies. My goal is to create a sustainable approach that drives growth without eroding profit margins or devaluing my brand. What strategic framework can help me make data-driven decisions about discount budget allocation?
Muhammed Tüfekyapan

Muhammed Tüfekyapan

Founder & CEO

2 min

TL;DR - Quick Answer

Allocate discount budgets using a 40-60% split, with 40% focused on acquisition and 60% on retention. Use customer lifetime value (LTV) calculations, segment performance data, and dynamic targeting to optimize spending across acquisition and loyalty campaigns.

Complete Expert Analysis

Strategic Discount Budget Allocation Framework

Effectively distributing discount budgets requires a nuanced approach that balances new customer acquisition with existing customer loyalty and long-term value.

Recommended Allocation Strategy

StrategyAllocationPrimary GoalKey Metrics
Acquisition40%New Customer ConversionCAC, Conversion Rate
Retention60%Customer LoyaltyLTV, Repeat Purchase Rate

Detailed Allocation Breakdown

Acquisition Strategies (40%)

  • •First-time buyer welcome discounts
  • •Targeted social media acquisition campaigns
  • •Referral program incentives
  • •Exit-intent offers for new visitors

Retention Strategies (60%)

  • •Loyalty program tiered discounts
  • •Personalized repeat purchase offers
  • •VIP customer exclusive promotions
  • •Anniversary and milestone rewards

Calculation Method

1.

Calculate Customer Acquisition Cost (CAC)

Total marketing spend / Number of new customers acquired

2.

Determine Customer Lifetime Value (LTV)

Average purchase value × Purchase frequency × Customer lifespan

3.

Optimize Ratio

Aim for LTV:CAC ratio of 3:1 or higher

Dynamic Targeting Approach

Segment
Customer Group
Intent
Purchase Likelihood
Offer
Personalized Discount
Conversion
Expected Result

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Muhammed Tüfekyapan

Muhammed Tüfekyapan

Founder & CEO of Growth Suite

With over a decade of experience in e-commerce optimization, Muhammed founded Growth Suite to help Shopify merchants maximize their conversion rates through intelligent behavior tracking and personalized offers. His expertise in growth strategies and conversion optimization has helped thousands of online stores increase their revenue.

E-commerce Expert Shopify Partner Growth Strategist

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