African Startups Shift Focus to Customer Retention for Sustainable Growth
African startups are increasingly focusing on customer retention to drive sustainable growth, as acquisition costs rise and funding decreases. This shift is evident in the fintech sector, which has seen a surge in ventures and competition.
African startups typically allocate a significant portion of their budgets to marketing and customer acquisition, with amounts ranging from 20% to 40%. However, top founders are now emphasizing retention strategies to reduce these costs and achieve long-term growth. This approach is evident in companies like Betika in Kenya, which prioritize community-driven affiliate marketing models that foster cultural connections and authentic engagement, ultimately enhancing player lifetime value and trust.
The fintech sector in Africa has witnessed remarkable growth, with the number of active ventures rising from 576 in 2021 to over 678 in the present day. This increase in competition has led to rising customer acquisition costs, exacerbated by infrastructure gaps and localised marketing needs. Despite this, innovative fintech companies like Flutterwave and Wave are winning customers by offering unique value propositions. Flutterwave, valued at over $3 billion, uses APIs, recurring payments, and social-commerce tools to deepen customer loyalty, while Wave, valued at $1.7 billion, attracts customers with ultra-low fees, free deposits and withdrawals, and 24/7 support.
The shift towards retention strategies in African startups is a response to increasing competition, rising customer acquisition costs, and decreasing tech funding. With a 5% increase in retention potentially boosting profits by 25% to 95%, this focus on customer loyalty is set to become a critical factor in the success of African startups, particularly in the competitive fintech sector.
