Family video is a subscription based video (DVD) rental store in the Melbourne suburb of Caulfield. It charges an annual subscription fee of $300, paid in arrears and allows its members to rent up to 2 DVDs at a time. The estimated cost of the store per customer is $200. Family video currently has 15000 customers, but is losing 5000 customers every year to competition. To improve its profitability, family videos is considering two strategies:

S1. An advertisement campaign targeted at 50,000 residents in the suburb of Caulfield at a cost of $100,000. The campaign is expected to bring an additional 300 customers to the store.

S2. A loyalty program to reward its existing customers which is expected to cost $200,000 and is expected to help retain half of the defecting customers.

Is acquisition or retention the best strategy for improving profitability of the Family video? Justify your answer.