As a small business owner, you’ve spent the time, money, and effort to craft a product or service that actually provides value to your customers. At the same time, you’ve strategized how to attract new customers to your business to help it grow—but how about getting more out of the customers you already have?
Once you have used valuable resources to acquire a customer, how can you make sure they stay with you for the long run? How can your small businesses avoid costly churn and maintain a steady stream of revenue from your current customers through repeat purchases, recurring subscriptions, and consistent product utilization?
Customer retention for small businesses is an important aspect of staying competitive in today’s market, though many business owners may not fully understand how crucial it is for the longevity of their company. Here, we’ll dive into some of the reasons why you should focus on retention, as well as ways to go about it.
Why is a strong customer retention strategy so important?
Past and current customers are important for small businesses, as they can be a great source of ongoing income if they are nurtured and rewarded for their loyalty. Even still, many business owners are unaware of how much more cost-effective it is to focus on customer retention strategies rather than putting marketing dollars into attracting new customers.
It’s been noted that customer acquisition costs are up to five times more expensive than the cost to retain existing customers. In addition, selling to new customers is successful 5-20% of the time compared to the 60-70% success rate of selling to existing customers. Therefore, it’s worthwhile for businesses to figure out how they can improve the experience for existing customers in order to boost customer retention rates and support more sustainable revenue generation.
How can you boost customer retention?
When it comes to customer retention for small businesses, there are a number of ways you can reduce churn without sacrificing revenue growth. Here are four customer retention strategies for small businesses that will help you get more out of the customers you’ve already acquired, whether through paid acquisition or other channels.
Provide excellent customer service.
Investing in a good customer service system may not be the most exciting element about running a business, though the implications of this department on customer retention cannot be understated. Research from Microsoft found that a poor customer service experience drives the majority—about 58%— of customers to consider switching companies.
The marketplace is highly competitive today, so beyond simply providing a strong product or service, it’s important to implement human customer service solutions that help customers with their questions, address their concerns, and resolve potential issues. This can make all the difference between gaining a repeat customer or losing them to a competitor.
Reward customer loyalty.
Going off that same theme, it is extremely easy for customers to switch providers if they feel they can get a more personalized or memorable experience elsewhere. Recognizing or giving loyal customers a way to benefit from their loyalty is one way to create a brand experience that feels special and shows your customers that they’re more than just a number.
According to research from Temkin Group, loyal customers are 5x as likely to make a repeat purchase, 5x as likely to forgive a poor experience, 4x as likely to refer your business or product to someone else, and 7x as likely to try a new offering. That said, finding a way to show loyal customers that you appreciate their commitment to your brand, such as through an incentive-based referral program or a rewards program with milestone benefits, can go a long way to keep them coming back.
Use a CRM tool.
No matter the size of your business, investing in a customer relationship management (CRM) tool can help you strategize how to increase customer retention for your company. With access to accurate and up-to-date data on your customers and their purchasing behaviors, you can have a better idea of who your most valuable or loyal customers are, and what they respond best to.
Having specific and personalized information on existing customers—like when their birthday is or when they made their last purchase with you—gives you an additional avenue to reach out and engage with them. Every touchpoint with customers matters, keeping you top-of-mind and moving them closer to their next purchase.
Get customer feedback.
Utilizing customer surveys and regularly inviting feedback is one of the most effective customer retention strategies available to small businesses today. It’s a good way to gauge how you’re meeting their expectations and where you can make improvements.
Customer preferences and purchasing trends are constantly evolving, so what worked last season may not work next time. Therefore, you should take the time to hear from your customers to ensure that you’re still providing them with value and making tweaks when necessary to boost customer retention.
Bottom line: Invest in customer retention strategies
It may be tempting to seek out new customers in order to continue growing your business rather than learning how to increase customer retention. However, consider the points laid out here that prove why having a customer retention strategy can be so vital for your business. Doing so can help you be more efficient with your resources, and help you build a strong and loyal customer base that will reward you with their business for years to come.