It costs up to five times as much to acquire new customers as it does to keep existing ones.1 In other words, customer retention is essential for any small business looking to keep costs low and grow sales.
What is customer retention? How do you go about fostering loyalty among your fans? Read on to learn more.
Whereas customer acquisition is the process by which you find new consumers for your business, customer retention is how you turn first-timers into repeat buyers – by offering lower prices, superior products, or a better overall shopping experience compared to the competition.
Although some business owners have a rough idea of the ratio of new customers to old ones, there’s a formula for calculating customer retention.
Over any given timeframe (e.g., month, quarter, or year):
Plug these figures into the customer retention rate formula – ((E – N) / S) x 100 – to determine your baseline. Then, you can try implementing the following six customer retention tips to help improve on that baseline and grow sales.
There are many reasons why customers might come back to your business – including great products and low prices. That said, providing a seamless and enjoyable shopping experience is foundational. Many customers may willingly pay more for a product or service if they feel like a business truly values them.
Well-timed promos, discounts, and deals can help attract new shoppers to your store – and give past customers a reason to return. This tactic is most effective when combined with omnichannel delivery, which allows you to send targeted promotions across each customer’s preferred communication channel (e.g., email, SMS text, social media).
This level of personalization is just another extension of the previous point about customer experiences.
Word-of-mouth advertising is technically a type of customer acquisition marketing that also offers the benefit of customer retention. Tap existing customers to spread the word about your business. In addition to attracting new customers, referrals can help create stronger emotional bonds with your current ones. Incentivizing referrals encourages your de facto word-of-mouth sales team to become more invested in the recommendations they’re sharing with family and friends. Set up opportunities to reward those who refer new business your way.
Another way to help strengthen loyalty is to actively solicit feedback from customers. Every one of them has an opinion. Whether positive or negative, many of these opinions could end up on social media or review sites. Of course, the positive posts can help work in your favor, but the negative comments could wrongly impact your business.
The goal is to get ahead of the process by providing customers with an outlet to share feedback directly with you. Showing that you care and are listening to their opinions helps to make customers more invested in your business. Honest criticism also allows you to improve the user experience for anyone who walks through the door.
Some customers prefer using cash. Others like to pay with credit cards. Still, others will only buy using their mobile wallets. As a business owner, you can’t anticipate every customer’s payment preferences. Expanding the number of payment types you accept can go a long way in attracting new customers and retaining existing ones.
This strategy is especially powerful if you add contactless payment options. Customer preferences are hard to predict, but many people are still concerned about germ transmission due to COVID-19.
No long-term customer retention strategy is complete without a loyalty program. With one, you can reward devoted customers with points and discounts earned specifically through repeat visits.
If you haven’t already launched a loyalty program in your business, we’ve published a free guide to help you get started.
You now have six customer retention strategies for small business owners. If you’ve never offered discounts, managed a loyalty program, or solicited feedback, Clover’s Customer Engagement suite includes a collection of powerful tools to help you connect with users, provide a more seamless experience, and develop stronger relationships. This suite integrates seamlessly with all our POS solutions – complete with real-time business reporting and analytics to help you measure the success of your small business customer retention strategies.
To discover how our POS and business management solutions can help you keep customers coming back for more, schedule a free consultation with our merchant services team today.
1 “Customer Retention Marketing vs. Customer Acquisition Marketing,” Outbound Engine, 20 April 2021