Attracting new customers is often top-of-mind for small business owners. However, turning new customers into loyal ones can be even more valuable—not to mention gratifying. Let’s dive into customer retention, why it’s worth prioritizing, and how you can use it to increase customer lifetime value and grow your business.
What is customer retention?
Simply put, customer retention is the ability to turn customers into repeat buyers. It can take a lot of time, effort, and money to retain customers, but once you’ve made the first sale, there are several benefits to focusing on how to keep them coming back.
If your business has a high customer retention rate, that means customers value and trust the product or service you offer. Once you establish that level of trust, your customers will be more likely to buy something from you whenever they visit your business online or in person. They’ll likely spend more with every visit, too.
Acquisition costs can really add up when you’re pouring your hard-earned revenue into marketing, sales, or training. However, a healthy customer retention strategy can be more cost-effective and efficient overall. In fact, Harvard Business Review found that acquiring a new customer can be 5–25 times more expensive than retaining one.
Not only will you save money, but you can also grow your profits. Longtime customers are often more willing to try new products or services from the same business. So, if you have multiple product lines or are getting ready to launch a new product, keep an eye on the people who already love what you do.
You can also think of loyal customers as brand ambassadors and local influencers. Rather than spend thousands on a risky social media influencer campaign, loyal customers are likely to spread the word about your brand through word-of-mouth. If they’re already fans, they’ll be open to recommending you to others.
So how can you build customer loyalty? In the following sections, we’ll review some tactics that can help you build this piece of your business.
Personalized customer experience
One way to increase customer retention is to make patrons feel like you know them on a personal level. According to research from McKinsey, businesses that do personalization right generate 40% more revenue on average.
You can leverage customer data and insights to help you shape your approach, which could include things like product education tailored to meet their needs, customized communications, and personalized product recommendations. A more personalized experience will go a long way toward nurturing lasting customer relationships.
Building strong relationships
Speaking of relationships, invest in building them beyond everyday transactions. We all know what it’s like to have a bad experience with customer service—it’s frustrating, time-consuming, and confusing. On the other hand, exceptional service and support will make your customers feel heard, giving you more credibility and inspiring them to recommend your business to others.
Allow your customers to engage with your business across multiple channels. Consider adding a newsletter to your email journey, so you’re reaching out to people beyond their purchases. You can include information about things like new offers or updates on your business plans. Give them opportunities to interact with your business on social media with things like polls or questions. Think about new promotions and events to get customers excited to continue their support in person. The more you can do at every touchpoint, the more invested they’ll feel in your continued success.
It’s also important to respond to online reviews—both positive and negative.
Loyalty programs and incentives
Create a loyalty program to reward repeat customers. Customer data will help inform whether a points-based, value-based, tiered, or subscription-based approach might be most effective for your business. You can also offer incentives and discounts to make customers feel appreciated and encourage them to buy again.
Word-of-mouth is still one of the most effective marketing strategies. One of the best ways to take advantage of it is to create a referral program that offers incentives to new customers and existing customers who refer them.
See how your business can use user-generated content to bolster your marketing efforts.
Managing customer feedback and satisfaction
Customers want to feel heard, so ask them to provide feedback regularly. Send them customer surveys and allow them to write reviews. You’ll see where you’re meeting their expectations and where you can make improvements. You can even contact them to see if they’re open to creating testimonial content.
Along with feedback, you should analyze customer satisfaction metrics like the Net Promoter Score (NPS) to understand where there’s room for improvement. Then, you can start addressing issues so you can enhance the customer experience. If your customers see that their feedback has a real impact, they’ll feel more invested in your success.
Leveraging technology and tools
Tapping into the right tech can help you make intelligent decisions and adjust your strategies. Customer relationship management (CRM) software can give you up-to-date data on your customers and their purchasing behavior, while email marketing automation tools like Mailchimp can streamline communications and make it easy to assess your email performance. Customer feedback and sentiment analysis tools can also give you a quick understanding of how customers feel about your business.
Using retention-focused marketing strategies
Finally, there are several marketing strategies you can implement to boost customer retention. Create personalized marketing campaigns that allow people to build a deeper connection with your business. Use automated segmentation to group your audience and tailor your communications so they get the right message from your business at the right time.
Customer success stories, reviews, and testimonials can be powerful sources of inspiration. New offers can spark surprise and delight. However, you add the most value when you focus on the quality of your product or service and embrace opportunities to exceed expectations.
A worthwhile investment
Customer acquisition will always be a part of doing business, but putting your marketing dollars behind customer retention strategies like personalization, loyalty programs, and customer feedback and satisfaction measurement can have a powerful impact on your business. Loyal customers can be one of your best assets.
Get even more expert marketing tips from the Bluevine team.
