Why Your Small Business Needs a Customer Retention Strategy

Ben Gran, The Motley Fool
5 min read
0


A woman handing her credit card through the window of a food truck to the owner standing inside wearing an apron.
Image source: Getty Images

Often in small business marketing, the focus is on selling to new customers. It's true that getting new business is exciting and fulfilling; it always feels great to land a new sale or launch a product in a new market. But one of the most important ways to make sure your business succeeds for the long term is not just selling to new customers -- it's keeping your existing customers.

Customer retention is a sometimes-overlooked strategy for small business marketing. After all, it's easy to find small business marketing software that promises to help improve sales and find new customers. But where's the customer retention software?

Let's look at a few big-picture ideas for what customer retention means for your small business, and how to make more money just by selling to the people who already know and love your product or service.

Customer retention for small businesses: What it means

Customer retention is a measure of how many customers you keep. A high rate of customer retention means that your customers are loyal and likely to keep making repeat purchases over the long term. Higher customer retention rates can mean lower costs of marketing and advertising for your business. That's because (according to HubSpot data) it can cost five to 25 times more to find, persuade, and close the sale with a new customer than it costs to keep an existing customer happy.

Businesses are always going to have a certain amount of customer turnover, or "churn." No business keeps 100% of its customers; sometimes people will decide to stop buying your product or stop buying from any companies in your industry or vertical. Sometimes businesses lose customers through no fault of their own, or for no reason at all.

But if you can get more precise, targeted, and strategic about understanding why your customers keep buying from you, you can improve your customer retention numbers -- and boost your sales.

Customer retention strategies for small business

Big corporations have made a science out of customer retention. They have entire teams dedicated to it -- studying the data about repeat purchases, conducting customer opinion surveys, analyzing why people decide to keep coming back (or not), and encouraging people to buy again and again.

Small businesses don't need the same level of intensity and complexity as corporate customer retention strategies. But there are a few simple ways your business can do more to boost customer retention.

Ask your customers how they feel about your business

How often do you ask your customers, "How are you feeling about everything, how are things going, how was your experience on your last purchase?" Depending on what you sell or the size of your business, this kind of customer feedback doesn't have to be time-consuming or formal. But make sure you take time to have those conversations. Every small business owner needs to be in constant dialogue with customers -- listening more than you speak.

Collecting customer feedback can be as low-tech as using old-fashioned comment cards printed on paper. But a tech-enabled way to get customer feedback is by using customer surveys. There are tools like SurveyMonkey, Intuit Mailchimp, and Google Forms that let you quickly create surveys and collect insights from your customers.

Don't overburden your customers with too many survey questions. But surveys can be a great way to find out what your customers really think -- and identify problems or customer service disconnects that could cause people to stop buying from your business.

Launch a customer loyalty program

Airline frequent flyer programs are a form of customer retention strategy. Airlines and their credit card partners want you to keep buying plane tickets from their companies, not from competitors.

Your small business doesn't need to have big corporate resources to launch a customer loyalty program. Think about how you can reward your best customers. What's it worth to your business if someone keeps coming back to spend thousands of dollars with you so you don't have to go out and market, advertise, and win a new customer to get that money?

Simple, low-tech punch cards at restaurants are one example of a customer loyalty program -- "buy nine lunches, get one free." You could also get more creative by offering exclusive events to your best customers. Or get personalized with a thoughtful gift or surprise discount to your most loyal customers, based on what you know about their preferences and what they love to buy.

Dedicate (some) of your marketing to customer retention

If you're using small business email marketing software, you can turn this into a tool for customer retention. Not all sales emails should be focused on new customers or new sales. Many of the customers on your email list have likely already purchased from you. Is your email marketing speaking to their needs and concerns, or are you just blasting out sales pitches intended for new audiences?

Look for ways to weave in some customer retention messaging into your overall marketing. "Here's a gift for our favorite long-time customers" or "We appreciate your business and would love to do more..."

Bottom line

Customer retention is often underappreciated as a small business strategy, but it can save your business big money on customer acquisition costs. If the economy slows down or your industry goes into a downturn, customer retention becomes even more important -- keeping good customers is cheaper than finding new ones.

Customer loyalty programs, customer surveys, and understanding why your customers keep doing business with you and why they might leave (or stay) can all help you boost retention and increase sales.

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Alphabet, Intuit, and Target. The Motley Fool has a disclosure policy.

Why Your Small Business Needs a Customer Retention Strategy was originally published by The Motley Fool

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