How many customers do you lose every year? How many customers leave your business and never return?
Depending on the kind of business you have, you may be losing between 10% and 50% of your customers every year.
Building customer loyalty is one of the best strategies for any business. Instead of spending huge amounts of money, time and effort to attract new customers, retaining your existing customers can actually help you save money, increase your profits and grow your business faster.
Luckily, there are many easy and inexpensive ways to increase customer retention.
Customer retention should be your #1 focus
According to research by Statista from 2020 in the USA, the following industries lose the highest percentage of customers every year:
- Hospitality, travel & restaurants (45%)
- Retail (37%)
The same research showed that the following industries lose the lowest percentage of customers per year:
- Professional services (16%)
- IT (19%)
Even though these percentages may not be the same in your country or business, they give you an idea of how your business should be doing.
Increase your customer retention before trying to get new customers
Many businesses focus on attracting new customers. Their marketing efforts are targeted on this objective. They believe that bringing in new customers will grow the business.
And it is true. Getting new customers is a good way to grow your business.
But if your business is losing existing customers at a faster rate than it is acquiring new customers, your efforts are useless.
It is like trying to fill a bucket that has a big hole in it. You keep adding water, but it keeps leaking out.
You never manage to fill the bucket.
Wouldn’t your efforts – and money – be better spent if you plugged that hole and filled the bucket so that you could go and fill additional buckets?
This is what customer retention is about.
It is about keeping the customers that you have.
This does not mean that you should not try to get new customers. You should. But your #1 focus should be on retaining the customers that you already have.
Increased customer retention will bring you more profit
Do you know that:
- it will cost you 6-7 times more money to acquire a new customer as compared to retaining an existing customer?
- the top 10% of your most loyal customers spend up to 3x more money in your business as compared to the other 90%?
- there is only a 5-20% chance that a new customer will buy from you? Whereas, there is a 60-70% chance that an existing customer will buy from you again.
- businesses that increase customer retention by 5% get up to a 25% increase in profit?
Knowing this, why would any business owner put a bigger focus on getting new customers? There is no reason to choose the hard road when there is still a lot of low-hanging fruit that you can pick.
Easy and inexpensive ways to increase customer retention
Luckily, there are many easy and inexpensive ways to increase customer retention. Try one or more of the following and see what results you get in your business.
1. Improve your customer service
The #1 way to retain more customers is to improve your customer service.
According to research, if customers are happy about the customer service they are getting from you, at least 72% of them will tell six other customers. This kind of positive word-of-mouth marketing is one of the best ways to get new customers!
But it also works the other way round.
If a customer is not satisfied with you, it is estimated that 13% of them will tell 15 other potential customers about their bad experience. However, most of them will just leave your business and never come back.
So bad customer service has two results:
- you lose your customer
- you lose potential new customers
Summary: great customer service is one of the best ways to retain customers.
2. Give gifts to customers
This strategy requires you to use some marketing psychology.
When we want something but it is scarce, we are likely to put in more effort to get it. Also, when we can only get it during a certain time frame, we are likely to take action during that time frame.
In marketing, make use of this “scarcity” to retain your customers.
Offer a time-limited giveaway. For example, during one month, offer your existing customers a free gift if they come back and buy a certain product.
This is also a great way to market new products or services to your existing customers.
3. Offer free trials to customers
This strategy is particularly useful if you are selling a service or if you sell very expensive products.
Offer customers the opportunity to test the product.
If you are sell software, create a trial version that runs for 30 days.
If you are a marketing consultant, give your existing customers a free upgrade to test some of your other services for two weeks (or one month).
If you sell heavy-duty equipment, let the customer test your product for a day or a week.
This shows customers that you are thinking about their needs and it also encourages them to keep buying more from you.
4. Create a members-only club
This is a very inexpensive strategy for your business.
Basically, it means that certain customers get access to specific benefits. The benefits that you choose depend on what you are selling.
- a clothes shop can offer club members the opportunity to view new arrivals before putting them in the shop
- an agribusiness can offer free home delivery to club members during specific times of the year
- website designers or marketeers can offer a free members-only add-on service
Creating a members-only club creates exclusivity and can encourage customers to keep coming back. Note: you can also call this a VIP-club.
5. Use discounts to make customers come back
Encourage existing customers to come back to your business by giving them a specific offer or discount.
- give them a 25% discount on any additional purchase of their choice
- use a buy-one-get-one-free offer to encourage them to come back and buy more
- offer them a free product if they spend a certain amount next time
6. Introduce customer loyalty cards
This is a strategy that you often see in the food and beverage industry. You buy a certain product and the business will add a stamp or sticker to the customer’s loyalty card.
When the card is full, the customer can choose a free product, get a discount or receive a gift from the business. This incentivises customers to keep coming back and making more purchases.
This strategy can be used in all kinds of industries:
- beauty and barber shops
- retail stores
- restaurants, pizza shops and bakeries
- consultants (use it for specific services)
- agribusiness (offer customers a discount after they buy a certain amount of produce)
For you, the cost is low. All you have to do is design and print the cards. For designs, check out Canva for free designs that are easy to customise for your business.
7. Give incentives for customer surveys
You can use customer surveys to get a lot of useful information for your business.
- run a poll on social media asking customers to choose which new products you should introduce in your business
- ask customers for feedback about a certain product
- ask customers to fill out a form about how your business can improve
The important part of this strategy is to make it worthwhile for your customer. So, make sure to offer them a discount after participating. Or, enter their name into a raffle so that they can win prizes.
8. Celebrate birthdays
This is a good strategy for those of you that maintain a customer database. If you keep customer records, make sure to ask them for their birthday. And tell them that if they come to buy from you on their birthday, they will get a surprise.
Then, if the customer does so, give them a discount or a small gift.
If you really want to make a big impression, have some things in your business that you can use to celebrate the customer. This could be balloons or a big sign saying “Happy birthday!”.
Don’t forget to take pictures to share on your social media!
9. Use raffles to keep engaging customers
Create a raffle that customers can participate in. You can do this once a month or a few times a year.
Customers can participate in the raffle through their purchase receipt.
Make sure to announce the results of the raffle after some time has passed. For example, you could run the raffle for one month and announce the results at the end of the month.
The prizes that you offer customers can be a discount or a free product from your business.
You can also use a similar strategy on Facebook to attract new customers.
10. Introduce partner programs
You can even use customer retention to grow your business.
All business are interested in retaining more customers. You can enter into a partnership with another business that complements your own business.
Once you have done so, you and your partner can create shared promotions and discounts. Meaning that customers who are loyal to your business and your partner will receive rewards from both businesses.
- you and your business partner can create shared customer loyalty cards.
- you can create discounts for joint products
- you can offer specific discounts for customers who buy from both businesses
Building customer loyalty is one of the best strategies for any business. Luckily, there are many easy and inexpensive ways to increase customer retention.
Instead of spending huge amounts of money, time and effort to attract new customers, focus on retaining your existing customers.
If you do this right, it will be a powerful way to increase revenue and profits while also growing your business!