6 Customer Retention Strategies Every Small Business Owner Should Knowby@rumzzbajwa
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6 Customer Retention Strategies Every Small Business Owner Should Know

by Rumzz BajwaApril 26th, 2021
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According to Harvard Business Review, spending time and resources to acquire new customers is 5 to 25 times more expensive than keeping your existing clients. Effective customer retention strategies ensure that the customers you worked so hard to get will continue to do business with you and get value from your products/services you offer. Here’s a list of techniques you can implement: Improve customer service, develop a CRM mindset and implement customer retention techniques to support that goal. IKEA implements several customer relationship management techniques to retain its customers.
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Generating leads and attracting new customers are keys to ensure initial business success. Because of this, many business owners focus on getting more clients that they often overlook the need to keep those they already have. According to Harvard Business Review, spending time and resources to acquire new customers is 5 to 25 times more expensive than keeping your existing clients.

That said, instead of focusing all your efforts on acquiring new customers, it’s best to strike a balance between customer retention and customer acquisition.

What is Customer Retention?

Customer retention can turn buyers into loyal customers and prevent them from doing business with a competitor. Effective customer retention strategies ensure that the customers you worked so hard to get will continue to do business with you and get value from your products/services you offer.

How to Improve Customer Retention

Now that you know the importance of customer retention, the next step is to create a strategy that works for your business. Here’s a list of techniques you can implement:

1. Improve Customer Service

Customer support systems allow you or a customer service representative to easily communicate with your customers and immediately address their concerns. If your customers contact you via your website, social media, or email, it’s best to have a live chat or help desk tool on these platforms. It’ll be easier for you to convert curious audiences into repeat customers or complaints into resolutions.

Another effective way to improve customer service is by sending a small gift to your best customers. It’s a great way to remind them to purchase from you again while adding the element of surprise, and in turn, increase customer satisfaction. The law of reciprocity comes into play as well when you’re giving unexpected gifts. This refers to a person’s tendency to reciprocate a positive action with another positive action.

Here’s an example: Chewy’s gifts and surprises.

Chewy knows how much pet parents love their pets. Chewy, a pet supply e-commerce company, are aware that their target market can buy pet food and supplies from their competitors for similar prices. To establish a competitive advantage, Chewy uses surprise reciprocity to surprise their customers with gifts and gift cards for their pets.

These gifts don’t have to be elaborate or expensive, but Chewy’s customers love these surprises. They’re memorable as it demonstrates how much the company cares about their customers’ pets. One notable example is when Chewy commissioned a painting of a customer’s pet. Another way to show your appreciation includes sending hand-written thank you letters, along with a gift card and a small pet accessory.

2. Develop Customer Relationship Management

Cultivating a customer relationship management (CRM) mindset within your organization to improve customer retention. This means that your company adopts specific strategies that emphasize positive customer experiences and implement customer retention techniques to support that goal.

As the business owner, it’s your responsibility to instill a CRM mindset across your company by setting attainable and measurable goals, such as increasing the turnaround time for customer service responses by 50%. Customer expectations are as high as ever, so it’s essential to figure out the types of customer experiences you can implement that align with your business model.

Let’s say you’re an online retailing company. Your customers may have high expectations when it comes to product delivery, so it’s your job to find a way to meet their expectations while maintaining profitability. For example, if your customers expect you to provide free shipping, you can remain profitable by requiring a minimum amount of orders.

Here’s an example: IKEA’s multipronged approach.

IKEA implements several customer relationship management techniques to retain its customers. They know that furniture is usually expensive and bulky, so they designed their products to remedy these issues. IKEA’s products aren’t preassembled, which lowers the cost of the furniture. The compact packaging also makes it easier for them to deliver the products to you. IKEA offers a wide range of affordable furniture to help customers decorate their homes for less.

Secondly, they further enhance the customer shopping experience by providing babysitting services and putting up restaurants in stores so customers would stay and shop with ease. These services are entirely unrelated to furniture, but these strategies work for IKEA’s customers.

Lastly, IKEA offers a loyalty program that provides various benefits to customers, such as free items, special discounts, and free items.

3. Continuously Improve Customer Experiences

One of the best ways to ensure customer retention is to continuously improve all aspects of your business, including customer support, your products/services, and your overall operations. The first step is to identify the areas in your business that need improvement. You don’t have to change everything at once, but it’s best to focus on creating greater convenience for your customers.

Here are a few examples: Amazon’s two-day shipping and Starbucks’ convenient payment system.

Amazon started offering two-day shipping back when the industry standard was within a week. However, they didn’t stop there. They further enhanced its customer shopping experience by offering one day-shipping. This move increased Amazon’s expenses, but it also increased the inventory turnover ratio and improved customer retention, which ultimately led to increased sales.

Starbucks provides another great customer retention strategy. Its customers patronize them because they continuously strive to improve customer experience. Starbucks enables customers to pay through their mobile app. They also offer a loyalty program that makes repeat purchases easier and more fun through a gamification feature. This incentivizes customers to try new flavors and products in exchange for loyalty points. The app even allows you to skip the long queue by placing your orders online.

4. Create Loyalty Programs

Loyalty programs are a great retention tool because it shows your customers that you appreciate them doing business with you. A great program entices them to continue choosing your products or services over your competitors.

For example, most airlines offer frequent flier miles, and customers who choose that airline for most of their travels will receive several benefits and discounts.

For small businesses, a loyalty program can be as simple (yet still as effective) as a punch card, where customers make multiple purchases to get a discount or a free item. It can also be as elaborate as setting up an entire system dedicated to loyalty programs, where your customers get to sign up online and earn points by tracking the purchases they make. Online shops selling through e-commerce platforms like Shopify can help sellers set up loyalty programs through third-party integrations.

Tailor the terms and conditions of your loyalty programs based on your business model and budget. However, you need to ensure that the program delivers value to your customers. Get to know your customers to see what works for them. Here are a few ideas for your business:

  • Special discounts
  • Members-only contests
  • Hosting events
  • Point system

Small businesses sometimes don’t have enough resources to offer benefits on their own. If this is the case, you can partner with a complementary business to expand your offer and provide more value to your customers. Let’s say you own a car repair shop. You can partner with a local carwash shop to offer a special promotion to drive business to both companies.

Here’s an example: Amazon Prime’s subscription program.

Amazon created an effective customer retention strategy through its Amazon Prime subscription service. Amazon Prime subscribers enjoy a wide range of benefits like faster shipping, as well as free movies and music.

You’ll need to create an account and log in to access the perks. This allows Amazon to track your buying behavior using customer analytics to refine your shopping experience, like recommending products based on your activity.

According to the Consumer Intelligence Research Partners, the perks Amazon offered, plus the valuable data they gathered, led to a more than 90% retention rate.

5. Obtain Customer Feedback

It’s hard to create effective customer retention strategies if you don’t know how your customers feel about your business. You need an efficient process for collecting feedback, analyzing the information, and sharing it with the rest of your team.

There are several ways to collect customer feedback, and one of the most common ways is to conduct a survey. You can ask your customers to participate in user testing and focus groups. Using these methods regularly, you should be able to obtain and provide relevant customer feedback.

Once you’ve gathered enough feedback, the next step is to analyze survey results by highlighting customer behavior trends to further enhance the shopping experience. After analyzing the data, you need to share this information with your team.

For instance, customer feedback on products should be given to your manufacturers and development teams. Customer support reviews should be distributed to your customer service team. By having a regular system in place to collect and distribute customer reviews, you’ll be able to immediately address criticism and improve the overall user experience.

Here’s an example: R&G Technologies’ customer satisfaction surveys.

R&G Technologies, an Australian IT support company, developed positive long-term relationships with their customers. Their customer satisfaction surveys allow their customers to express what the company is doing right, and more specifically, what they’re doing wrong. This gives R&G a heads up so they could identify unhappy customers before they jump ship.

In their surveys, the R&G makes sure they’re asking the right questions to get the answers they are looking for. They use this crucial piece of information to continuously improve their operations and increase customer retention rate.

These surveys can identify the challenges R&G’s target market faces, and if used right, this information can help improve their overall marketing efforts and retention strategies. Aside from surveys, you can also strike a casual conversation with your clients. Small businesses, especially digital businesses, can benefit a lot from one-to-one conversations with their clients.

6. Launch a Corporate Social Responsibility Program

Nowadays, businesses are expected to be socially responsible. This means that businesses should strive to minimize their impact on the environment and establish a positive impact on society at the same time. Most customers these days are socially aware. They look at everything your business promotes, sells, and buys. They’ll be quick to point out inconsistencies between your brand’s message and actions.

One of the ways to increase customer retention is to create a CSR program. Identify your company’s core values, share this with your customers, and then create a corporate social responsibility program revolving around these values. Another way is to find a cause that your customers care about and position your brand around it.

Here are two examples: Johnson & Johnson’s sustainable practices and Tom’s One for One policy.

For three decades, Johnson & Johnson focused their CSR efforts on minimizing the impact on the planet. One of their initiatives includes providing safe water to communities that need it the most. They also purchased a privately-owned energy supplier to reduce pollution and provide renewable electricity.

TOMS’ “One for One” policy has become one of the most popular CSR initiatives that touched the hearts of millions. For every pair of shoes sold, they give another pair to a person in need. To date, they’ve already given almost 100 million shoes to people in need. The company also has a “Giving Team” which manages its giving fund, and their latest initiative is giving $1 for every $3 they make.

Grow Your Business Through Customer Retention

Your existing customers are your company’s greatest assets. They know your products, they’re already familiar with your brand, and they appreciate the service you provide, so it makes sense to focus your time and energy on improving their experience. Customer retention techniques can be a great way to boost business growth and expansion.

The strategies mentioned above may seem challenging to implement at first. But making small proactive steps towards your goal can help improve customer retention. Work towards delivering a more superior experience than your competitors and you’ll be able to strengthen customer loyalty and retention.