While the cost of acquiring a new customer is hotly debated, the generally agreed rule is that it costs five times as much to acquire a new customer rather than to retain an existing one.
Why is customer retention such an essential strategy? Constantly having to look for new customers will drain your business’s time and money. Building a sustainable business model comes down to taking care of your biggest asset––your customers.
It’s essential to establish a healthy balance between both welcoming new customers and retaining your existing customer base.
How do you keep your existing customers? By ensuring their needs and expectations are met.
Customers who have a great experience with your business are much more likely to come back rather than choose a competitor.
In this article, we’re sharing why customer retention is important for small businesses along with our top 7 strategies for keeping your customers happy.
Why is customer retention important for small businesses?
Simply put, it’s more cost-effective and sustainable to retain your customers than always having to find and attract new ones.
Converting customers can be expensive and time-consuming––it ultimately pays off when you create a base of loyal customers who repeatedly purchase your services and products.
In fact, studies show that improving customer retention rates by just 5% results in a profit increase of between 25% and 95%.
Loyal satisfied customers often become promoters of your business and fuel powerful word of mouth recommendations, therefore attracting more customers. This form of advertising can save your business money while also increasing your prospective client base.
Retaining customers is ultimately a win-win situation for any business.
7 customer retention strategies for local businesses
Retaining valuable customers essentially boils down to providing a top-quality customer experience.
But, your business should also set aside time to build in a specific set of initiatives and strategies designed to improve how your customers view and experience your business offering.
Customer retention strategies should ultimately build trust, loyalty, positive sentiments, and encourage customers to continue returning to your business for more.
Here are our top customer retention rates to get you started.
1. Deliver on your promises
First of all, you need to ensure you’re delivering customers what your business promised them.
To do this, you must give customers what they want, at the price point they expect, and at the desired time. It’s essential not to fall short of what your business promised. Failing to meet customer expectations is a surefire way of encouraging customers to go to competitors.
Here are a few examples of how different local businesses should deliver on their promises:
- Restaurants. If a customer orders a takeaway pizza from their nearest branch, they’ll want to receive the correct pizza flavor on time at a price point they expect. If your menu prices are higher than local competitors and the food isn’t significantly better, you can expect your customers to go elsewhere instead of choosing your restaurant again.
Take a look at this positive restaurant review. The customer’s expectations were met resulting in enthusiasm to return:
- Beauty salon. Customers expect effective beauty treatments delivered by friendly and experienced technicians. Customers also expect to arrive and be greeted by a friendly staff member. Ensure that your appointments are running on time and that each customer is met with an experienced member of the team.
This positive review of hairstylist Laurel, shows how a customer’s expectations can be met by top quality service:
- Plumbers. From the initial consultation to the delivery of the service, customers expect plumbers and other home visiting technicians to arrive punctually, bring the right equipment to fix the problem, and resolve the issue according to the initial price quote. Take care to ensure you provide realistic timelines from the start of the process and stick to them.
This review shows how a plumbing company was able to beat the competition and meet customer expectations by providing an accurate and reasonable quote:
2. Exceed expectations
Going above and beyond for your customers will increase the chance they convert into loyal promoters of your brand and keep coming back for more.
Prioritize generosity and try giving your customers unexpected surprises.
Choose to get creative and offer different customers personalized surprises depending on their interaction with your business.
Here are a few examples of thoughtful surprises:
- Birthday gift. If your business offers a subscription service like a gym, you’ll probably have your customers’ birthdates on file. When it’s their birthday, you could surprise them with a gift like a free personal training session.
- Loyalty discount. Once a customer has become a regular at your business, you could thank them for their loyalty by providing them a voucher or a discount. Depending on your business type, this will change according to your offering. For example, an HVAC business could offer a free seasonal central heating or air conditioning service check.
Read more: 5 ways to improve customer experience.
3. Build genuine customer relationships
Creating meaningful relationships with your customers can help people see you as more than just a business. Solid business relationships are built on trust. When your customer trusts your business they’ll be more likely to feel good about purchasing your products or services.
To help you build genuine customer relationships, communicate authentically with customers through multiple channels.
Here are some ideas:
- Social media. Facebook, Instagram, LinkedIn, and Twitter are excellent social media platforms for communicating with your current and potential customer base. If users leave comments on your posts take the time to engage with them. Potential customers may write you DMs asking about specific elements of your business’s products or services. Always take time to respond thoroughly and promptly to any questions they might have about your offering.
- Signage. Local brick and mortar businesses can use signage throughout their premises to help build a connection with their customers. For instance, you could use leaflets and posters to encourage customers to give you their feedback or participate in upcoming events.
- Email. Use emails to let customers know about new products or changes in your service offerings. You could also use newsletter campaigns to send out customers exclusive discounts and other news related to your business or the wider community.
Make your appreciation known to your customers by taking time to personally thank them individually for choosing your business.
This is best-done face to face (if you can) or over the phone. A handwritten note along with a small gift is also a great way to make customers feel special. This personalized approach will help customers feel valued by your business and encourage them to keep choosing your business over the competition.
4. Become a part of the local community
Local businesses should strive to become recognizable names in the local community. When your current and potential customer base continues to see your presence in the area it helps build a sense of trust and authenticity.
Your regular customers may enjoy interacting with your business in a different context, while you continue to build more authentic connections with customers.
Your business could do this in several different ways:
- Sponsoring events. Associating your business with local calendar events like marathons, fairs, and farmers’ markets will help your customers see you as a regular fixture in the community.
- Appearing in local media. Try contacting local newspapers and magazines for your business to either appear in ads or feature stories about a new offering or how your business helped a local customer achieve certain goals.
- Partnering with charities and non-profit groups. It’s good to give back to the community by supporting charities and other local initiatives. Not only will you be helping to make a difference, but members of your local community will recognize your brand. You could ask your customers about any of their own projects and how your business could help them.
5. Welcome customer feedback
Asking for and taking on board customer feedback helps customers feel appreciated. Customers like to feel that they matter to a business and that managers or owners truly care about their opinion.
On top of that, customer feedback helps you improve your customer experience so customers are more likely to keep coming back.
Questionnaires, customer feedback surveys, and NPS surveys help you build a picture of how customers feel about your business. They can help you identify areas of your business that need improvement along with which parts of your business offering customers are happy with.
Make it easy for customers to give you feedback by proactively seeking it. Don’t wait until customers come to you with a complaint, instead schedule feedback requests at regular intervals, for instance following an interaction or every quarter.
You could ask for customer feedback by:
- Email. Following a purchase or service completion, you could send customers a quick NPS survey or a more detailed customer satisfaction survey.
- TextBack. On receipts, flyers, or signage, you could invite customers to give you feedback by texting a specific number. A GatherUp TextBack integration makes it easy for customers to leave your business feedback by using a keyword and mobile number provided by your business.
- Face-to-face. You could ask customers directly how they feel about your business. This could be as simple as a cashier asking a customer if they found everything they were looking for or a server asking whether someone enjoyed their meal.
- Paper questionnaires. Businesses that use waiting rooms like healthcare providers or gyms could try offering their clients paper questionnaires to complete while they’re waiting. These are especially effective for customers that may not be that comfortable with technology.
Find out more about how to ask for customer feedback and try our free templates.
Once you’ve gathered valuable customer feedback, it’s important to manage and monitor it in one place. That way when you set about improving your customer experience, you’ll have all your references stored in one place.
GatherUp makes it easy to request and manage customer feedback. Using our customer activity dashboard, you can get a complete view of your business through the eyes and voice of your customers.
View your Net Promoter Score, survey questions, 1st-party reviews, and customer profiles all in one place. You can also tag your customer feedback according to themes so it’s easier to find what you’re looking for.
6. Use customer complaints as an opportunity to improve
Customer complaints can be hard to face up to, but they’re a reality of running any business. All businesses will experience customer complaints at some point.
A customer complaint is usually down to custom expectations that are mismatched with the reality of the offering. When they’re given to a business on a one-off basis, they could be simply interpreted as negative feedback––you can usually salvage the customer relationship by making some improvements.
Consistent customer complaints about a specific element of your business, like customer service could indicate a more severe problem that requires urgent attention.
The key is not to run away from customer complaints but, instead use them as an opportunity to grow.
Customers will often judge a business based on how they handle their complaints. In spite of a negative experience, customers who see that their complaints are acknowledged with steps taken to improve the situation are much more likely to return to your business.
For instance, take a look at this comprehensive business owner response following a negative review:
Hopefully, after reading this response, the customer will feel that their opinion matters and has been taken on board, making it more likely they return to the cafe.
Just as the review response above suggests using the complaint as an opportunity to train staff, whenever you receive a customer complaint, you should always identify a suitable solution.
Here are a few examples of solutions to common customer complaints:
- Faulty product. Offer compensation or a new fully functioning product as a replacement.
- Slow customer service. First, apologize and consider offering a discount, voucher, or free gift.
- Unsatisfactory restaurant meal. Offer compensation, a free meal, discount or their money back.
Maintaining an empathetic and open mindset towards customer complaints will help you use them to improve your business and encourage customers to keep coming back.
Learn more about how to handle customer complaints.
7. Train your employees
Train your employees to value customers and put them at the heart of everything they do. Your team represents your business and has the ability to change how customers view your business.
Positive, efficient team members who truly care about customers and their needs will encourage customers to keep coming back.
There’s no doubt about it––exceptional customer service boosts customer experience and sets you apart from the competition.
But perfect customer service won’t just happen overnight. To achieve a top level of service, you’ll need to train your staff on customer service expectations and how they can go above and beyond.
Try building in regular team training sessions so all your staff is up to date on best practices and they consistently deliver top customer service.
Here are a few ideas for how your could train your team members:
- In-person sessions. Face-to-face on-site training sessions are great for getting everyone together and running through customer service best practices along with any new strategies. You could choose to hold a mix of presentations and interactive activities that encourage your team to think about how they can provide the best possible customer experience.
- Roleplay. Acting out different scenarios can help build your team’s confidence in dealing with customers. For instance, many frontline staff members dread the moment a customer comes to them with a complaint. Help them to approach the situation with empathy and an open mind by giving them the tools to listen to customers and provide satisfactory solutions.
- Webinars/conferences. To take your team members’ learning to the next level, you could enroll them in industry webinars and conferences. These sessions will give your staff insight into current industry best practices as well as innovative solutions they might not have considered yet.
Prioritize customer experience and retain more customers
Implementing customer retention strategies will help you maintain a solid base of loyal customers. Each of these retention strategies stems from enhancing your customer experience and understanding your customer needs and desires.
Retaining more customers will save you time and money, ultimately enabling you to create a sustainable and profitable business model.
Start slowly by implementing a couple of these customer retention strategies and evaluating how you get on.