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7 customer retention strategies for small businesses

Customer retention: entrepreneur talking to clients

Key takeaways

  • It costs 6-7 times less to keep existing customers than to win new ones, making customer retention key to boosting your bottom line 
  • Always be improving your customer experience, from onboarding to post-sale support, to keep long-term customer satisfaction high
  • Keep the spark in your customer relationships alive with personalized messaging, loyalty programs, and unexpected “just because” freebies

If most of your first-time customers only become one-time customers, your business isn’t scaling as fast as it could. While new customers can boost your sales, every company needs a loyal customer base to achieve sustainable business growth. It costs 6-7 times less to keep existing customers than to win new ones, which is why focusing on customer retention can help you increase profits long-term. Read on to discover customer retention strategies you can use in any industry.

What is customer retention?

Customer retention refers to your company’s ability to inspire repeat purchases. When your retention is strong, returning customers continue to choose your products or services over time instead of switching to your competitors’ offerings.

Your customer retention rate is a key metric you can use to gauge your customer loyalty. To measure customer retention over a given period of time, you can use this formula:

(Total number of customers at end of period – Total number of new customers during period) ÷ Total number of customers at start of period

A high customer retention rate naturally reduces your churn rate—the number of customers who stop using your products or services—and boosts your customer lifetime value, which is the average amount of money that customers spend during your relationship.

7 customer retention strategies

The best way to increase customer retention is to provide the customer experience your clients are looking for. However, if you think churn may occur, it’s equally important to have a plan to re-engage customers before you lose them. 

Here are seven customer retention strategies that can help you achieve greater brand loyalty, along with examples of what they can look like in action.

1. Improve your onboarding process

Customer retention: entrepreneur talking on the phone while using a laptop

Your first few touchpoints with an existing customer set the stage for the rest of their interactions with your business—this is considered the onboarding process. Nurturing the relationship after the initial transaction gives you the opportunity to follow up on their experience, show them more products or services, and/or share educational material. For example, if you own a hair salon, you can send follow-up emails to new color clients to explain how to maintain their new hair color themselves and when they should return for a touch-up.

Interactive walkthroughs, video demos, and one-on-one video calls can also make your onboarding process more engaging and personal.

2. Listen to customer feedback

To figure out where you’re meeting customer expectations—and where you’re not—it’s vital to review, respond to, and act on feedback quickly. Whether you’re getting it from customers in-store, via email, on social media, or on a review platform like Yelp, customer feedback helps you home in on what you do well and what customer problems you can tackle. 

Not only can feedback help you shape your future operations, but customers appreciate being heard. At least one survey shows that 83% of consumers feel greater loyalty to brands that respond to and resolve customer complaints.

Josh Campbell, owner of Rescue Air Heating and Cooling, shared in a recent interview, “[Reviewers] want people to listen. I’ll listen to them, and I’ll be like, ‘I’m taking action on this. I’m going into my company. I’m going to build a better company.’ Every time I thank them for it: ‘Thank you for the 1-star review. This is how I grow. Without you bringing these mistakes to my attention, I would never know they were occurring. You’re a layer of accountability for me to build a better business.’ ’’

Plus when you receive positive feedback, you can reach out to those happy customers for testimonials that you can share on your website and social media channels. Marketing tools like Mailchimp can also help you create templates for customer feedback surveys that you can send after someone makes a purchase. With this type of automation, you can gain more insights into customer experiences from people who otherwise wouldn’t reach out.

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3. Build a customer loyalty program

Giving repeat customers exclusive rewards is a highly effective customer retention strategy that can keep them coming back. When you build a customer loyalty program, you provide incentives that can influence customer behavior and give your current clients something to strive for.

For example, Starbucks lets customers rack up points (or “stars”) that they can trade in for freebies, like bakery items and drinks, and offers regular chances to get bonus stars. Customers know how close they are to a reward each time they buy, which encourages them to return—and, perhaps, buy more next time. Once per year, Starbucks re-engages customers with a free birthday drink too.

Customer loyalty software like Kangaroo or Loyalty Gator can help you make your program fully digital so you don’t have to rely on physical punch cards.

4. Personalize your sales promotions

Person using a laptop

Using the same marketing strategy for all your current customers doesn’t cut it if you want to stand out from your competitors. Think about when you have a good relationship with someone—you expect them to know a lot more about you than someone they just met. Same goes with your customers. Personalize your sales promotions to meet the needs of your unique market segments. If a client exclusively buys shoes from your ecommerce shop, for example, they should receive discounts for footwear but not necessarily for jackets.

Offering sales promotions for birthdays and first-purchase anniversaries can also be great ways to keep customer engagement high throughout the year. To make this customer retention strategy efficient, use a customer relationship management (CRM) tool like Zoho CRM or Capsule to keep track of client information.

5. Improve your customer support

The quality of your customer support can make or break your client relationships. Data shows that after a poor customer service experience, 40% of clients will stop buying from a brand. As such, improving your customer support experience is one of the most critical customer retention strategies you can put into action.

Keep in mind that 31% of consumers expect a response time of 24 hours or less for questions or complaints made on social media. Whether you offer live chat, phone support, or email support, make sure you set customer expectations about your response times so they’re not waiting for an instant reply if that’s unlikely. 

To speed up customer support times, add an FAQ page to your website so clients can get the help they need before you (or your support team) can personally respond. You can also consider setting up a knowledge base using tools like Document360 or Help Scout.

6. Win back disengaging clients

Customer retention strategies aren’t 100% foolproof. When you notice a client disengaging or see your overall customer retention metrics dropping, you should have a workflow in place to win them back. 

For example, if you have customers who haven’t repurchased in two months, you can send a “we haven’t seen you in a while” email with a welcome-back offer. Or you can make phone calls to ask why customers haven’t returned, which helps you figure out what you could do better next time. It also opens up the opportunity for you to upsell customers with new products or services that better fit their needs.

If customer churn does occur, don’t forget to follow up later on. A client’s decision to drop out of the customer journey may not be permanent— if they’re facing temporary financial hardships and have to cancel their personal training contract, for instance—but they might forget about your brand if you don’t reach out.

7. Show your appreciation

Creating small moments of customer delight throughout the customer journey is a simple retention tactic that can make clients feel like a VIP when shopping with your business. A bakery can provide a free treat “just because,” while a car mechanic can leave an air freshener in customers’ cupholders when a service is complete. 

These special moments can be the reason clients go from loyal customers to brand ambassadors who become your de facto word-of-mouth marketers who actively provide referrals and recommend your business.

Boost your brand loyalty with the best customer retention strategies

Customer acquisition without customer retention can lead to a lot of wasted effort and reduced revenue. Fine tuning your customer retention strategies is a cost-effective way to keep your clients engaged and happy over time. 

Improve your current customer experience by making onboarding more engaging, acting quickly on feedback, and offering rewards for loyal customers. Personalize your sales promotions and provide ongoing customer support as well as tokens of appreciation.

Then make sure you have a good retention program in place to bring back clients who may disengage. Creating a customer engagement strategy will help you further boost loyalty.

The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.